UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant x ☒ | | |
| Filed by a Party other than the Registrant ☐ | | |
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| ☐ Preliminary Proxy Statement | ☐ | Confidential, for Use of the Commission Only (as permittedby Rule 14a-6(e)(2)) |
| ☒ Definitive Proxy Statement | �� |
| ☐ Definitive Additional Materials | | |
| ☐ Soliciting Material Pursuant to Rule 14a-12 | | |
Eastern Bankshares, Inc.
(Name of the Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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| ☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
(1)Title of each class of securities to which transaction applies:
(2)Aggregate number of securities to which transaction applies:
(3)Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(5)Total fee paid:
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| ☐ | Fee paid previously with preliminary materials. |
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| ☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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April 3, 2023
October 15, 2021
Dear Shareholder:
I am pleased to invite you to attend a Specialthe 2023 Annual Meeting of Shareholders of Eastern Bankshares, Inc. The meeting will be held on Monday, November 29, 2021May 15, 2023, at 1212:00 p.m. Eastern Time both online via the Internet at https://agm.issuerdirect.com/ebc and at our corporate offices located at 265 Franklin Street, Boston, Massachusetts 02110. Details regarding the business to be conducted at the meeting are described in the enclosed notice of the meeting and proxy statement.
Shareholders will receive a notice describing how to access our proxy materials over the Internet, how to register to attend the meeting virtually, and how to request to receive a paper copy of the proxy materials by mail.materials. Our proxy materials, includeincluding this proxy statement.statement and our 2022 annual report to shareholders, contain our audited financial statements and information about our business.
Your vote is very important. You can ensure your shares of our common stock are represented and are voted at the meeting by submitting your instructions by telephone, the Internet, or in writing by returning your proxy card or voting form. We encourage you to consider registering for and attending this Specialour 2023 Annual Meeting of Shareholders virtually through the Internet.virtually.
Thank you for your support and continued interest in Eastern Bankshares, Inc.
Sincerely,
ROBERT F. RIVERS
Chair of the Board of Directors and
Chief Executive Officer
October 15, 2021April 3, 2023
To Shareholders of
Eastern Bankshares, Inc.
NOTICE OF SPECIALANNUAL MEETING
A SpecialThe 2023 Annual Meeting of Shareholders of Eastern Bankshares, Inc. will be held on Monday, November 29, 2021,May 15, 2023, at 12:00 p.m. Eastern Time online via the Internet at https://agm.issuerdirect.com/ebc and at our corporate office located at 265 Franklin Street, Boston, Massachusetts 02110. The purpose of the meeting is to consider and take action upon the following matters:
1.to elect four directors for a three-year term expiring in 2026;
2.to hold an advisory vote on executive compensation;
3.to ratify the appointment of Ernst & Young LLP by the Audit Committee of our Board of Directors’ proposal Directors as our company’s independent registered public accounting firm for the 2023 fiscal year; and
4.to approve and implement the Eastern Bankshares, Inc. 2021 Equity Incentive Plan andvote on such other mattersbusiness as may properly comebe brought before the Special Meeting, ormeeting and any adjournments thereof. The Boardadjournment of Directors is not aware of any other business to come before the Special Meeting.meeting.
The record date for the determination of the shareholders entitled to receive notice of and to vote at the SpecialAnnual Meeting is Friday, October 1, 2021.March 10, 2023. Our stock transfer books will remain open.
Our Bylaws require that the holders of a majority of the shares of our common stock, issued and outstanding and entitled to vote at the meeting, be present online or in person, or represented by proxy at the meeting in order to constitute a quorum for the transaction of business. Accordingly, it is important that your shares be represented at the meeting regardless of the number of shares you may hold. Please ensure that your shares of our common stock are present and voted at the meeting by submitting your instructions by telephone, the Internet, or in writing by completing, signing, dating and returning your proxy card or voting form. If you choose to attend the Special2023 Annual Meeting virtually, you may also vote your shares through the Internet during the meeting. If you choose to attend the Special2023 Annual Meeting in person, please be advised that pursuant to the laws of the City of Boston, Massachusetts masks will be required for attendees, regardless of their vaccination status. In person seatingyou may be limited due to social distancing requirements.obtain directions by contacting us at annualmeeting@easternbank.com.
You are entitled to participate in the Special2023 Annual Meeting if you were a shareholder at the close of business on October 1, 2021,Friday, March 10, 2023, the record date, or hold a legal proxy for the meeting provided by your bank, broker or nominee as of such record date.
•To access,register to attend the 2023 Annual Meeting online via the Internet or in person, visit www.proxydocs.com/EBC and enter your control number. Registrants who choose to participate in, andvirtually will be provided a link to the virtual meeting on the day of the meeting.
•To vote your shares virtually in advance of or at the Special2023 Annual Meeting, visit https://agm.issuerdirect.com/ebcwww.proxypush.com/EBC and enter your control number:number.
•Shareholders of record must enter theYour control number can be found on theiryour proxy card, vote authorization form or the Notice of Internet Availability of Proxy Materials.
•If your shares are held in “street name” through a broker, bank or other nominee, in order to participate in the Special Meeting virtually or vote your shares in person at the Special Meeting, you must first obtain a legal proxy from your broker, bank or other nominee reflecting the number of shares of Eastern Bankshares, Inc. common stock you held as of the record date, your name and email address. You must then obtain a new control number from Continental Stock Transfer & Trust Company, LLC, our transfer agent, by presenting the legal proxy to Continental. You should submit a request for a new control number to Continental by emailing proxy@continentalstock.com no later than 5:00 p.m. on Wednesday, November 24, 2021.
•Plan participants in our 401(k) Plan and/or Employee Stock Ownership Plan must enter the control number found on their vote authorization form or their Notice of Internet Availability of Proxy Materials.
If you join the Special2023 Annual Meeting virtually, you can submit questions in writing during the meeting through the Q&A tab on the virtual platform. We intend to answer as many questions that pertain to company matters as time allows during the meeting. Questions that are substantially similar may be grouped or not answered to ensure we are able to address as many topics as possible.
A complete list of registered shareholders will be made available to shareholders of record at the meeting and in accordance with our Bylaws by emailing annualmeeting@easternbank.com.
This notice, the proxy and proxy statement are sent to you by order of our Board of Directors on behalf of the company.
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| KATHLEEN C. HENRY |
| Executive Vice President, General Counsel and |
| Corporate Secretary |
TABLE OF CONTENTS
PROXY STATEMENT
We are furnishing this proxy statement (the “Proxy Statement”) in connection with the solicitation of proxies by the Board of Directors (which we sometimes refer to as the “Board”) of Eastern Bankshares, Inc. (which we may also refer to as “we,” “us,” or the “Company” throughout this Proxy Statement)Statement; Eastern Bank is sometimes referred to herein as the “Bank,” and Eastern Bankshares, Inc. and Eastern Bank are sometimes collectively referred to herein as “Eastern”) for use at our special2023 annual meeting of shareholders (“SpecialAnnual Meeting” or the “Meeting”) to be held on Monday, November 29, 2021May 15, 2023 at 12:00 p.m. Eastern Time online via the Internet at https://agm.issuerdirect.com/ebc and at our corporate office located at 265 Franklin Street, Boston, MA 02110, and at any adjournment of that meeting. The mailing address of our principal executive office is 265 Franklin Street, Boston, MA 02110. The Notice of SpecialAnnual Meeting, this Proxy Statement, and the enclosed proxy are being first furnished to our shareholders on or about October 18, 2021.April 3, 2023.
INTERNET AVAILABILITY OF PROXY MATERIALS
Our proxy materials are available over the Internet. YouShareholders will receive a Notice of Internet Availability of Proxy Materials (the “Notice”) on or about Monday, October 18, 2021April 3, 2023, to comply with the 40-day requirement pursuant to Rule 14a-16(a) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). The Notice contains instructions on how to access our proxy materials, including our Proxy Statement, in connection with the SpecialAnnual Meeting and submit your proxy or vote authorization form. The Notice also provides information on how to request paper copies of our proxy materials if you prefer.materials. If you have previously requested a paper copy of the proxy materials, you will receive a paper copy of our proxy materials by mail. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials electronically unless you elect otherwise. If you receive more than one Notice, it means that your shares are registered in more than one name or are registered in different accounts. In order to vote the shares you own, you must vote pursuant to the instructions on each Notice.
VOTING PROCEDURES
Purpose of SpecialAnnual Meeting
Shareholders entitled to vote at the SpecialAnnual Meeting will consider and act upon the matters outlined in the notice of meeting accompanying this Proxy Statement, including the election of four individuals to our Board of Directors, each to be elected for a three-year term expiring in 2026 (Proposal 1); approval, and implementationby non-binding advisory vote, of the Eastern Bankshares, Inc. 2021 Equity Incentive Plan.compensation of our named executive officers (“NEOs”) (Proposal 2); and ratification of the appointment by the Audit Committee of our Board of Directors of Ernst & Young LLP as our independent registered public accounting firm for the 2023 fiscal year (Proposal 3).
Voting Securities and Record Date
Only shareholders of record at the close of business on October 1, 2021Friday, March 10, 2023 (“Record Date”), are entitled to vote at the meeting or any adjournment of the Meeting. Our outstanding capital stock entitled to vote at the meeting as of October 1, 2021,Friday, March 10, 2023, consisted of 186,758,154176,328,426 shares of our common stock, $0.01 par value per share. Each holder of record of our common stock on the Record Date is entitled to one vote per share of common stock held, except that, as provided in our Articles of Organization, as amended, and under applicable law, if anyone owns more than 10% of our common stock without prior approval of the Federal Reserve Board and the Massachusetts Commissioner of Banks, shares in excess of 10% will not be counted as shares entitled to vote.
In accordance with our amended and restated bylaws (“Bylaws”) a list of shareholders of record as of the Record Date (“Shareholder List”) will be available for inspection by any shareholder, beginning two (2) business days after notice is given of the Meeting and continuing through the SpecialAnnual Meeting. The Shareholder List may be accessed during the SpecialAnnual Meeting by contactingthrough the Corporate Secretary or by submitting an email to annualmeeting@easternbank.com and requesting access to the Shareholder List.virtual meeting platform. In addition, you may contact our Corporate Secretary by submitting an email to annualmeeting@easternbank.com and requesting a time to view the Shareholder List virtually, for any purpose germane to the SpecialAnnual Meeting, between the hours of 9:00 a.m. and 5:00 p.m., local time, on any business day from Monday, November 23, 2021 upWednesday, April 5, 2023, to the time of the SpecialAnnual Meeting.
The Bylaws have not been amended since the completion of our initial public offering (“IPO”).
Quorum
The holders of a majority of the shares of our common stock that are issued and outstanding and entitled to vote at the Annual Meeting constitute a quorum for the transaction of business at the meeting.Annual Meeting. If a quorum is not present, the meetingAnnual Meeting will be adjourned until a quorum is obtained. For purposes of determining the presence or absence of a quorum, abstentions and broker non-votes will be counted as present. A “broker non-vote” is a proxy from a broker or other nominee indicating that such person has not received instructions from the beneficial owner on a particular matter with respect to which the broker or other nominee does not have discretionary voting power. Brokers have the discretion to vote their clients’ proxies only on routine matters.
Attending the SpecialAnnual Meeting
We encourage ourinvite all shareholders as of the Record Date to attend the SpecialAnnual Meeting, virtually. Please note that the process required to access the meeting virtuallywhich will vary depending on the nature of your individual ownership interest:be held both online and at our corporate headquarters located at 265 Franklin Street, Boston, Massachusetts 02110.
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| | | | | Virtual Meeting Registration and Attendance Process |
Type of Ownership | Nature of Ownership | Accessing•To attend the SpecialAnnual Meeting Virtually |
Record Holder | Your shares are represented by ledger entries invirtually, you must first register at www.proxydocs.com/EBC.•On this registration website, you will be asked to enter your own name, directly registered with our transfer agent, Continental Stock Transfer & Trust Company LLC ("Continental") | Enter youremail address and the unique shareholder Control Number (found on your Notice or proxy card) found on the registration webpage for the Special Meeting to register for and gain accessproxy materials you received.
•A link to the Meeting. |
Held in "Street Name" | Your shares are held for your benefit inAnnual Meeting will be emailed to you on the name of a broker, bank or other intermediary | •First, obtain a legal proxy from your broker, bank or other nominee reflecting the number of shares of our common stock you held asday of the Record Date, your name and your email address.
•Second, request a new Control Number from Continental by presenting the legal proxy to Continental by emailing a copy of your legal proxy to proxy@continentalstock.com with a subject line "Eastern Bankshares Special Meeting". Requests for new control numbers must be received by Continental no later than 5:00 p.m. Eastern Time on Wednesday, November 24, 2021.
•Third, enter the newly-obtained Control Number on the registration webpage for the Special Meeting to register for and gain access to the meeting.
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Participant in Company's 401(k) Plan or ESOP | Your shares are held for your benefit in the name of an independent trustee of the applicable plan, namely the Company's 401(k) Plan and/or its Employee Stock Ownership Plan ("ESOP") | Enter your unique shareholder Control Number (found on your Notice or vote authorization form) on the registration webpage for the Special Meeting to register for or gain access to theAnnual Meeting.
Please note that the trustees of the applicable plans vote on behalf of plan participants, based on voting instructions received from participants. The deadline for providing voting instructions to the trustees is Sunday, November 21, 2021. Plan participants may attend, but may not provide voting instructions at, the Special Meeting.
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Given the ongoing global pandemic, shareholders are encouraged to participate in the Special Meeting virtually.
If you choose to attend the SpecialAnnual Meeting in person, we ask that you register for the meeting at www.proxydocs.com/EBC or mark your attendance preference on the proxy card that you return by mail.
If you are a record holder of our common stock, which means that your shares are represented by ledger entries in your own name, directly registered with our transfer agent Continental Stock Transfer & Trust Company, please be advised that pursuantbring valid picture identification to the lawsAnnual Meeting to allow us to verify your ownership as of the CityRecord Date. If your shares are held in “street name,” which means that the shares are held for your benefit in the name of Boston, Massachusetts masks willa broker, bank or other intermediary, please also bring a brokerage account statement or letter from your broker, bank or other intermediary reflecting stock ownership as of the Record Date in order to be required for attendees, regardless of their vaccination status.admitted to the Annual Meeting. Please note that seatingif you hold your common stock in street name, you may be limited duenot vote your shares in person at the Annual Meeting unless you obtain a legal proxy from your broker giving you the right to social distancing requirements. vote the shares at the Annual Meeting. If you own an interest in our common stock through the Company's Employee Stock Ownership Plan ("ESOP") or 401(k) Plan, you may register to attend, but may not vote at, the Annual Meeting.
Even if you plan to attend the SpecialAnnual Meeting virtually or in person, we encourage you to vote in advance by Internet, telephone, or mail so that your vote will be counted in the event that you later decide not to attend the SpecialAnnual Meeting.
Manner of Voting
Each share of common stock you hold is entitled to one vote for or against a proposal. Shares entitled to be voted at the SpecialAnnual Meeting can only be voted if the shareholder of record of such shares is present at the meetingAnnual Meeting (either in-person or virtually), returns a signed proxy card, or authorizes proxies to vote his or her shares by telephone or over the Internet. Shares represented by valid proxy will be voted in accordance with your instructions. If you choose to vote your shares by telephone or over the Internet, you may do so until the dates and times set forth below, by following the instructions on the proxy card or the Notice.
Shareholders of Record
If you are a shareholder of record of our common stock as of the Record Date, you may vote in one of the following ways:
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| By Internet |
by following the Internet or mobile voting instructions included in the proxy card and Notice until the close of polls at any time up until 11:59 p.m., Eastern Time, on Sunday, November 28, 2021.the Annual Meeting.
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| By Telephone |
by following the telephone voting instructions included in the proxy card and Notice at any time up until 11:59 p.m., Eastern Time, on Sunday, November 28, 2021.the close of polls at the Annual Meeting.
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| By Mail |
by marking, dating and signing your printed proxy card (if requested and received by mail) in accordance with the instructions on it and returning it by mail in the pre-addressed reply envelope provided with the proxy materials for receipt prior to the SpecialAnnual Meeting.
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By Internet during the Special Meeting | by following the Internet voting instructions included in the Notice or proxy card during the Special Meeting. |
In-person at
the SpecialAnnual Meeting |
by voting by ballot at the SpecialAnnual Meeting.
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You may revoke your proxy at any time before the shares are voted at the SpecialAnnual Meeting by entering new voting instructions by telephone or over the Internet before 11:59 p.m., Eastern Time on Sunday, November 28, 2021,until the close of polls at the Annual Meeting, by written notice received by our Corporate Secretary before the SpecialAnnual Meeting, by executing and returning a new proxy bearing a later date, or by voting at the Meeting. Attendance at the SpecialAnnual Meeting without voting by ballot will not revoke a previously submitted proxy.
You may specify your choices by marking the appropriate box on the proxy card. If your proxy card is signed and returned without specifying choices, your shares will be voted in accordance with the recommendation of our Board of Directors and as the individuals named as proxy holders on the proxy card deem advisable on all other matters that may properly come before the Annual Meeting. The Board of Directors recommends that you vote for the listed nominees for director; for the approval of an advisory vote on compensation paid to our NEOs; and implementationfor ratification of the Eastern Bankshares, Inc. 2021 Equity Incentive Plan ("2021 Equity Plan").appointment by the Audit Committee of our Board of Directors of our independent registered public accounting firm for the 2023 fiscal year.
Shareholders in "Street Name"“Street Name”
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| If your shares are held in “street name” through a broker, bank or other intermediary, your broker, bank or other intermediary should give you instructions for voting your shares. In these cases, you may vote by internet, telephone or mail, as instructed by your broker, bank or other intermediary. |
If you hold your shares in “street name” through a broker, bank or other representative,name,” generally the broker or other representative may only vote the shares that it holds for you in accordance with your instructions. However, if the broker or other representative has not timely received your instructions, it may vote on certain matters for which it has discretionary voting authority. Brokers have the discretion to vote their clients’ proxies only on routine matters.
At our Annual Meeting, only the ratification of the appointment of our auditors is a routine matter. The vote on election of directors and the approval of the 2021 Equity Plan is aadvisory vote on executive compensation are non-discretionary voting mattermatters, and therefore your broker will not be able to vote on this matterany of these matters without receiving your instructions. Your broker or other representative will generally provide detailed voting instructions with your proxy materials. These instructions may include information on whether your shares can be voted by telephone or over the Internet and the manner in which you may revoke your votes. You should reach out to your broker, bank or other nomineeintermediary if you have not received such instructions or have questions.
Participants in the Company's 401(k) Plan or ESOP
If you are a participant in the Company's ESOP or 401(k) Plan, you will receive a Notice by e-mail, unless you otherwise requested to receive the Notice by mail. Under the terms of these plans, the trustee or administrator votes all shares held by the plan, but each participant may direct the trustee or administrator how to vote the shares of our common stock allocated to his or her plan account. Using the Control Number received on your Notice, follow the instructions above (for "Shareholders“Shareholders of Record"Record”) to provide your voting instructions to the applicable plan trustee or administrator by Internet or telephone. If you own shares through any of these plans and you do not provide your voting instructions by 11:59 p.m., Eastern Time, on Sunday, November 21, 2021,Wednesday, May 10, 2023, the respective plan trustees or administrators will vote your shares in accordance with the terms of the respective plans. Please note that the deadline for plan participants tomust provide voting instructions (Sunday, November 21, 2021)by the specified deadline (May 10), which is one week earlier than the voting deadline for shareholders of record (Sunday, November 28, 2021)(who may vote through the closing of the polls at the Annual Meeting). In addition, due to the earlier voting deadline for plan participants, you cannot provide your voting instructions at the SpecialAnnual Meeting (either virtually or in-person). However, you may still register for and attend the SpecialAnnual Meeting and ask questions.
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Even if you plan to attend the SpecialAnnual Meeting virtually or in-person, we encourage you
to vote in advance by Internet, telephone, or mail so that your vote will be counted
in the event that you later decide not to attend the SpecialAnnual Meeting.
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Vote Required
Assuming a quorum is present at the SpecialAnnual Meeting, the vote required to adopt each of the proposal shallproposals is as follows:
•Election of Directors (Proposal 1). The election of directors is determined by a majority of the votes cast in person or by proxy by the shareholders entitled to vote on the election of directors in an uncontested election. Under our Bylaws, a nominee will be elected to the Board of Directors if the votes cast “for” the nominee’s election exceed the votes cast “against” the nominee’s election. Abstentions and broker non-votes are not counted as votes “for” or “against” a nominee and will have no effect upon the outcome of the vote on the election of directors.
•All Other Matters: Advisory Vote on Executive Compensation (Proposal 2); and Ratification of the Appointment by the Audit Committee of our Board of Directors of Our Independent Registered Public Accounting Firm (Proposal 3). All other matters are determined by a majority of the votes cast by the holders of the shares present or represented by proxy at the SpecialAnnual Meeting and voting on each matter. Under our Bylaws, abstentionsAbstentions and broker non-votes will have no effect on the determination of whether shareholders have approved the proposal.these proposals.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of shares of our common stock as of October 1, 2021,Friday, March 10, 2023, with respect to:
•those persons we know to beneficially own more than 5% of the outstanding shares of our common stock based on our review of filings made with the Securities and Exchange Commission ("SEC"(“SEC”);
•each of our named executive officers ("NEOs")NEOs and directors; and
•all of our directors and executive officers as a group.
Unless otherwise indicated, the address of any person or entity listed is c/o Eastern Bankshares, Inc., 265 Franklin Street, Boston, MA 02110Massachusetts 02110. The applicable percentage of beneficial ownership is based on 186,758,154176,328,426 shares of our common stock outstanding as of October 1, 2021.March 10, 2023.
Beneficial ownership is determined in accordance with the rules of the SEC. Unless otherwise indicated, we believe, based on information furnished by such persons, that each person listed below has sole voting and investment power with respect to the shares of Company common stock shown as beneficially owned. Securities that may be beneficially acquired within 60 days of October 1, 2021Friday, March 10, 2023 are deemed to be beneficially owned by the person holding such securities for the purpose of computing ownership of such person but are not treated as outstanding for the purpose of computing the ownership of any other person.
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| Name of Beneficial Owner | Director or Indirectly Held
(#)(1)(2) | Right to Acquire
(#)(3) | Total Amount and Nature of Beneficial Ownership of Common Stock
(#) | Percentage of Common Stock (%) |
| The Vanguard Group (4) | 15,889,055 | | 15,889,055 | 8.51% |
| Principal Trust Company (5) | 14,940,652 | | 14,940,652 | 8.00% |
| BlackRock, Inc. (6) | 11,466,094 | | 11,466,094 | 6.14% |
| Richard C. Bane | 120,000 | (7) | 120,000 | * |
| Luis A. Borgen (8) | 100,000 | (7) | 100,000 | * |
| Joseph T. Chung (9) | 50,000 | (7) | 50,000 | * |
| Paul M. Connolly | 12,500 | (7) | 12,500 | * |
| Bari A. Harlam (9)(10) | 30,000 | (7) | 30,000 | * |
| Diane S. Hessan (11) | 42,000 | (7) | 42,000 | * |
| Richard E. Holbrook (10) | 196,500 | (7) | 196,500 | * |
| Deborah C. Jackson (9)(12) | 32,500 | (7) | 32,500 | * |
| Peter K. Markell | 100,000 | (7) | 100,000 | * |
| Robert F. Rivers (9)(13) | 200,105 | - | 200,104 | * |
| Greg A. Shell (9) | 200,000 | (7) | 200,000 | * |
| Paul D. Spiess (14) | 100,000 | (7) | 100,000 | * |
| Quincy L. Miller (15) | 84,625 | - | 84,624 | * |
| James B. Fitzgerald (16) | 150,301 | - | 150,104 | * |
| All Directors and Executive Officers as a group (22 persons)(17) | 1,895,715 | (7) | 1,895,715 | 1.01% |
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| Name of Beneficial Owner | Directly or Indirectly Held
(#)(1)(2) | Right to Acquire
(#)(3) | Total Amount and Nature of Beneficial Ownership of Common Stock
(#) | Percentage of Common Stock (%) |
| The Vanguard Group (4) | 15,603,193 | | 15,603,193 | 8.83% |
| Principal Trust Company (5) | 14,921,646 | | 14,921,646 | 8.45% |
| BlackRock, Inc. (6) | 11,277,394 | | 11,277,394 | 6.40% |
| Richard C. Bane (7) | 184,965 | - | 184,965 | * |
| Luis A. Borgen (8) | 77,546 | - | 77,546 | * |
| Joseph T. Chung (9)(12) | 114,965 | - | 114,965 | * |
| Paul M. Connolly (10) | 77,465 | - | 77,465 | * |
| Bari A. Harlam (11)(12) | 72,465 | - | 72,465 | * |
| Diane S. Hessan (13) | 106,965 | - | 106,965 | * |
| Richard E. Holbrook (14) | 261,465 | - | 261,465 | * |
| Deborah C. Jackson (12)(15) | 91,752 | - | 91,752 | * |
| Peter K. Markell (16) | 164,965 | - | 164,965 | * |
| Robert F. Rivers (12)(17) | 216,926 | - | 216,926 | * |
| Paul D. Spiess (18) | 164,965 | - | 164,965 | * |
| Quincy L. Miller (19) | 96,410 | - | 96,410 | * |
| James B. Fitzgerald (20) | 162,531 | - | 162,531 | * |
| Donald M. Westermann (21) | 29,139 | - | 29,139 | * |
| Kathleen C. Henry (22) | 29,140 | - | 29,140 | * |
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| All Directors and Executive Officers as a group (24 persons) (23) | 2,307,333 | - | 2,307,333 | 1.31% |
* Less than 1%
(1)The number of shares beneficially owned by each shareholder is determined under the rules of the SEC, and the information provided is not necessarily indicative of beneficial ownership for any other purpose. Unless otherwise indicated, as determined under such rules, each shareholder has sole investment and voting power (or
shares such power with his or her spouse) with respect to the shares reported in this table. The inclusion of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of such shares.
(2)For executive officers, shares directly or indirectly held includes shares held by the Company's ESOP, including in the amounts of 1051,845 shares for each of Mr. Rivers, Mr. Miller and Mr. Fitzgerald, respectively.our NEOs. Fractional shares have been rounded down.
(3)Consists of shares of the Company's common stock which the named individual or group has the right to acquire within 60 days of October 1, 2021.Friday, March 10, 2023.
(4)The addressBased upon information regarding Company holdings reported by way of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. The Vanguard Group filed as the parent holding company of Vanguard Asset Management, Limited; Vanguard Fiduciary Trust Company; Vanguard Global Advisors, LLC; Vanguard Group (Ireland) Limited; Vanguard Investments Australia Ltd; Vanguard Investments Canada Inc.; Vanguard Investments Hong Kong Limited; and Vanguard Investments UK, Limited. The information about The Vanguard Group is based on itsAmendment No. 2 to a Schedule 13G filed with the SEC on February 10, 2021, and is9, 2023, by The Vanguard Group ("Vanguard"). Vanguard reported that, as of December 31, 2020.2022, it had shared voting power over 150,702 shares; sole dispositive power over 15,295,853 shares; and shared dispositive power over 307,340 shares. Vanguard beneficially owns the Company holdings disclosed in the table above in its capacity as an investment advisor.
(5)Based upon information regarding Company holdings reported by way of Amendment No. 2 to a Schedule 13G filed with the SEC on February 6, 2023, by Delaware Charter Guarantee & Trust Company dba Principal Trust Company as Directed Trustee ("Trustee") of the ESOP. The Trustee reported that, as of December 31, 2022, it held 14,921,646 shares of the Company's common stock, as to which it had both shared voting power and shared dispositive power and as to which it disclaims beneficial ownership. The address of Principal Trust Companythe Trustee is 1013 Centre Road Ste 300, Wilmington DE 19805-1265. The ESOP is subject to the Employee Retirement Income Security Act of 1974 (“ERISA”). Delaware Charter Guarantee & Trust Company dba Principal Trust Company acts as the Directed Trustee of the ESOP (“Trust”). As of December 31, 2020, the Trust held 14,940,652 shares of the Company's common stock. The securities reported include all shares held of record by the Trustee. The Trustee follows the directions of the investment fiduciary named in the ESOP or other parties designated in the ESOP’s trust agreement with respect to voting and disposition of shares. The Trustee, however,shares and is subject to certain fiduciary duties under ERISA as limited in the trust agreement. The Trustee disclaims beneficial ownershipERISA.
(6)Based upon information regarding Company holdings reported by way of the shares of common stock that are the subject of theAmendment No. 2 to a Schedule 13G filed with the SEC by Principal Trust Company on February 11, 2021, which is as of December 31, 2020.
(6)6, 2023, by BlackRock, Inc. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. BlackRock, Inc. filed as the parent holding company of Blackrock Life Limited, BlackRock Advisors, LLC; Aperio Group, LLC; BlackRock Asset Management Canada Limited; BlackRock Fund Advisors;(Netherlands) B.V.; BlackRock Institutional Trust Company, National Association; BlackRock Asset Management Ireland Limited; BlackRock Financial Management, Inc; andInc.; BlackRock Asset Management Schweiz AG; BlackRock Investment Management, LLC.LLC; BlackRock Investment Management (UK) Limited; BlackRock Asset Management Canada Limited; BlackRock Investment Management (Australia) Limited; BlackRock Fund Advisors; and BlackRock Fund Managers Ltd. The information about BlackRock, Inc. is based on its Schedule 13G filed with the SEC on February 2, 2021, and isreporting person reported that, as of December 31, 2020.2022, it had sole voting power and sole dispositive power over 10,964,730 and 11,277,394 shares, respectively.
(7)If the 2021 Equity Plan is approved by the Company's shareholders, the director will automatically be granted a number of whole shares of restricted stock with a value approximately equal to, but not in excess of, $1.25 million as of the date of grant. Such grant will be self-executing and will be deemed to be granted on the day following the approval of the 2021 Equity Plan by the Company’s shareholders. These grants will vest pro-rata on an annual basis over a five-year period.
(8)Consists of (i) 53,730132,419 shares held directly and (ii) 46,27052,546 shares of restricted stock that are subject to applicable vesting requirements.
(8)Consists of (i) 25,000 shares held directly and (ii) 52,546 shares of restricted stock that are subject to applicable vesting requirements.
(9)Consists of (i) 62,419 shares held directly and (ii) 52,546 shares of restricted stock that are subject to applicable vesting requirements.
(10)Consists of (i) 24,919 shares held directly and (ii) 52,546 shares of restricted stock that are subject to applicable vesting requirements.
(11)Consists of (i) 7,419 shares held directly; (ii) 12,500 shares held in an individual retirement account ("IRA").joint tenancy with spouse; and (ii) 52,546 shares of restricted stock that are subject to applicable vesting requirements.
(9)(12)Excludes 7,479,3265,759,427 shares of Company common stock beneficially owned by the Eastern Bank Foundation ("Foundation"(“Foundation”), as of March 10, 2023, as to which the director shares investment power as a trustee of the Foundation. The Company donated such shares in connection with its IPO.initial public offering. The Foundation is a charitable trust under Massachusetts law. It is organized exclusively for charitable purposes, and its trust instrument provides that no part of the Foundation's net earnings will inure to the benefit of or be payable to any private shareholder or individual. As required by Federal Reserve Board regulations, all shares of Company common stock held by the Foundation must be voted in the same ratio as all other shares of the Company common stock on all proposals considered by the Company's shareholders.
(10)Shares held in joint tenancy with spouse.
(11)(13)Consists ofof (i) 40,000052,419 shares held directly; (ii) 52,546 shares of restricted stock that are subject to applicable vesting requirements; and (ii)(iii) 2,000 shares held by Crimson Seed Capital, LLC, which is controlled by Ms. Hessan's spouse and ofas to which Ms. Hessan disclaims beneficial ownership except to the extent of any pecuniary interest therein.
(12)(14)Consists of (i) 13,50012,419 shares held directlydirectly; (ii) 196,500 shares held in joint tenancy with spouse; and (ii) 52,546 shares of restricted stock that are subject to applicable vesting requirements.
(15)Consists of (i) 20,206 shares held directly; (ii) 19,000 shares held in an IRA.IRA; and (ii) 52,546 shares of restricted stock that are subject to applicable vesting requirements.
(13)(16)Consists of (i) 112,419 shares held directly and (ii) 52,546 shares of restricted stock that are subject to applicable vesting requirements.
(17)Consists of (i) 15,081 shares held directly; (ii) 200,000 shares held in joint tenancy with spousespouse; and (ii) 105(iii) 1,845 shares held by the Company's ESOP.
(14)(18)Consists of (i) 50,00062,419 shares held directly anddirectly; (ii) 50,000 shares held by spouse.spouse; and (ii) 52,546 shares of restricted stock that are subject to applicable vesting requirements.
(15)(19)Consists of (i) 10,045 shares held directly; (ii) 83,240 shares held through IRAs, (ii)IRAs; (iii) 1,280 shares held by spouse's IRA, and (iii) 105(iv) 1,845 shares held by the Company's ESOP.
(16)(20)Consists of (i) 17,96510,046 shares held directly; (ii) 18,409 shares held in Mr. Fitzgerald's 401(k) Plan account, (ii)account; (iii) 132,231 shares held in joint tenancy with spouse,spouse; and (iii) 105(iv) 1,845 shares held by the Company's ESOP.
(17)(21)Consists of (i) 6,574 shares held directly; (ii) 20,720 shares held in 401(k) Plan account; and (iii) 1,845 shares held by the Company's ESOP.
(22)Consists of (i) 6,575 shares held directly; (ii) 20,720 shares held in 401(k) Plan account; and (iii) 1,845 shares held by the Company's ESOP.
(23)Includes (i) 1,361,2411,818,806 shares held directly or indirectly with spouse or spouse's entity;as custodian for the benefit of a family member; (ii) 188,510142,240 shares held in IRAs, (iii) 344,809320,457 shares held in 401(k) Plan accounts, and (iv) 1,15525,830 shares held by the Company's ESOP. Dividends paid on shares held by participants in 401(k) Plan and ESOP accounts are automatically reinvested to acquire additional shares of Company stock. Shares forfeited by ESOP participants are reallocated to remaining participants based on eligible compensation, in the same manner that shares are allocated for such year.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our securities. Based solely upon a review of these filings, all Section 16(a) filing requirements applicable to such persons were complied with during 2022 on a timely basis, with the following exception: a Form 4 for executive officer Martha A. Dean in connection with an equity award granted on March 1, 2022, was untimely filed on March 9, 2022, due to a delay in receiving EDGAR filing codes.
PROPOSAL 1
APPROVALELECTION OF THE EASTERN BANKSHARES, INC. 2021 EQUITY INCENTIVE PLANDIRECTORS
Overview
The Company’sCurrently, our Board of Directors unanimously recommendsis divided into three classes of directors serving staggered three-year terms, with each class being as equal in number as possible. Directors for each class are elected at the annual meeting of shareholders held in the year in which the term for their class expires. Four directors are standing for election at the Annual Meeting.
Based on the recommendation of its Nominating and Governance Committee, our Board of Directors has nominated Luis A. Borgen, Diane S. Hessan, Robert F. Rivers, and Paul D. Spiess for election as directors for the three-year term expiring at the 2026 annual meeting of shareholders. Messrs. Borgen, Rivers, and Spiess and Ms. Hessan are each currently a member of our Board of Directors. If any nominee becomes unable to serve as a director, the proxy holders may vote the proxy for the election of a substitute nominee to be designated by our Board of Directors. We do not expect that any nominee will be unable to serve. Directors serve until the expiration of their terms and until their successors have been elected and qualified or until their earlier retirement or their resignation, death or removal in accordance with our Bylaws.
In accordance with an amendment approved by our shareholders approvein 2022, our Articles of Organization have been modified such that for our annual meetings of shareholders in 2025 and 2026, the Eastern Bankshares, Inc. 2021 Equity Incentive Plan (referred to in this proxy statement asclasses of directors whose terms expire at those meetings will be nominated for re-election for two- and one-year terms, respectively, and our Board of Directors will be fully declassified, with all directors standing for annual election, beginning with the “2021 Equity Plan” or the “Plan”).Company's 2027 annual meeting of shareholders.
Recommendation
Each of our nominees has considerable professional and business expertise. Our Board of Directors unanimously approvedrecommends a vote “FOR” each nominee based on its carefully considered judgment that the 2021 Equity Planexperience, qualifications, attributes and skills of each nominee qualify him or her to serve on October 1, 2021. The 2021 Equity Plan will become effective on November 29, 2021 (the “Plan Effective Date”) if shareholders approveour Board of Directors and its belief that the 2021 Equity Plan on that date. No awards have been made under the 2021 Equity Plan, however, initial awards to our non-employeeelection of Messrs. Borgen, Rivers, and Spiess and Ms. Hessan as directors are set forthis in the Plan document and will be self-executing on the day following the approvalbest interests of the Plan by shareholders.
No awards may be granted underCompany. Information regarding the 2021 Equity Plan after the day immediately before the tenth anniversaryexperience and qualifications of the Plan Effective Date. However, awards outstanding under the 2021 Equity Plan at that time will continue to be governed by the 2021 Equity Plan and the agreements under which they were granted.
Best Practices
The 2021 Equity Plan reflects the following equity compensation plan best practices:
•The Plan limits the maximum number of shares that may be issued to any one employee or one non-employee director under the 2021 Equity Plan, respectively, and to all non-employee directors as a group. For these purposes, we have generally adopted the limits set forth under the regulations of the Board of Governors of the Federal Reserve System for equity plans adopted no earlier than six months and no later than one year after a conversion stock offering, even though the 2021 Equity Plan, which is being submitted to our shareholders more than one year after our conversion offering, is not otherwise subject to these limits;
•The Plan provides for a minimum vesting requirement of one year for all equity-based awards, except that up to 5% of the awards may be issued (or accelerated) pursuant to awards that do not meet this requirement and any award may provide for accelerated vesting for death, disability, involuntary termination without cause or resignation for good reason following a change in control;
•Under the Plan, performance goals may be established by the Compensation Committee (the “Committee”) in connection with the grant of any award. The Committee generally intends to grant 50% or more of the Management Committee’s awards under the Plan as performance-based awards;
•The Plan prohibits grants of stock options with a below-market exercise price;
•The Plan prohibits repricing of stock options and cash buyout of underwater stock options without prior shareholder approval;
•The Plan prohibits payment of dividends on restricted stock or dividend equivalent rights on restricted stock units (sometimes referred to herein as “RSUs”) prior to the vesting date of the underlying award and does not permit the payment of dividend equivalent rights on any stock option;
•The Plan does not permit liberal share recycling. Shares withheld to satisfy tax withholding or to pay the exercise price of a stock option will not be available for future grant;
•The Plan does not contain a liberal change in control definition. The Plan requires “double trigger” vesting of awards upon a change in control, requiring both a change in control plus an involuntary termination or a resignation for “good reason,” except to extent an acquiror fails or refuses to assume the awards or replace them with awards issued by the acquiror; and
•Awards under the Plan are subject to the Company’s clawback policies, including under Section 954 of the Dodd-Frank Act, as well as the Company’s trading policy restrictions and hedging/pledging policy restrictions.
In addition to the above Plan features, assuming the approval of the 2021 Equity Plan by shareholders, the Company has adopted stock ownership guidelines for its officers and non-employee directors, as described further below under “Compensation Discussion and Analysis — Compensation Practices, Policies and Guidelines” section of this proxy statement, that will ensure our employees and directors interests are further aligned with thoseeach of our shareholders.directors, including our director nominees, is provided below.
Nominees for Class III Directors for the Three-Year Term That Will Expire in 2026
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| Luis A. Borgen | Experience |
| Age 53 | Luis Borgen has been a director of Eastern Bank and a trustee of its predecessor holding company, Eastern Bank Corporation, since 2016. From September 2019 through April 2022, he was Chief Financial Officer for athenahealth, Inc., a leading SaaS provider of healthcare software that automates and manages revenue cycle management and electronic health records for physician practices and health systems. Prior to that, he was Chief Financial Officer for Vistaprint, an e-commerce company that produces marketing products for small and micro businesses. Previously, he served as Chief Financial Officer for two publicly traded companies: DAVIDsTEA (from 2012-2017) and DaVita Inc. (from 2010-2012). Beginning in 1997, Mr. Borgen served in increasing roles of responsibility at Staples, Inc., leading to his appointment as Senior Vice President, Finance for the U.S. Retail business. He has served on the Boards of Directors of Carters, Inc., since November 2021 and Synopsys, Inc., since May 2022. Mr. Borgen served in the U.S. Air Force from 1992 to 1997 and attained the rank of Captain. He holds a B.S. in Management from the United States Air Force Academy, an M.S. in Finance from Boston College and an MBA with Honors from the University of Chicago Booth School of Business. Mr. Borgen is also a CFA charterholder. |
| Qualifications |
| We believe Mr. Borgen’s experience with financial accounting matters and oversight of the financial reporting process of public companies qualifies him to serve on our Board of Directors.
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| Diane S. Hessan | Experience |
| Age 68 | Diane S. Hessan has served as a director of Eastern Bank and a trustee of its predecessor holding company, Eastern Bank Corporation, since 2016. She currently serves as Chief Executive Officer of Salient Ventures, an investment and advisory company with a portfolio of angel investments focused on technology companies, a position she has held since November 2016. Previously, she was Chief Executive Officer of Startup Institute, which is dedicated to helping people transform their careers to succeed in the innovation economy. She is also Chairman of C Space, where she was Founder and Chief Executive Officer for 14 years. C Space (formerly Communispace) is a market research company, which builds online communities to help marketers generate consumer insights. Ms. Hessan has served on the boards of Brightcove since March 2017 and DP Cap Acquisition Corp I since November 2021. Ms. Hessan also serves on the boards of Tufts University, MassChallenge, Panera Brands, The Schlesinger Group and Beth Israel Deaconess Medical Center. Ms. Hessan received her MBA from Harvard Business School and her B.A. in Economics and English from Tufts University. She has also received Honorary Doctorate degrees from Bentley University and the New England College of Business. |
| Qualifications |
| We believe Ms. Hessan’s executive experience, entrepreneurial passion and customer-centric, data driven perspective qualify her to serve on our Board of Directors.
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| Robert F. Rivers | Experience |
| Age 58 | Robert F. Rivers is the Chief Executive Officer and Chair of the Board of Directors of Eastern Bankshares, Inc. and has served as the Chief Executive Officer and Chair of the Board of Directors of Eastern Bank since January 1, 2017. Mr. Rivers joined Eastern Bank in 2006 as its Vice Chair and Chief Banking Officer, becoming President in 2007, Chief Operating Officer in 2012 and an Eastern Bank director in 2015. He has also served as a trustee of Eastern Bank's predecessor holding company, Eastern Bank Corporation, since 2007. Prior to joining Eastern, from 1991 to 2005, Mr. Rivers held a number of staff and line leadership positions at M&T Bank in Buffalo, NY. Immediately prior to joining Eastern, he was an Executive Vice President for Retail Banking at the former Commercial Federal Bank in Omaha, Nebraska, following 14 years at M&T Bank. Mr. Rivers serves as Foundation Board Chair of the Dimock Center, is a member of the executive committee of the Greater Boston Chamber of Commerce, and is a trustee of Stonehill College. He also serves on the Board of the Lowell Plan, the Advisory Boards of the Lawrence Partnership and the JFK Library Foundation, and the Boston Women’s Workforce Council. A leader in Boston’s business community, Mr. Rivers has been recognized as a champion for social justice issues, having led the “Yes on 3” campaign to protect the rights of members of the LGBTQ+ community. He received his undergraduate degree from Stonehill College and holds an MBA from the University of Rochester.
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| Qualifications |
| We believe that Mr. Rivers is qualified to serve as a director based upon his experience as our Chief Executive Officer beginning in January 2017, his prior service as one of our senior executive officers, his prior senior management positions at other banks, and his familiarity with the communities that Eastern serves, including through his involvement with numerous non-profit organizations in the greater Boston area.
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| Paul D. Spiess | Experience |
| Age 73 | Paul D. Spiess has served as a director of Eastern Bank and a trustee of its predecessor holding company, Eastern Bank Corporation, since 2014. He has spent fifty years in the banking and financial services industry, serving as former Chairman of the Board of Centrix Bank and Trust, which merged with Eastern in 2014. He also served as Executive Vice President and Chief Operating Officer of CFX Bank in Keene, New Hampshire from 1993 to 1997. From 2004 to 2010, Mr. Spiess served in the office of the Governor of New Hampshire as an insurance and banking advisor. From 2000 to 2004, he served as a state legislator in Concord, New Hampshire, during which time he served on the House Commerce Committee. From 1983 to 1993, Mr. Spiess was Founder and President of Colonial Mortgage, Inc., of Amherst, New Hampshire. From 2004 through 2010, Mr. Spiess served as a health care advisor to New Hampshire Governor John Lynch and as Chairman of the Citizen’s Health Initiative. He graduated with a B.A. from Colby College in 1971 and earned an MBA degree from Boston University in 1977. |
| Qualifications |
| We believe Mr. Spiess’s extensive knowledge of banking operations and credit risk, his experience in the banking and mortgage industries, and his board leadership experience qualify him to serve on our Board of Directors. |
Our directors listed below are not up for election this year, and each will continue in office for the remainder of the 2021 Equity Plan is attached as Appendix A to this proxy statement, and the following summaryhis or her specified term of the 2021 Equity Plan is qualifiedoffice or until his or her earlier resignation, death, or removal in its entirety by reference to Appendix A.accordance with our Bylaws.
Why The Company Believes You Should Vote to Approve the 2021 Equity PlanClass II Directors Continuing in Office (Term Will Expire in 2025)
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| Richard E. Holbrook | Experience |
| Age 71 | Richard E. Holbrook currently serves as director and Chair Emeritus of Eastern Bank. Mr. Holbrook retired as Chair and Chief Executive Officer of Eastern Bank in 2016, having served in those roles since 2007. He also served as a trustee of its predecessor holding company, Eastern Bank Corporation, since 2001. Mr. Holbrook joined Eastern Bank in 1996 as Chief Financial Officer and Executive Vice President and was named President and Chief Operating Officer of Eastern Bank and Eastern Bank Corporation in 2001. He has more than 30 years of banking experience as a commercial lender, trust officer and planning and financial manager. During his leadership at Eastern, Mr. Holbrook served as the Federal Advisor Council representative for the First Federal Reserve District, meeting quarterly to discuss business and financial conditions with the Federal Reserve Board of Governors in Washington, D.C. Mr. Holbrook also served on the Board of Directors of the Federal Reserve Bank of Boston, and on the executive committee of the Boston Chamber of Commerce. He is also the former chair of the Massachusetts Bankers Association. He received his undergraduate degree from Yale University and his MBA from Harvard Business School. |
| Qualifications |
| We believe Mr. Holbrook’s experience working in the banking industry, particularly his decades of past experience as a member of our executive management team, qualifies him to serve on our Board of Directors.
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| Deborah C. Jackson | Experience |
| Age 71 | Deborah C. Jackson, the Lead Director of Eastern Bank, has served as a director of Eastern Bank since 2000 and as a trustee of its predecessor holding company, Eastern Bank Corporation, since 2001. She serves as the President of Cambridge College in Cambridge Massachusetts, a position she has held since 2011. Prior to that, Ms. Jackson served for nearly a decade as Chief Executive Officer of the American Red Cross of Eastern Massachusetts, one of the nation's largest Red Cross units. Prior to that, she served as Vice President of the Boston Foundation, where she managed its $50 million grant and initiatives program. Throughout her career, Ms. Jackson has served and continues to serve on numerous commissions, task forces and boards including the Boston Green Ribbon Commission; the Mayor's Task Force to Eliminate Racial and Ethnic Disparities in Health Care; the "City to City" program focusing on national and global best practices for urban policies; and the American Red Cross National Diversity Advisory Council. Ms. Jackson served for over 15 years on the board of the American Student Assistance Corporation, the nation's first student loan guarantor agency; and she has served on the Boston College Carroll School of Management's Advisory Board and the boards of Milton Academy and Harvard Pilgrim Health Care. She also served as Chairman of the Board of Directors of the Association of Independent Colleges and Universities in Massachusetts and was a board member of the New England Chapter of The National Association of Corporate Directors. In addition, Ms. Jackson served as the Chair of the Audit Committee and on the Board of Directors of the Boston Stock Exchange. She currently serves on the Boards of Directors of John Hancock Investments and the Amwell Corporation, where she has served since October 2020. Ms. Jackson also serves on the Board of Trustees of the Eastern Bank Foundation. Ms. Jackson attended Hampton University, graduated from Northeastern University with a B.A. and pursued graduate studies in urban studies and planning from the Massachusetts Institute of Technology. Ms. Jackson is also the recipient of Honorary Doctorate degrees from Curry College and Merrimack Valley College. Ms. Jackson was a fellow of the British American Project of Johns Hopkins University, and previously served as a fellow of the Harvard University Advanced Leadership Institute and the Harvard University Institute for College Presidents. |
| Qualifications |
| We believe Ms. Jackson's extensive executive, civic, community and board leadership experience qualifies her to serve on our Board of Directors.
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| Peter K. Markell | Experience |
| Age 67 | Peter K. Markell has served as a director of Eastern Bank and a trustee of its predecessor holding company, Eastern Bank Corporation, since 2006. He has been Executive Vice President and Chief Financial Officer of Lifespan Health Systems since January 2023. Until March 2021, he served as Executive Vice President of Administration and Finance, Chief Financial Officer and Treasurer for Mass General Brigham, which he had joined in 1999. Prior to that, he was a partner at Ernst & Young LLP. A Certified Public Accountant, Mr. Markell is a Boston College graduate with a B.A. in Accounting and Finance and serves on the Boston College Board of Trustees, where he has served as both Chairman of the Board and Chairman of the Finance Committee. Mr. Markell also currently serves on the Board of Directors of Huron Consulting Group Inc., where he is a member of its Audit and Technology and Information Security Committees, and CodaMetrix, a medical coding software platform. |
| Qualifications |
| We believe Mr. Markell’s extensive executive, accounting, and board leadership experience qualify him to serve on our Board of Directors. |
Class I Directors Continuing in Office (Term Will Expire in 2024)
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| Richard C. Bane | Experience |
| Age 67 | Richard C. Bane has served as a director of Eastern Bank since 2001 and as a trustee of its predecessor holding company, Eastern Bank Corporation, since 1996. He is the Executive Chairman of Bane Care Management LLC, which operates skilled nursing facilities and assisted living facilities in Massachusetts, where he was employed since 1984. Mr. Bane formerly served as Chairman of the Massachusetts Senior Care Association, the state’s largest professional provider group. He lectures frequently on many aspects of senior care services and post-acute care and is considered one of New England’s senior care industry leaders. Mr. Bane is also involved in a wide range of corporate and community service activities, and he is a board member of Steward Carney Hospital in Dorchester, MA. Mr. Bane holds an A.B. in Economics from Dartmouth College, and an MBA from Harvard Business School. He was also awarded an Honorary Doctorate from Salem State University. |
| Qualifications |
| We believe Mr. Bane’s extensive executive management experience and civic leadership qualify him to serve on our Board of Directors. |
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| Joseph T. Chung | Experience |
| Age 58 | Joseph T. Chung has served as a director of Eastern Bank and trustee of its predecessor holding company, Eastern Bank Corporation, since 2014. He is co-founder and Chief Executive Officer of Kinto, a care coaching platform for family caregivers looking after loved ones with Alzheimer’s Disease and related dementias, where he has served since 2019. He is also co-founder and Managing Director of Redstar Ventures, an innovative venture foundry developing a series of new companies through a topdown, market driven process, positions he has held since 2010. Prior to Kinto and Redstar, Mr. Chung was Chairman and Chief Executive Officer of Allurent and co-founder, Chairman and Chief Technology Officer of Art Technology Group, a publicly traded, global enterprise software company. Mr. Chung also serves on the Board of Trustees of the Eastern Bank Foundation. Mr. Chung holds B.S. and M.S. degrees in Computer Science from the Massachusetts Institute of Technology, and he conducted his graduate work at MIT’s Media Lab. He is a Venture Partner at the Media Lab’s E14 Fund. |
| Qualifications |
| We believe Mr. Chung’s extensive expertise in innovation and technology qualifies him to serve on our Board of Directors. |
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| Paul M. Connolly | Experience |
| Age 73 | Paul M. Connolly has served as a director of Eastern Bank and a trustee of its predecessor holding
company, Eastern Bank Corporation, since 2011. Mr. Connolly retired in 2010 as the First Vice President and Chief Operating Officer at the Federal Reserve Bank of Boston, a position he had held since 1994. As Chief Operating Officer of the Federal Reserve Bank of Boston, Mr. Connolly had responsibility for the Bank’s financial services, information technology, finance, and support and administrative activities. Mr. Connolly joined The Federal Reserve Bank in 1975. Throughout his 36-year career, he served in a variety of positions in information technology, payments, planning and economic research, served on the Federal Reserve Financial Services Policy Committee and had national leadership responsibility for payment services and financial management. He currently serves on the Board of Directors for the John Hancock Life Insurance Companies. He received an MBA from Harvard Business School and an A.B. from Boston College. |
| Qualifications |
| We believe Mr. Connolly’s extensive banking and regulatory experiences qualify him to serve on our Board of Directors. |
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| Bari A. Harlam | Experience |
| Age 61 | Bari A. Harlam has served as a director of Eastern Bank and a trustee of its predecessor holding company, Eastern Bank Corporation, since 2014. Ms. Harlam is the co-founder of Trouble, LLC, a position she has held since April 2020, and has served as a member of the Boards of Directors of Aterian, Inc., since February 2020; OneWater Marine, Inc., since May 2020; and Rite Aid Corporation since August 2020. She also serves on the Board of Directors of Champion Petfoods, LP. From April 2018 to March 2020, Ms. Harlam served as the Chief Marketing Officer for Hudson's Bay Company. Prior to that, she served as the Executive Vice President of Membership, Marketing, and Analytics for BJ's Wholesale Club, beginning in 2012. Before that, she was Chief Marketing Officer at Swipely, a technology startup, and served as Senior Vice President of Marketing for CVS Health Corporation. Ms. Harlam serves on the Board of Trustees of the Eastern Bank Foundation. Ms. Harlam has also served on the faculties of The Wharton School at the University of Pennsylvania, Columbia University's Graduate School of Business, and the University of Rhode Island. She received her B.S., M.S., and Ph.D. from the University of Pennsylvania, The Wharton School of Business. Her work has been published in a variety of journals including Marketing Science, Journal of Marketing Research, and the Journal of Business Research. |
| Qualifications |
| We believe Ms. Harlam's extensive marketing and analytics expertise qualifies her to serve on our Board of Directors. |
CORPORATE GOVERNANCE
Our Board of Directors believes that equity-based incentive awards can play a key rolegood corporate governance is important to ensure that the Company is managed for the long-term benefit of its shareholders. Current copies of our Corporate Governance Guidelines, Code of Conduct, and charters for our Audit, Compensation and Human Capital Management, Nominating and Governance, and Risk Management Committees are available on our website, investor.easternbank.com, in the successGovernance section under the caption “Governance Documents.” We may also use our website in the future to make certain disclosures required by the rules of the Nasdaq Global Select Market (“Nasdaq”), on which our common stock is listed.
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Corporate Governance Highlights We have implemented several important measures that are designed to promote long-term stakeholder value:
☑ To facilitate board refreshment, we adopted a director retirement policy in our Corporate Governance Guidelines pursuant to which any director who reaches the age of 75 while serving as a director will retire from the Board effective as of the end of the year in which he or she turns 75. ☑ We seek an annual advisory vote on the compensation of our Named Executive Officers, who are the five executive officers shown in the compensation tables in this Proxy Statement. We believe this practice underscores the careful consideration we give to our shareholders’ views on our compensation practices. ☑ We have established a compensation clawback policy that will enable the Company to recoup cash and incentive compensation from executive officers in the event of certain financial restatements. ☑ We have adopted equity ownership guidelines for directors and executive officers, which set minimum ownership requirements based on a multiple of the cash portion of the annual base retainer or base salary, as applicable, then in effect. ☑ Our Insider Trading Policy prohibits our executives and directors from pledging and hedging our common stock, in order to further the alignment between shareholders and our executives and directors.
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Director Independence
Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, family and other relationships, including those relationships described under the section of this Proxy Statement entitled “Certain Relationships and Related Party Transactions,” our Board of Directors has determined that each of the following directors qualifies as an “independent director,” as defined in the listing requirements of Nasdaq: Mses. Jackson, Harlam and Hessan and Messrs. Bane, Borgen, Chung, Connolly, Markell, and Spiess. Neither Mr. Rivers nor Mr. Holbrook qualify as an “independent director” under the Nasdaq rules. Mr. Rivers is not considered independent because he currently serves as our Chief Executive Officer ("CEO"). Mr. Holbrook served as CEO from January 1, 2007 through December 31, 2016, and he has continued to receive compensation in connection with his retirement through 2022. In making these determinations on the independence of our directors, our Board of Directors considered the relationships that each such non-employee director has with the Company and all other facts and circumstances our Board of Directors deemed relevant in determining independence. Our Board of Directors also determined that each member of the Audit, Compensation and Human Capital Management, and Nominating and Governance Committees satisfies the independence standards for such committees established by encouragingthe SEC and enabling employees, officersthe Nasdaq listing rules, as applicable.
The Company has also adopted a Director Independence Policy that incorporates the requirements for independence set forth in the SEC and non-employee directorsNasdaq independence rules, as well as an Audit Committee Independence Policy that establishes separate and higher standards of independence for members of the Audit Committee, consistent the SEC and Nasdaq rules, as well as guidelines of the Federal Deposit Insurance Corporation (“FDIC”). Our Board of Directors has determined that each of Mses. Jackson, Harlam and Hessan and Messrs. Bane, Borgen, Chung, Connolly, Markell, and Spiess is an “independent director” under the Director Independence Policy and that each of Messrs. Bane, Borgen, Connolly, Markell, and Spiess meets the enhanced independence standards for Audit Committee members set forth in the Company's Audit Committee Independence Policy.
Board Composition and Leadership Structure of the Board of Directors
Our Board of Directors oversees and advises our CEO and management team, exercising their business judgment in good faith to ensure the long-term interests of our shareholders are being served. As of March 20, 2023, our Board of Directors was composed of 11 directors.
The Board does not have a fixed policy regarding the separation of the offices of the chair of the Board of Directors and the chief executive officer and believes that it should maintain the flexibility to select the chair of the Board of Directors and its board leadership structure, from time to time, based on the criteria that it deems to be in the best interests of the Company and its subsidiaries, including Eastern Bank (as usedshareholders. At this time, the offices of the chair of the Board of Directors and the chief executive officer are combined, with Mr. Rivers serving as Chair and CEO. He has served in this section,role since January 2017. With over 30 years of experience in the financial services industry, including over 16 years with us, Mr. Rivers has the knowledge, expertise, and experience to understand the opportunities and challenges facing our Company, Eastern Bank and their respective subsidiaries are collectively referred toas well as the “Company”), upon whose judgment, initiativeleadership and effortsmanagement skills to promote and execute our values and strategy.
In accordance with what we believe are governance best practices, the CompanyBoard of Directors has dependedestablished the position of Lead Director. As further set forth in the Corporate Governance Guidelines, the Lead Director is independent and continues to largely dependis recommended by our Nominating and Governance Committee and elected by the Board of Directors. Since January 2018, Ms. Jackson has served in that role, performing many of the functions that an independent chair would perform for the successful conductCompany. Those functions include serving as a key source of its business,communication between the independent directors and the CEO, consulting with the chair of the Board of Directors in establishing the agenda for each meeting of the Board, presiding in executive sessions of meetings of the Board of Directors, and coordinating the agenda for and leading meetings of the independent directors, as needed.
The Company believes that having the same person serve as CEO and Chair focuses leadership, responsibility, and accountability in a single person and that having a Lead Director provides for effective checks and balances and the ability of the independent directors to acquire an ownership stakework effectively in the Company, thereby stimulating their efforts on behalfboard setting. The Board of Directors reviews its leadership structure periodically in light of the composition of the Board of Directors and the needs of the Company and strengthening their desire to remainits shareholders.
Committees of our Board of Directors
Our Board of Directors has established four standing committees: an Audit Committee, a Compensation and Human Capital Management Committee, a Nominating and Governance Committee, and a Risk Management Committee, each with the Company. The detailscomposition and responsibilities described below. Each committee operates under a charter that has been approved by our Board of Directors. Current copies of the key design elementscommittee charters are posted on our website, investor.easternbank.com, in the Governance section under the caption “Governance Documents.”
The table below reflects the composition of the 2021 Equity Plan are set forth in the section entitled “Plan Summary” beginning on page 10Board’s four standing committees as of this proxy statement. As is further described therein, we believe our continued future success depends in large part on our ability to attract, motivate and retain the talented and highly qualified employees and non-employee directors necessary for our continued growth and success.March 20, 2023:
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| Audit Committee | Compensation and Human Capital Management Committee | Nominating and Governance Committee | Risk Management Committee |
| Richard C. Bane | µ | £ | £ | £ |
| Luis A. Borgen | £ | £ | | |
| Joseph T. Chung | | £ | £ | |
| Paul M. Connolly | £ | | µ | £ |
| Bari A. Harlam | | | | £ |
| Diane S. Hessan | | | £ | £ |
| Richard E. Holbrook | | | | £ |
| Deborah C. Jackson (1) | | £ | £ | |
| Peter K. Markell | £ | µ | £ | £ |
| Robert F. Rivers (2) | | | | £ |
| Paul D. Spiess | £ | £ | | µ |
µ Committee Chair £ Committee Member |
Historically, We Have Not Been Able to Make Equity-Based Incentive Awards(1) Lead Director
We view the use of Company common stock as a key part of our holistic compensation program, enhancing a pay-for-performance culture that aligns the interests of our leadership teams more closely to those of our shareholders.
Prior to our conversion offering, Eastern Bank was a wholly-owned subsidiary of Eastern Bank Corporation, a mutual holding company (the “MHC”), and neither the MHC nor Eastern Bank were able to issue stock compensation to employees. As a subsidiary of a mutual holding company, Eastern Bank had in place elements of its holistic compensation program that are more typical of a mutual financial institution that lacks access to equity. For example, Eastern Bank had in place (i) a performance-based long term incentive plan for senior officers and executives, with cash-based grants that matured over a multi-year period; (ii) a Senior Executive Retirement Plan (“SERP”) pursuant to which Eastern Bank made annual contributions on behalf of its four most senior executives; and (iii) an Outside Directors Retainer Continuance Plan (“ODRC”), which offered a retirement benefit to non-employee directors, with annual payments equal to the directors’ annual cash retainer. All of these compensation plans were frozen as the Company sought to align its executive and director compensation practices with those of public companies, through the anticipated adoption(2) Chair of the 2021 Equity Plan.
In anticipationBoard of the Company’s ability to adopt an equity plan, the following actions were taken. Eastern Bank froze its long-term incentive plan, effective at the end of 2019. Accordingly, no long-term incentive awards were made to senior officers and executives in 2020 or 2021. In addition, as part of the transition to public company compensation practices, the Company froze the SERP, such that no additional contributions will be made by Eastern Bank for plan years ending after December 31, 2021. It also froze the ODRC effective December 31, 2020, such that non-employee directors did not receive this benefit in 2021. The Company believes that transitioning to equity-based compensation will provide greater alignment between director and executive officer compensation and shareholder value than cash-based long term incentive compensation has provided, since the value employees realize from equity-based compensation will be based on the Company’s stock price performance. Equity-based compensation will further align the compensation interests of our employees with the investment interests of our shareholders as it promotes a focus on long-term value creation through time-based and/or performance-based vesting criteria. If the 2021 Equity Plan is approved, it is anticipated that at least half of the awards granted to the Company’s Management Committee (which includes it most senior executives including the NEOs) will be performance-based equity awards.Directors
If the 2021 Equity Plan is not approved by shareholders, the Company will have to rely entirely on the cash component of its employee compensation program to attract new employees and to retain our existing employees, which may not align our employees’ interests as closely with the investment interests of the Company’s shareholders. In addition, if the 2021 Equity Plan is not approved and the Company is not able to use stock-based awards to recruit and compensate its directors, officers and other key employees, it could be at a competitive disadvantage for key talent, which could impede our future growth plans and other strategic priorities. The inability to provide equity-based awards would likely increase cash compensation expense over time and use up cash that might be better utilized if reinvested in the Company’s business or returned to the Company’s shareholders.
Equity Awards Will Enable Us to Better Compete for Talent in Our Marketplace
Most of our competitors offer equity-based compensation to their employees and non-employee directors. We view the ability to offer equity-based compensation as important to our ability to compete for talent within our highly competitive talent marketplace. If the 2021 Equity Plan is not approved, we will be at a significant disadvantage as compared to our competitors to attract and retain our executives as well as directors and, as noted above, this could impede our ability to achieve our future growth plans and other strategic priorities.
Equity Based Incentive PlansAttendance at Meetings
In 2022, our Board of Directors met nine times, the Audit Committee met eight times, the Compensation and Human Capital Management Committee met six times, the Nominating and Governance Committee met nine times, and the Risk Management Committee met four times. Each director attended over 75% of all meetings of our Board of Directors and committees on which he or she served that were held during 2022. Our directors are Routinely Adoptedencouraged to attend the Annual Meeting, to the extent practicable. All of our directors attended the 2022 annual meeting of shareholders held on May 16, 2022.
Board Self-Evaluation and Individual Director Evaluation
Our Board of Directors conducts an annual self-evaluation of the Board’s performance as a whole to determine whether it and its committees are functioning effectively. The Nominating and Governance Committee receives comments from all directors and reports the results of the board and committee evaluations to the Board of Directors and its committees. The results are discussed with the full Board of Directors and among the respective committees, as applicable. Our Board of Directors believes such evaluations are valuable tools in assessing the Board’s effectiveness in performing its oversight of management and fulfilling its responsibilities.
Audit Committee
The current members of our Audit Committee are Mr. Bane (chair), and Messrs. Borgen, Connolly, Markell, and Spiess, and their committee report is included in this Proxy Statement under the heading “Audit Committee Report.” Each of the Audit Committee members is independent under the listing standards of Nasdaq, including under Rule 10A-3 of the Exchange Act, and our Audit Committee Independence Policy. Each of our independent directors Messrs. Markell and Borgen has been designated by Newly Publicour Board of Directors as an “audit committee financial expert” (as defined in applicable SEC regulations). None of the Audit Committee members is an employee of ours or any of our subsidiaries, nor simultaneously serves on the audit committees of more than two public companies, including ours.
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Our Audit Committee is responsible for assisting the Board in overseeing and monitoring:
•the integrity of the Company’s financial statements and other financial information provided by the Company to its shareholders; •the integrity of the accounting and financial reporting processes of the Company, and the audit of the Company’s financial statements; •the Company’s compliance with legal, regulatory and public disclosure requirements; •the appointment, qualifications, independence, performance and retention of the Company’s independent external auditor; and •the performance of the Company’s internal audit function and its Sarbanes-Oxley internal controls function.
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The Audit Committee meets regularly with management and our independent registered public accounting firm to discuss the annual audit of our financial statements, our disclosures in the “Management’s Discussion and Analysis of Financial Institutions
A substantial majorityCondition and Results of Operations” in our annual and quarterly reports filed with the SEC, the quarterly reviews of our financial institutions that complete a mutual-to-stock conversion have adopted equity-based compensation from which grants are made to attract, retainstatements and reward qualified personnelour quarterly and management. As noted above,annual earnings disclosures prior to our conversion offering, Eastern Bank was a wholly-owned subsidiarytheir release. The Audit Committee also reviews the experience and qualifications of the MHC. The Company was incorporated by the MHC in 2020 to conduct the offering, which was completed on October 14, 2020lead partner and its common stock began trading on the Nasdaq Global Select Market on October 15, 2020. Prior to the Company’s initialother senior members of Ernst & Young LLP, our independent registered public offering, noneaccounting firm (“Ernst & Young” or “EY”), including compliance with applicable rotation requirements, and considers whether there should be rotation of the MHC,firm itself.
The Audit Committee has authority under its charter to obtain advice and assistance from outside legal counsel, accounting or other outside advisors as deemed appropriate to perform its duties and responsibilities.
Compensation and Human Capital Management Committee
The current members of the Company norCompensation and Human Capital Management Committee ("C&HCM Committee") are Mr. Markell (chair), Ms. Jackson and Messrs. Bane, Borgen, Chung and Spiess. Each member of the Bank could provide equity-based incentives to employees and non-employee directors.
Our Share ReserveC&HCM Committee is Generally Consistent with Banking Regulations and Industry Standards Disclosed in Connection with our Stock Offering
The number of restricted stock awards and stock options that may be grantedindependent under the 2021 Equity Plan, measured as a percentagelisting standards of total outstanding shares issued in the stock offering, is consistent with disclosures made in connection with our stock offering in the offering prospectus. The share pool under the 2021 Equity Plan represents 14% of the 186,758,154 shares of the Company common stock issued at the time of our initial public offering including shares donated to the Eastern Bank Foundation (“IPO Shares Outstanding”), of which a number equal to 4% of the IPO Shares Outstanding (“4% Limit) will be available to grant as awards of restricted stock and/or RSUs (collectively, or separately, sometimes referred to herein as “full value awards”) and a number equal to 10% of IPO Shares Outstanding (“10% Limit”) will be comprised of stock options (the “stock option award pool”). This share reserve size,Nasdaq, including the limits on award types described above, is also consistent with the amounts permitted under Massachusetts and federal banking regulations for equity plans adopted within the first year following the initial public stock offering. Although we are not bound by such regulatory limits because we will be implementing our plan more than one year following the completion of our offering, we have generally determinedheightened standards that apply to maintain the size of the share reserve at that limit, subject to the following important exception. To the extent that we choose to grant full value awards in excess of the 4% Limit, we have committed in the 2021 Equity Plan to reduce the share pool by three stock options for each share associated with a full value award granted in excess of the 4% Limit. Should any full value awards in excess of the 4% Limit be forfeited, the stock option award pool will increase by three for each share of restricted stock or each RSU forfeited above the 4% Limit. This plan design is referred to as a “fungible plan design” and is intended to ensure that the overall plan costs remain relatively constant irrespective of the type of award granted.compensation committee members.
Determination of Shares Available under the 2021 Equity Plan
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The Compensation and Human Capital Management Committee is responsible for: •reviewing and approving compensation of executive officers (other than the chief executive officer) and recommending the chief executive officer’s compensation for approval by the independent members of the Board of Directors; •reviewing and proposing goals and objectives relevant to the chief executive officer’s compensation and evaluating the chief executive officer’s performance in light of such goals and objectives; •overseeing the Company’s various compensation and benefits plans; •overseeing senior management succession planning; •administering our incentive compensation plans, including our equity incentive compensation plan; •overseeing risk review processes for incentive compensation plans; •making recommendations to the Board regarding compensation of our directors; •overseeing the implementation of the Company's diversity, equity and inclusion (“DE&I”) programs and policies related to human capital management; •oversight of talent management programs, including employee engagement surveys and development initiatives; and •reviewing and approving the general design and terms of any significant non-executive compensation and benefits plans.
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The Company is requesting approval of a pool of shares ofC&HCM Committee has authority under its common stock (referredcharter to in this proxy statementobtain advice and assistance from outside legal counsel and other outside advisors as deemed appropriate to perform its duties and responsibilities. For 2022, the “share reserve” or “share pool”) for awards under the 2021 Equity Plan, subject to adjustment as described in the 2021 Equity Plan. The shares of common stock to be issued by the Company under the 2021 Equity Plan will be currently authorized but unissued shares or shares that may subsequently be acquired as treasury shares, including shares that may be purchased on the open market or in private transactions.
In determining the size of the share pool under the 2021 Equity Plan, the Company considered a number of factors, including: (i) the recommendations and analysis provided byC&HCM Committee engaged an independent compensation consultant, Pearl Meyer & Partners, LLC ("(“Pearl Meyer"Meyer”), the independent to advise on compensation consultant retained by the Committee to assist in the designmatters and implementation of the 2021 Equity Plan; (ii) industry practices related to the adoption of equity-based incentive plans by recently converted institutions; (iii) applicable banking regulations related to the adoption of equity based incentive plans;provide experiential guidance on what is considered fair and (iv) guidelines issued by proxy advisory firms with respect to equity incentive plans, including the potential cost and dilution to shareholders associated with the share pool.
The Company disclosed to shareholders in its prospectus for its initial public offering that it expected to adopt an equity incentive plan that, if adopted within the first year following the initial public stock offering, would include restricted stock awards and stock options equal to 4% and 10%, respectively, of the total shares issued in connection with the offering, including shares issued to the Eastern Bank Foundation. Based on these percentages and the 186,758,154 shares issued at the time of the offering, the total amount of shares available for issuance under the equity incentive plan is 26,146,141. As noted, this is the same number of shares we would be permitted to issue under applicable federal and Massachusetts regulations if our equity plan had been implemented within the one-year period following our stock offering. Even though we are implementing the 2021 Equity Plan more than one year after our offering, we have determined to maintain the size of the 2021 Equity Plan at the amount disclosedcompetitive practice in our offering prospectus.
Application of Share Pool
The Company has determined that of the shares available under the Plan, 7,470,326 shares may be issued as restricted stock or restricted stock units, including performance shares and performance share units (representing the 4% Limit described above) and 18,675,815 shares may be issued upon the exercise of stock options (representing the 10% Limit described above). As noted, the Company is adopting a fungible plan design that would permit the grant of additional awards of restricted stock or RSUs above the 4% Limit, provided that the share pool will be reduced by three shares available to be issued on the exercise of stock options for each additional share of restricted stock or RSU granted in excess of the 4% Limit (i.e., per the 3:1 fungibility ratio).
Current Stock Price
The closing price of the Company common stock on the Nasdaq Global Select Market on October 1, 2021 was $20.70 per share.
In evaluating this proposal, shareholders should specifically consider the section entitled “Plan Summary” beginning immediately below.
Plan Summary
The following summary of the material terms of the 2021 Equity Plan is qualified in its entirety by reference to the full text of the 2021 Equity Plan, which is attached as Appendix A to this proxy statement. The 2021 Equity Plan is not a qualified deferred compensation plan under Section 401(a) of the Code and is not intended to be an employee benefit plan within the meaning of ERISA.
Purpose of the 2021 Equity Plan
The purpose of the 2021 Equity Plan is to promote the long-term financial success of the Company and its subsidiaries, including Eastern Bank, by providing a means to attract, retain and reward individuals who contribute to that success and to further align their interests with those of the Company shareholders through the ownership of shares of common stock of the Company and/or through compensation tied to the value of the Company’s common stock.
Administration of the 2021 Equity Plan
The 2021 Equity Plan will be administered by the Committee or such other committee consisting of at least two “Disinterested Board Members” defined as directors who are not,industry, primarily with respect to the Company or any subsidiary: (i) current employees; (ii) former employees who continuecompensation of our executive officers, and also with regard to receive compensation (other than through a tax-qualified plan); (iii) officers at any time indirector compensation.
The C&HCM Committee has the past three years; (iv) do not receive compensation for which disclosure would be required pursuantauthority to Item 404 of Regulation S-K in accordance with the proxy solicitation rulesdelegate to subcommittees of the Securities and Exchange Commission; and (v) do not possess an interest in any other transaction andC&HCM Committee, to the chair of the C&HCM Committee, or engaged in a business relationship for which disclosure would be requiredone or more of our executive officers, as permitted under Item 404(a) of Regulation S-K. To the extent permitted by law, theapplicable law. The C&HCM Committee may also delegate its authority, including its authority to grant awards, toa committee of one or more personsdirectors, or one or more of our executive officers, subject to certain restrictions, the power to grant equity awards to employees who are not members of the Company’s Board of Directors, except that no such delegation will be permitted with respect to awards to officers who are subject to Section 16 of the Exchange Act.
Eligible Participants
Employees of, service providers to and non-employee members of the Boards of Directors of the Company and its subsidiaries, including Eastern Bank, will be eligible for selection by the Committee for the grant of awards under the 2021 Equity Plan. As of October 1, 2021, approximately 1,816 Employees of the Company and its subsidiaries and 11 non-employee members of the Company’s Board of Directors were eligible for awards under the 2021 Equity Plan.
Types of Awards
The 2021 Equity Plan provides for the grant of restricted stock, RSUs, non-qualified stock options (also referred to as “NQSOs”), and incentive stock options (also referred to as “ISOs”), any or all of which can be granted with performance-based vesting conditions. ISOs may be granted only to employees of the Company’s subsidiaries and affiliates.
Restricted Stock and Restricted Stock Units.
A restricted stock award is a grant of common stock to a participant for no consideration, or such minimum consideration as may be required by applicable law. Restricted stock awards under the 2021 Equity Plan will be granted only in whole shares of common stock and will be subject to vesting conditions and other restrictions established by the Committee consistent with the 2021 Equity Plan. Prior to the awards vesting, unless otherwise determined by the Committee, the recipient of a restricted stock award may exercise voting rights with respect to the common stock subject to the award. Cash dividends declared on unvested restricted stock awards will be withheld by the Company and distributed to a participant at the same time that the underlying restricted stock vests to the participant. Stock dividends on shares of restricted stock will be subject to the same vesting conditions as those applicable to the restricted stock on which such dividends were paid.
Restricted stock units are similar to restricted stock awards in that the value of an RSU is denominated in shares of common stock. However, unlike a restricted stock award, no shares of stock are transferred to the participant until certain requirements or conditions associated with the award are satisfied. A participant who receives an RSU award will not possess voting rights and will accrue dividend equivalent rights only on such units to the extent provided in the award agreement evidencing the award. If dividend equivalent rights are granted with respect to an RSU award, the dividend equivalent rights
will be withheld by the Company and will not be distributed before the underlying RSU vests. At the time of settlement, restricted stock units can be settled in Company common stock or in cash, in the discretion of the Committee. The same limitation on the number of shares that are available to be granted as restricted stock awards available under the 2021 Equity Plan, referred to above as the 4% Limit, also applies to RSUs.
The Committee will specify the terms applicable to a restricted stock award or an RSU award in the award agreement including the number of shares of restricted stock or number of RSUs, as well as any restrictions applicable to the restricted stock or RSU such as continued service or achievement of performance goals, the length of the restriction period and the circumstances under which the vesting of such award will accelerate.
Stock Options.
A stock option gives the recipient the right to purchase shares of common stock at a specified price (referred to as the “exercise price”) for a specified period of time. The exercise price may not be less than the fair market value of the common stock on the date of grant. “Fair Market Value” for purposes of the 2021 Equity Plan means, if the common stock of the Company is listed on a securities exchange, the closing sales price of the common stock on that date, or, if the common stock was not traded on that date, then the closing price of the common stock on the immediately preceding trading date. If the common stock is not traded on a securities exchange, the Committee will determine the Fair Market Value in good faith and on the basis of objective criteria consistent with the requirements of the Code. Under the Plan, no stock option can be exercised more than 10 years after the date of grant and the exercise price of a stock option must be at least equal to the fair market value of a share on the date of grant of the option. However, with respect to an ISO granted to an employee who is a shareholder holding more than 10% of the Company’s total voting stock, the ISO cannot be exercisable more than five years after the date of grant and the exercise price must be at least equal to 110% of the fair market value of a share on the date of grant. Stock option awards will be subject to vesting conditions and restrictions as determined by the Committee and set forth in the applicable award agreement.
Grants of stock options under the 2021 Equity Plan will be either ISOs or NQSOs. ISOs have certain tax advantages and must comply with the requirements of Code Section 422. Only employees will be eligible to receive ISOs. One of the requirements to receive favorable tax treatment available to ISOs under the Code is that the 2021 Equity Plan must specify, and the Company shareholders must approve, the number of shares available to be issued as ISOs. As a result, in order to provide flexibility to the Committee, the 2021 Equity Plan provides that all of the stock options may be issued as ISOs. ISOs cannot be granted under the 2021 Equity Plan after October 1, 2031. Dividend equivalents rights will not be paid with respect to awards of stock options.
Shares of common stock purchased upon the exercise of a stock option must be paid for in full at the time of exercise: (1) either in cash or with stock valued at fair market value as of the day of exercise; (2) by a “cashless exercise” through a third party; (3) by a net settlement of the stock option using a portion of the shares obtained on exercise in payment of the exercise price; (4) by personal, certified or cashiers’ check; (5) by other property deemed acceptable by the Committee; or (6) by a combination of the foregoing.
Performance Awards
The Committee will specify the terms of any performance awards issued under the 2021 Equity Plan in the accompanying award agreements. Any award granted under the plan, including stock options, restricted stock (referred to herein as a “performance share”) and restricted stock units (referred to herein as a “performance share unit”) may be granted subject to the satisfaction of performance conditions determined by the Committee. A performance share or performance share unit will have an initial value equal to the fair market value of a share on the date of grant. In addition to any non-performance terms applicable to the performance share or performance share unit, the Committee will set one or more performance goals which, depending on the extent to which they are met, will generally determine the number of performance shares or performance share units that will vest for the participant (unless subject to further time-based vesting conditions). The Committee may provide for payment of earned performance share units in cash, shares of the Company’s common stock, or a combination thereof. The Committee will also specify any restrictions applicable to the performance share or performance share unit award such as continued service, the length of the restriction period (subject to the one-year minimum described above) and whether any circumstances, such as death, disability, or involuntary termination in connection with or following a change in control, shorten or terminate the restriction period.
Performance Measures
A performance objective may be described in terms of company-wide objectives or objectives that are related to a specific subsidiary or business unit of the Company, and may be measured relative to a peer group, an index or business plan and based on absolute measures or changes in measures. An award may provide that partial achievement of performance measures result in partial payment or vesting of an award. Achievement of the performance measures may be measured over more than one period or fiscal year. In establishing performance measures applicable to a performance-based award, the
Committee may provide for the exclusion of the effects of certain items, including but not limited to: (i) extraordinary, unusual, and/or nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) dividends declared on the Company’s stock; (iv) changes in tax or accounting principles, regulations or laws; or (v) expenses incurred in connection with a merger, branch acquisition or similar transaction. Moreover, if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or the manner in which the Company or its Subsidiaries conducts its business or other events or circumstances render current performance measures to be unsuitable, the Committee may modify the performance measures, in whole or in part, as the Committee deems appropriate.
The Committee will specify the period over which the performance goals for a particular award will be measured and will determine whether the applicable performance goals have been met with respect to a particular award following the end of the applicable performance period. Notwithstanding anything to the contrary in the Plan, performance measures relating to any award granted under the Plan will be modified, to the extent applicable, to reflect a change in the outstanding shares of stock of the Company by reason of any stock dividend or stock split, or a corporate transaction, such as a merger of the Company into another corporation, any separation of a corporation or any partial or complete liquidation by the Company or a subsidiary.
Individual Limits
The Board of Directors has chosen to adopt the overall limitations set forth in federal banking regulations for individual and aggregate awards to employees and non-employee directors under equity plans adopted within the first year after an initial conversion to a publicly traded company. The Committee will determine the individuals to whom awards will be granted, the number of shares subject to an award, and the other terms and conditions of an award, subject to the limits set forth herein. Subject to adjustment as described in the 2021 Equity Plan:
•Employee Limits. Any individual employee will not receive shares issued under any award in excess of 25% of the aggregate shares available under the 2021 Equity Plan
•Non-Employee Director Limits. The maximum number of shares of the Company common stock that may be granted over the life of the plan to any one non-employee director shall not exceed 5% of the aggregate shares available under the 2021 Equity Plan. In addition, the maximum number of shares that may be issued, in the aggregate, to all non-employee directors under awards granted under the 2021 Equity Plan shall not exceed 30% of the aggregate shares available under the Plan.
Non-Employee Director Grants
Subject to approval of the 2021 Equity Plan, the Committee has determined to make a one-time grant to each non-employee director of the Company a number of whole shares of restricted stock with a value approximately equal to, but not in excess of, $1.25 million as of the date of grant. If the 2021 Equity Plan is approved, these one-time grants will be self-executing and will be deemed to be granted on the day following the approval of the 2021 Equity Plan by the Company’s shareholders. These one-time grants will vest pro-rata over a five-year period.
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| Restricted Stock Awards |
| Name of Non-Employee Director | Dollar Value ($) (1) | Number of Awards |
| Richard C. Bane | $ | 1,250,000 | | 60,386 |
| Luis Borgen | $ | 1,250,000 | | 60,386 |
| Joseph T. Chung | $ | 1,250,000 | | 60,386 |
| Paul M. Connolly | $ | 1,250,000 | | 60,386 |
| Bari A. Harlam | $ | 1,250,000 | | 60,386 |
| Diane S. Hessan | $ | 1,250,000 | | 60,386 |
| Richard E. Holbrook | $ | 1,250,000 | | 60,386 |
| Deborah C. Jackson | $ | 1,250,000 | | 60,386 |
| Peter K. Markell | $ | 1,250,000 | | 60,386 |
| Greg A. Shell | $ | 1,250,000 | | 60,386 |
| Paul D. Spiess | $ | 1,250,000 | | 60,386 |
| Non-Employee Directors as a Group (11 persons) | $ | 13,750,000 | | 664,246 |
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(1) Amounts are based on the fair market value of Eastern Bankshares, Inc. common stock on October 1, 2021 (the latest practicable date before the printing of this proxy statement) of $20.70 per share. The actual value of the awards is not
determinable since their value will depend upon the fair market value of Eastern Bankshares, Inc. common stock on the date of grant.
The Committee determined to grant these one-time awards in this amount, in part, in recognition of the significant efforts and dedication of each such director in connection with the Company’s initial public offering. These awards are also in recognition of the fact that the non-employee directors have not previously had the opportunity to receive equity grants. Moreover, in making these awards, consideration was given, in part, to the fact that the Board of Directors voted to freeze the ODRC effective as of December 31, 2020, in consideration of becoming a publicly traded company and the non-employee directors have not received an annual payment under the ODRC for 2021. Although the grants are, in part, in recognition of past service, the initial restricted stock grants to directors are expected to vest in equal annual installments over a period of five years from the date of grant, subject to the directors continued dedication and service to the Company during such time, subject to acceleration due to death, disability, involuntary termination of service following a change in control or other circumstance which, in the discretion of the Committee, would warrant acceleration.
On a going forward basis, the Committee intends to replace the ODRC with annual equity grants to non-employee Directors, beginning in 2022.
Employee Grants
At the present time, no specific determination has been made as to the grant or allocation of awards to officers and employees. However, the Committee intends to grant equity awards to senior executives and will meet over the next few months after shareholder approval is received to determine the specific terms of the awards, including the allocation of awards to officers and employees.
Certain Restrictions with Respect to Awards
No dividend equivalent rights will be granted or paid with respect to any stock option. Additionally, no dividends or dividend equivalent rights will be paid on unvested awards contemporaneously with dividends paid on shares of the Company’s common stock. Instead, any dividends (or dividend equivalent rights, to the extent granted), with respect to an unvested award will be accumulated or deemed reinvested until such time as the underlying award becomes vested (including, where applicable, upon the achievement of performance goals).
The minimum vesting period for each award granted under the 2021 Equity Plan must be at least one year, provided that up to 5% of the shares authorized for issuance under the 2021 Equity Plan may be issuedAct pursuant to awards with minimum vesting periods of less than one year or may be accelerated by the Committee and paid in the first year in the appropriate case. In addition, the minimum vesting requirement does not apply to accelerated vesting on account of death, disability, involuntary termination without cause, or resignation for good reason as otherwise permitted by the 2021 Equity Plan.
Adjustments
The Committee shall make equitable adjustments in the number and class of securities available for issuance under the 2021 Equity Plan (including under any awards then outstanding), the number and type of securities subject to the individual limits set forth in the 2021 Equity Plan, and the terms of any outstanding award, as it determines are necessary and appropriate, to reflect any merger, reorganization, consolidation, recapitalization, reclassification, stock split, reverse stock split, spin-off combination, exchange of shares, distribution to shareholders (other than an ordinary cash dividend), or similar corporate transaction or event.
Termination of Service
Subject to certain exceptions, generally, if a participant ceases to perform services for the Company and its subsidiaries for any reason: (i) all of the participant’s restricted stock, RSUs, performance shares, and performance share units that were not vested on the date of such cessation shall be forfeited immediately upon such cessation; (ii) all of the participant’s stock options that were exercisable on the date of such cessation shall remain exercisable for, and shall otherwise terminate at the end of, a period of 90 days after the date of such cessation, but in no event after the expiration date of the stock options; and (iii) all of the participant’s stock options that were not exercisable on the date of such cessation shall be forfeited immediately upon such cessation. In the event of a participant’s termination of service due to death, disability (as defined in the plan), retirement after age 65 or involuntary termination at or following a change in control, the participant or the participant’s beneficiary, as applicable, has up to one year to exercise outstanding stock options, provided that such period does not exceed the stock option award’s original term. Unless the Committee specifies otherwise in the award agreement, the 2021 Equity Plan provides that a participant shall be eligible for a full or prorated award upon a cessation of the participant’s service relationship due to death, disability, involuntary termination without cause or resignation for “good reason” (as defined in the 2021 Equity Plan) at or following a change in control.
Change in Control
Unless the Committee provides otherwise in the award agreement, any time-based vesting requirement applicable to an award shall be deemed satisfied in full in the event that (i) both a change in control occurs and a participant has an involuntary termination of service (including a resignation for good reason) with the Company or (ii) the surviving entity in such change in control does not assume or replace the award with a comparable award issued by the surviving entity. With respect to an award that is subject to one or more performance objectives, unless the Committee specifies otherwise in the award agreement, in the event of a change in control and involuntary termination of service (including a resignation for good reason) or in the event that the surviving entity fails to assume or replace the award with a comparable award issued by the surviving entity, achievement of such performance objective shall be deemed achieved at the greater of target or the actual level of performance measured as of the most recent completed fiscal quarter.
Transferability
Generally, awards granted under the 2021 Equity Plan are not transferable prior to death, except in limited circumstances with respect to stock options. Unless otherwise determined by the Committee, stock options, including ISOs, are transferable to certain grantor trusts established by the participant in which the participant is the sole beneficiary or between spouses’ incident to divorce, in the latter case, however, any ISOs so transferred will become NQSOs. In the Committee’s sole discretion, an individual may transfer non-qualified stock options to certain family members or to a trust or partnership established for the benefit of such family member or to a charitable organization, in each case, provided no consideration is paid to the participant in connection with the transfer. However, a participant may designate a beneficiary to exercise stock options or receive any rights that may exist upon the participant’s death with respect to awards granted under the 2021 Equity Plan. Any transferee is subject to the terms and conditions of the Plan and applicable award agreement.
Amendment and Termination
The Company’s Board of Directors may at any time amend or terminate the 2021 Equity Plan, and the Board of Directors or the Committee may amend any award agreement for any lawful purpose, but no such action shall materially adversely affect any rights or obligations with respect to any awards previously granted under the 2021 Equity Plan, except to the extent set forth herein. The Board of Directors or Committee may also amend the 2021 Equity Plan or an outstanding award agreement to conform the plan or award agreement to applicable law (including but not limited to Code Section 409A) or to avoid an accounting treatment resulting from an accounting pronouncement or interpretation issued by the SEC or Financial Accounting Standards Board after adoption of the plan or the grant of the award, which may materially and adversely affect the financial condition or operations of the Company. Neither the Board of Directors nor the Committee can reprice a stock option without prior shareholder approval, except in accordance with the adjustment provisions of the 2021 Equity Plan (as described above)defined below). NotwithstandingReferences to the foregoingC&HCM Committee in this Proxy Statement also refer to its subcommittees and its delegates, where applicable.
Compensation and Human Capital Management Committee Interlocks and Insider Participation
During 2022, none of our officers, former officers or employees served on our C&HCM Committee. None of our executive officers serves or has served as a member of the board of directors, C&HCM Committee, or other board committee performing equivalent functions of any amendmententity that would materially (i) increasehas one or more executive officers serving as one of our directors or on our C&HCM Committee.
Nominating and Governance Committee
The current members of the benefits availableNominating and Governance Committee are Mr. Connolly (chair), Mses. Jackson and Hessan and Messrs. Bane, Chung and Markell. Each member of the Nominating and Governance Committee is independent under the Plan, (ii) increase the aggregate numberlisting standards of securities under the Plan, or (iii) materially modify the requirements for participation in the Plan must be approved by the Company’s shareholders.Nasdaq.
Certain Federal Income Tax Consequences | | |
The Nominating and Governance Committee is responsible for:
•identifying, evaluating and recruiting qualified persons to serve on our Board of Directors; •selecting, or recommending to the Board for selection, nominees for election as directors; •reviewing and recommending the composition of the Board’s standing committees; •onboarding new directors and overseeing director education; •overseeing policies and programs for disclosure of environmental, social and governance (“ESG”) issues, including environmental and social matters and issues related to DE&I; •reviewing and assessing the Company’s Corporate Governance Guidelines; •overseeing compliance with our Related Party Transactions Policy; and •annually evaluating the performance, operations, and composition of our Board of Directors and its committees.
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The following is intended only as a brief summary of the federal income tax rules relevant to the primary types of awards available for issuance under the 2021 Equity Plan and is based on the terms of the Code as currently in effect. The applicable statutory provisions are subject to change in the future (possibly with retroactive effect), as are their interpretations and applications. Because federal income tax consequences may vary as a result of individual circumstances, participants are encouraged to consult their personal tax advisors with respect to their tax consequences. The following summary is limited only to United States federal income tax treatment. It does not address state, local, gift, estate, social security or foreign tax consequences, which may be substantially different.
Restricted Stock Awards
A participant generally will recognize taxable ordinary income upon the receipt of shares as a stock award or restricted stock award if the shares are not subject to a “substantial risk of forfeiture,” which is generally considered to require the performance of substantial future services. The income recognized will be equal to the fair market value of the shares at the time of receipt less any purchase price paid for the shares. If the shares are subject to a substantial risk of forfeiture, the participant generally will recognize taxable ordinary income when the substantial risk of forfeiture lapses. If the substantial risk of forfeiture lapses in installments over several years, the participant will recognize income in each year in which the substantial risk of forfeiture lapses as to that installment. If the participant cannot sell the shares without being subject to suit under Section 16(b) of the Exchange Act, also known as the short swing profits rule, the shares will be treated as subject to a substantial risk of forfeiture. The income recognized upon lapse of a substantial risk of forfeiture will be equal to the fair market value of the shares determined as of the time that the substantial risk of forfeiture lapses less any purchase price paid for the shares. The Company generally will be entitled to a deduction in an amount equal to the amount of ordinary income recognized by the participant, subject to the requirements of Section 162(m) of the Code (“Section 162(m)”), as applicable.
Alternatively, unless prohibited by the Committee, a participant may make a timely election under Section 83(b) of the Code (referred to in this proxy statement as Section 83(b)) to recognize ordinary income for the taxable year in which the participant received the shares underlying an award in an amount equal to the fair market value of the shares at that time. That income will be taxable at ordinary income tax rates. If a participant makes a timely Section 83(b) election, the participant will not recognize income at the time the substantial risk of forfeiture lapses with respect to the shares. At the time of disposition of the shares, a participant who has made a timely Section 83(b) election will recognize capital gain or loss in an amount equal to the difference between the amount realized upon sale and the ordinary income recognized upon receipt of the share (increased by the amount paid for the shares, if any). If the participant forfeits the shares after making a Section 83(b) election, the participant will not be entitled to a deduction with respect to the income recognized as a result of the election but will be entitled to a capital loss limited to the actually amount paid for the shares (if any). To be timely, the Section 83(b) election must be made within 30 days after the participant receives the shares.
The Company will generally be entitled to a deduction in an amount equal to the amount of ordinary income recognized by the participant at the time of the election.
Restricted Stock Units
A participant generally is not taxed upon the grant of an RSU. Generally, if an RSU is designed to be settled on or shortly after the RSU is no longer subject to a substantial risk of forfeiture, then at the time of settlement in stock or cash the participant will recognize ordinary income equal to the amount of cash and/or the fair market value of the shares received by the participant (subject to the short swing profits rule) and the Company will be entitled to an income tax deduction for the same amount, subject to the requirements of Section 162(m), as applicable. However, if an RSU is not designed to be settled on or shortly after the RSU is no longer subject to a substantial risk of forfeiture, the RSU may be deemed a nonqualified deferred compensation plan under Section 409A. In that case, if the RSU is designed to meet the requirements of Section 409A, then at the time of settlement the participant will recognize ordinary income equal to the amount of cash and/or the fair market value of the shares received by the participant, and the Company will be entitled to an income tax deduction for the same amount. However, if the RSU is not designed to satisfy the requirements of Section 409A, the participant may be subject to income taxes and penalties under Section 409A in the event of a violation of Section 409A.
Nonqualified Stock Options
A participant generally is not taxed upon the grant of a NQSO. However, the participant must recognize ordinary income upon exercise of the NQSO in an amount equal to the difference between the NQSO exercise price and the fair market value of the shares acquired on the date of exercise (subject to the short swing profits rule). The Company generally will have a deduction in an amount equal to the amount of ordinary income recognized by the participant in the Company’s tax year during which the participant recognizes ordinary income, subject to the requirements of Section 162(m).
Upon the sale of shares acquired pursuant to the exercise of an NQSO, the participant will recognize capital gain or loss to the extent that the amount realized from the sale is different than the fair market value of the shares on the date of exercise. This gain or loss will be long-term capital gain or loss if the shares have been held for more than one year after exercise.
Incentive Stock Options
A participant is not taxed on the grant or exercise of an ISO. The difference between the exercise price and the fair market value of the shares covered by the ISO on the exercise date will, however, be a preference item for purposes of the alternative minimum tax. If a participant holds the shares acquired upon exercise of an ISO for at least two years following the ISO grant date and at least one year following exercise, the participant’s gain or loss, if any, upon a subsequent disposition of the shares is long-term capital gain or loss. The amount of the gain or loss is the difference between the proceeds received on disposition and the participant’s basis in the shares (which generally equals the ISO exercise price). If a participant disposes of shares acquired pursuant to exercise of an ISO before satisfying these holding periods and realizes an amount in excess of the exercise price, the amount realized will be taxed to the participant as ordinary income up to the fair market value of the shares on the exercise date and any additional amount realized will be taxable to the participant as capital gain in the year of disposition; however, if the exercise price exceeds the amount realized on sale, the difference will be taxed to the participant as a capital loss. The Company is not entitled to a federal income tax deduction on the grant or exercise of an ISO or on the participant’s disposition of the shares after satisfying the holding period requirement described above. If the holding periods are not satisfied, the Company will be entitled to a deduction in the year the participant disposes of the shares in an amount equal to any ordinary income recognized by the participant, subject to the requirements of Section 162(m).
In order for an option to qualify as an ISO for federal income tax purposes, the grant of the stock option must satisfy various other conditions specified in the Code. In the event a stock option is intended to be an ISO but fails to qualify as an ISO, it will be taxed as an NQSO as described above.
Performance AwardsThe Nominating and Governance Committee has authority under its charter to obtain advice and assistance from outside legal counsel and other outside advisors as deemed appropriate to perform its duties and responsibilities.
A participant generally is not taxed uponNomination of Directors
The Nominating and Governance Committee of our Board of Directors identifies and evaluates director candidates and recommends to our Board of Directors qualified candidates for nomination as directors for election at our annual meeting of shareholders or to fill vacancies on our Board of Directors. The process followed by the grantNominating and Governance Committee in fulfilling its responsibilities includes requests to board members and others for recommendations, meetings to evaluate biographical information, experience and other background material relating to potential candidates, and interviews of restricted stock or restricted stock units granted subject toselected candidates.
In considering candidates, the satisfactionNominating and Governance Committee reviews a candidate's qualifications and independence based on the criteria set forth in the Company's Corporate Governance Guidelines, its Director Independence Policy, Audit Committee Independence Policy, and the Nominating and Governance Committee's charter (or the charter of performance conditions (such restricted stock or restricted stock units will be referred to herein as “performance shares” or “performance share units”)a particular committee). The participant will recognize taxable income atNominating and Governance Committee considers the time of settlementcomposition of the performance share/unit in an amount equal to the amount of cashBoard or committees; succession planning; and the fair market valuecurrent challenges and needs of the shares received upon settlement. The income recognized will be taxable at ordinary income tax rates. The Company generally will be entitled to a deduction in an amount equal to the amount of ordinary income recognized by the participant, subject to the requirements of Code Section 162(m). Any gain or loss recognized upon the disposition of the shares acquired pursuant to settlement of a performance share/unit will qualify as long-term capital gain or loss if the shares have been held for more than one year after settlement.
Golden Parachute Payments
The terms of the award agreement evidencing an award under the 2021 Equity Plan may provide for accelerated vesting or accelerated payout of the award in connection with a change in ownership or control of the Company. In such event, certain amounts with respect to the award may be characterized as “parachute payments” under the golden parachute provisions of the Code. Under Section 280G of the Code, no federal income tax deduction is allowed to the Company for “excess parachute payments” made to “disqualified individuals,” and receipt of such payments subjects the recipient to a 20% excise tax under Section 4999 of the Code. For this purpose, “disqualified individuals” are generally officers, shareholders or highly compensated individuals performing services forBoard, its committees, the Company and the term “excess parachute payments” includes paymentsBank, while taking into account the professional and business experience, leadership, skill, expertise, judgment, background, collegiality, diversity, availability, teamwork, and other aspects of the candidates.
Nasdaq listing requirements require each listed company to have, or explain why it does not have, two diverse directors on its board of directors, including at least one diverse director who self-identifies as female and one diverse director who self-identifies as an underrepresented minority or LGBTQ+ (subject to exceptions set forth in the natureNasdaq rules). The composition of compensationour current Board of Directors is in compliance with the Nasdaq diversity requirement.
The table below sets forth composition of our Board members within the categories prescribed by the Nasdaq listing requirements. Each category has the meaning as it is used in Nasdaq Rule 5605(f).
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Eastern Bankshares, Inc.
Board of Directors Diversity |
| As of March 20, 2023 | | As of March 20, 2022 |
| Total Number of Directors | 11 | | 12 |
| Part I: Gender Identity |
| Female | Male | Non-Binary | Did Not Disclose Gender | | Female | Male | Non-Binary | Did Not Disclose Gender |
| Directors | 3 | 8 | 0 | 0 | | 3 | 9 | 0 | 0 |
| Part II: Demographic Background |
| African American or Black | 1 | 0 | 0 | 0 | | 1 | 1 | 0 | 0 |
| Alaskan Native or Native American | 0 | 0 | 0 | 0 | | 0 | 0 | 0 | 0 |
| Asian | 0 | 1 | 0 | 0 | | 0 | 1 | 0 | 0 |
| Hispanic or Latinx | 0 | 1 | 0 | 0 | | 0 | 1 | 0 | 0 |
| Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 | | 0 | 0 | 0 | 0 |
| White | 2 | 6 | 0 | 0 | | 2 | 6 | 0 | 0 |
| Two or More Races or Ethnicities | 0 | 0 | 0 | 0 | | 0 | 0 | 0 | 0 |
| LGBTQ+ | 0 | 0 | 0 | 0 | | 0 | 0 | 0 | 0 |
| Did Not Disclose Demographic Background | 0 | 0 | 0 | 0 | | 0 | 0 | 0 | 0 |
While we do not have a formal policy on board diversity, we are proud of the diversity and talent of our Board and our management team, and our Nominating and Governance Committee and Board of Directors have affirmed their commitment to
actively seeking women, diverse and/or LGBTQ+ candidates for the pool from which director candidates are contingentselected. Our current Board of Directors' composition is 27% women and 9% Black, 9% Asian and 9% Latino/x. The Nominating and Governance Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all prospective nominees. The Nominating and Governance Committee believes that the backgrounds and qualifications of our Company’s directors, considered as a group, should provide a significant breadth of experience, knowledge and abilities to assist our Board of Directors in fulfilling its responsibilities. Nominees are not discriminated against on the basis of race, religion, national origin, sex, sexual orientation, gender identity or expression, disability or any other basis prohibited by law.
After completing its evaluation of potential nominees, the Nominating and Governance Committee makes a recommendation to our Board of Directors as to the persons who should be nominated for election to our Board of Directors, and our Board of Directors determines the nominees after considering the recommendation and report of the committee.
The Nominating and Governance Committee will consider candidates recommended by individual shareholders in accordance with the procedures and other requirements set forth in the Bylaws. Names and credentials must be provided to the committee on a change in ownership or effective control of the Company,timely basis for consideration prior to the extent that such payments (in present value) equal or exceed three timesAnnual Meeting. Shareholders who wish to recommend an individual to the recipient’s average annual taxable compensation fromNominating and Governance Committee for consideration as a potential candidate for director should submit the Companyindividual’s name, together with appropriate supporting documentation, to the Nominating and Governance Committee at the following address: Nominating and Governance Committee, c/o Corporate Secretary, Eastern Bankshares, Inc., 265 Franklin Street, Boston, Massachusetts 02110. A submission will be considered timely if it is made during the timeframes disclosed in this Proxy Statement under “Shareholder Proposals.” If our Board of Directors determines to nominate and recommend for election a shareholder-recommended candidate, then the candidate’s name will be included in the Company’s proxy card for the previous five years. Certain payments for reasonable compensation for services rendered after a changenext annual meeting of control and payments from tax-qualified plans are generally not includedshareholders.
Risk Management Committee
The Risk Management Committee of our Board of Directors assists the board in determining “excess parachute payments.” If payments or accelerations may occurfulfilling its oversight responsibilities with respect to awards granted under the 2021 Equity Plan, certain amounts in connection with such awards may constitute “parachute payments”oversight of Eastern Bank's enterprise risk management (“ERM”) practices and be subject to these “golden parachute” tax provisions.
Code Section 162(m)
Section 162(m)procedures, as in effect prior to the enactmentwell as its ERM framework (“ERM Framework”). The current members of the Tax CutsRisk Management Committee are Mr. Spiess (chair), Mses. Harlam and Jobs Act (“TCJA”)Hessan and Messrs. Bane, Connolly, Holbrook, Markell, and Rivers. The chair of the Risk Management Committee meets the criteria contained in December 2017, limitedthe Federal Reserve Board’s Enhanced Prudential Standards (12 C.F.R. § 252.33(a)(4)(ii)), as is required under this committee's charter.
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The Risk Management Committee is responsible for:
•oversight of the design, implementation and operation of the ERM Framework, approval of ERM policies, and risk monitoring practices by the Bank's enterprise risk management committee; review of reports related to the Bank's risk profile; •review of management's assessments in connection with the Bank's credit risk management and provide related reports to the Audit Committee; •review of capital, liquidity, and interest rate risks within the business and advise the Board with respect to the adequacy of capital allocated; •oversight of regulatory compliance, operational and cyber risk; and •review of adequacy of major insurance policies and coverage and related reports from the Bank's subsidiary, Eastern Insurance Group LLC. |
The Risk Management Committee has authority under its charter to one million dollarsobtain advice and assistance from outside legal counsel and other outside advisors as deemed appropriate to perform its duties and responsibilities.
Board Role in Risk Oversight
Our Board of Directors administers its internal controls and risk management oversight function directly and through its Audit, C&HCM and Risk Management Committees. In general, management is responsible for the deductionday-to-day management of the risks our Company faces, while the Board of Directors, acting as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that a company was permittedthe risk management processes designed and implemented by management are adequate and functioning as designed.
Our Board of Directors has formed the Risk Management Committee to take for annual compensation paidassist it in fulfilling its oversight responsibilities with respect to each “covered employee” (at that time defined as the Chief Executive Officer (“CEO”)management’s identification, evaluation, management and monitoring of our Company’s critical enterprise risks, including major operational, strategic and financial risks inherent in our business.
The Board of Directors and the three other highest paid executive officers employedAudit Committee regularly discuss with management, our independent auditors and our Sarbanes-Oxley controls group the Company's major risk exposures, their potential financial impact on the Company, and the steps we take to manage these risks. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements. In addition, the Audit Committee discusses policies with respect to our internal auditors and Sarbanes-Oxley controls group, as well as our independent auditors.
The C&HCM Committee assesses whether our compensation arrangements encourage inappropriate risk-taking, and whether risks arising from our compensation arrangements are reasonably likely to have a material adverse effect on the Company. See the “Compensation Disclosure and Analysis” section starting at Page 25 for information regarding the C&HCM Committee’s assessment of risks arising from our compensation practices.
Board Refreshment
Our Board of Directors believes that our Board represents a balance of experience in the industries served by our Company and in the financial and business communities, which provides effective guidance and oversight to management. Our Board of Directors also recognizes the desire to keep our Board of Directors “refreshed” and has adopted a policy limiting director tenure to age 75 for members. Directors retire at the end of the year in which they turn age 75.
Declassified Board of Directors
Historically, our Board of Directors has been divided into three classes of directors serving staggered three-year terms, with each class being as equal in number as possible. Directors for each class are elected at the annual meeting of shareholders held in the year in which the term for their class expires. However, in accordance with an amendment approved by our shareholders in 2022, our Articles of Organization have been modified such that for our annual meetings of shareholders in 2025 and 2026, the classes of directors whose terms expire at those meetings will be nominated for re-election for two- and one-year terms, respectively, and our Board of Directors will be fully declassified, with all directors standing for annual election, beginning with the Company's 2027 annual meeting of shareholders.
Communications with Directors
Shareholders and other interested parties who wish to send written communications on any topic to our Board of Directors, or the presiding director of executive sessions of the non-employee and independent directors, may do so by addressing such communications to our Board of Directors, c/o Corporate Secretary, Eastern Bankshares, Inc., 265 Franklin Street, Boston, Massachusetts 02110. Communications will be distributed to the chair of the Board, the Lead Director or the other members of the Board as appropriate depending on the facts and circumstances outlined in the communication received.
Code of Business Conduct and Ethics
Our company’s Code of Conduct is applicable to all our employees, officers and directors, as well as those representing the Company in an official capacity. A current copy of our Code of Conduct is posted on our website at investor.easternbank.com under “Governance Documents” in the “Corporate Governance” section. We intend to satisfy disclosure requirements of the SEC and Nasdaq regarding amendments to, or waivers of, our Code of Conduct by providing information on our website.
Certain Relationships and Related Party Transactions
We review relationships and transactions between our Company and our directors, nominees for director, executive officers and their immediate family members to determine whether these individuals have a direct or indirect material interest in a transaction, based on the facts and circumstances. Directors and executive officers are canvassed in writing to determine whether such related party transactions exist or are under consideration, and are required under our Code of Conduct to disclose to us potential conflicts of interest with our Company.
SEC rules require us to disclose certain relationships and related party transactions our Company enters into with our directors, nominees for director, executive officers, owners of more than 5% of the outstanding shares of our common stock, or
members of their immediate families. In accordance with the charter of the Nominating and Governance Committee and our written Related Party Transaction Policy (“RPT Policy”), the Nominating and Governance Committee is responsible for reviewing and approving related party transactions. If it is not feasible to approve related party transactions in advance, the Nominating and Governance Committee is permitted to ratify such transactions after the Company has entered into them, subject to the procedures and considerations described below.
The RPT Policy applies to any transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which:
•the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year;
•the Company or any of its subsidiaries is a participant; and
•any related person has or will have a direct or indirect interest.
Under the RPT Policy, a related person is:
•A non-employee director (or nominee for election as director) or executive officer of the Company;
•any beneficial owner of more than 5% of our common stock; or
•any immediate family member of the foregoing.
Under the RPT Policy, a related entity is:
•Any entity (other than the Company or its subsidiaries), including non-for-profit or for-profit entities, of which a related person is an employee, executive officer, partner or principal, or in which a related person directly or indirectly owns at least a 10% equity interest; or
•Any non-for-profit entity for which a related person serves as a director or trustee.
The RPT Policy also provides that certain types of related party transactions are deemed to be pre-approved or ratified, even if the aggregate amounts involved exceeds $120,000, and do not require review or approval of the Nominating and Governance Committee. Such transactions include:
•Executive and director compensation;
•Certain transactions with companies for which the only relationship of a related person is as an employee, beneficial owner of less than a 10% equity interest, or in the case of partnerships, a partner if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of that company's total annual revenues;
•Ordinary course transactions, including financial services, personal loans, and business relationships, provided that they are made in the ordinary course of business on terms substantially the same as those prevailing at the time for comparable services provided to non-affiliates;
•Certain charitable contributions made by Eastern Bank or the Foundation to organizations where a related person is a director if the aggregate amount does not exceed the lesser of $500,000 or 2% of the donee's total annual expenses, as well as charitable contributions made to organizations under common control with the Company that have been preapproved by the Board of Director or the board of trustees of the Foundation; and
•Transactions where a related person's interest arises solely from ownership of the Company's common stock and all holders of the stock receive the same benefit on a proportional basis.
The Nominating and Governance Committee is provided with the material facts of all transactions that require the Nominating and Governance Committee’s approval under the RPT Policy. In determining whether to approve or ratify a particular transaction, the Nominating and Governance Committee will take into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
Under the RPT Policy, a director is not permitted to participate in any discussion or approval of a transaction for which he or she (or an immediate family member) is the related person, and such director must provide the Nominating and Governance Committee with all material information concerning the transaction. If an approved transaction is ongoing, the Nominating and Governance Committee may establish guidelines for management to follow in its dealings with such person and will annually review and assess compliance with such guidelines, and whether the transaction remains appropriate for the Company.
Transactions with Certain Related Persons
Our Company has not entered into any such disclosable relationships or transactions under the RPT Policy since the beginning of our 2022 fiscal year and no such disclosable relationships or transactions are currently proposed.
The Sarbanes-Oxley Act of 2002 generally prohibits publicly traded companies from making loans to their executive officers and directors, but it contains a specific exemption for loans made by federally insured financial institutions, such as Eastern Bank, to their executive officers and directors in compliance with federal banking regulations. During 2022, certain directors and executive officers of the Company and Eastern Bank, as well as related persons and entities associated with those directors and executive officers, were customers of Eastern Bank and had loans outstanding. Such loans were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to Eastern Bank, and, in the opinion of management, did not involve more than the normal risk of collectability or present other unfavorable features.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following table provides certain information regarding our executive officers who are not directors. Ages are as of the date of this Proxy Statement. Our executive officers serve at the discretion of our Board of Directors.
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| Name | Age | Position |
| Quincy L. Miller | 48 | President, Eastern Bankshares, Inc.; Vice Chair and President of Eastern Bank |
| James B. Fitzgerald | 65 | Chief Administrative Officer, Chief Financial Officer and Treasurer, Eastern Bankshares, Inc.; Vice Chair, Chief Administrative Officer and Chief Financial Officer of Eastern Bank
|
| Steven L. Antonakes | 54 | Executive Vice President, Enterprise Risk Management of Eastern Bank
|
| Gregory P. Buscone | 58 | Executive Vice President, Senior Commercial Banking Officer of Eastern Bank |
| Martha A. Dean | 61 | Executive Vice President, Senior Operations Director of Eastern Bank |
| Barbara J. Heinemann | 60 | Executive Vice President, Consumer Banking of Eastern Bank |
| Kathleen C. Henry | 50 | Executive Vice President, General Counsel and Corporate Secretary of Eastern Bankshares, Inc.; Executive Vice President, General Counsel, Corporate Secretary and Chief Human Resources Officer of Eastern Bank |
| Timothy J. Lodge | 46 | President and Chief Executive Officer, Eastern Insurance Group LLC |
| Matthew A. Osborne | 48 | Executive Vice President, Senior Commercial Banking Officer of Eastern Bank |
| Nancy Huntington Stager | 63 | President and Chief Executive Officer of the Eastern Bank Foundation; Executive Vice President of Eastern Bank |
| Daniel J. Sullivan | 62 | Executive Vice President, Chief Credit Officer of Eastern Bank |
| Donald M. Westermann | 45 | Executive Vice President, Chief Information Officer of Eastern Bank |
| Sujata Yadav | 45 | Executive Vice President, Chief Marketing Officer of Eastern Bank |
Executive Officers
Quincy L. Miller - President, Eastern Bankshares, Inc.; Vice Chair and President of Eastern Bank
Mr. Miller is President of Eastern Bankshares, Inc. and Vice Chair and President of Eastern Bank. Mr. Miller joined Eastern in 2016 as Chief Banking Officer and was promoted to his current position with the Bank in 2017. He oversees Marketing and all of the Bank's Consumer, Commercial, and Wealth Divisions, and, with the Chief Executive Officer, leads the overall strategic direction of Eastern. Prior to joining Eastern, Mr. Miller served as the President of Citizens Bank, Massachusetts, and President of its Business Banking division. He started his career in consumer banking at M&T Bank in New York City in 1997. Mr. Miller is a founding member of The New Commonwealth Racial Equity & Social Justice Fund. He also serves on the Board of Directors for The Boys and Girls Club of Boston, The Bottom Line, Blue Cross Blue Shield of MA, The Alliance for Business Leadership, and Mill Cities Community Investments and as Board Emeritus of The Greater Boston Food Bank and Chair Emeritus of The Urban League of Eastern Massachusetts. Mr. Miller earned a B.A. in economics and business from Lafayette College and graduated from the Consumer Bankers Association’s Executive Banking School. He currently serves on the Board of The Consumer Bankers Association.
James B. Fitzgerald - Chief Administrative Officer, Chief Financial Officer (“CFO”))and Treasurer, Eastern Bankshares, Inc.; Vice Chair, Chief Administrative Officer, and Chief Financial Officer of Eastern Bank
Mr. Fitzgerald is the Chief Administrative Officer, Chief Financial Officer and Treasurer of Eastern Bankshares, Inc., exceptand Vice Chair, Chief Administrative Officer and Chief Financial Officer of Eastern Bank. Since joining Eastern in 2012, his responsibilities have included managing the Finance, Legal, Technology, Operations and General Services groups. He brings over 38 years of experience in the financial services industry to Eastern Bank. In 2009, Mr. Fitzgerald co-founded and was chief financial officer for NBH Holdings Corp., the extent the compensation qualified as “performance-based”bank holding company for purposesBank Midwest NA of Section 162(m). The TCJA retained the one million dollar deduction limit, but it repealed the performance-based compensation exemption and expanded the definition of “covered employees” effective for taxable years beginning after December 31, 2017. “Covered employees” for a fiscal year now includes any person whoKansas City. Prior to that, Mr. Fitzgerald served as CEO or CFO ofan executive vice president and chief financial officer at Citizens Financial Group for eight years. He began his career as a companyfinancial leader in mergers and acquisitions at any time during that fiscal year, the three other most highly compensated company executive officers for that fiscal year (whether or not employed on the last day of that fiscal year)First Fidelity Bancorp, Citizens Financial Group and any other person who wasWashington Mutual. Mr. Fitzgerald currently serves as a covered employee in a previous taxable year (but not earlier than 2017) as determined pursuant to the pre-TCJA version of Section 162(m). Any awards that the Company grants pursuant to the 2021 Equity Plan to covered employees, whether performance-based or otherwise, will be subject to the one million dollar annual deduction limitation. While the Committee intends to consider the deductibility of compensation when making equity awards, it is only one factor it considers. Becausetrustee of the eliminationMassachusetts Taxpayers Association and of the performance-based compensation exemption, the Committee expects that a portion of the compensation paid to covered employees in the form of equity grants under the 2021 Equity Plan may not be deductible by the Company.
New 2021 Equity Plan Benefits
The Company has never had an equity plan and therefore has no equity awards outstanding. Except as disclosed above with respect to the self-executing grants to non-employee directors on approval of the 2021 Equity Incentive Plan, any future awards to executive officers, non-employee directors, employees of or service providers to the Company under the 2021 Equity Plan are discretionary and cannot be determined at this time. As a result, the benefits and amounts that will be received or allocated under the 2021 Equity Plan are not determinable at this time, and the Company has not included a table that reflects such future awards.
Recommendation
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY’S SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE EASTERN BANKSHARES, INC. 2021 EQUITY INCENTIVE PLAN.Savings
Bank Employees’ Retirement Association, and he is on the board of the Thompson Island Outward Bound Education Center. Mr. Fitzgerald earned his bachelor’s degree in finance at Lehigh University and his MBA at Fordham University.
Steven L. Antonakes - Executive Vice President, Enterprise Risk Management of Eastern Bank
Mr. Antonakes is the Executive Vice President for Enterprise Risk Management at Eastern Bank, a role he has held since March 2018. He oversees Eastern Bank’s Enterprise Risk Management function, which includes Bank Secrecy Act/Anti-Money Laundering, Compliance, Credit Risk Review, Information Security, Financial and Model Risk Management, and Operational Risk. He joined Eastern Bank in 2015 as Senior Vice President, Chief Compliance Officer. Mr. Antonakes previously served as the Deputy Director and the Associate Director for Supervision, Enforcement, and Fair Lending at the Consumer Financial Protection Bureau. Prior to joining the Bureau, Mr. Antonakes served as the Massachusetts Commissioner of Banks from 2003 to 2010. Preceding his appointment as Commissioner, Mr. Antonakes served in a variety of managerial positions at the Division of Banks having joined the agency as an entry-level bank examiner in 1990. During his 25-year regulatory career, Mr. Antonakes staffed the Financial Stability Oversight Council, served as the first state-voting member of the Federal Financial Institutions Examination Council, Vice Chairman of the Conference of State Bank Supervisors, and as a founding member of the governing board of the Nationwide Multistate Licensing System. Mr. Antonakes serves on the Board of Trustees of Mass General Brigham Salem Hospital and on the Board of Directors of Camp Fire North Shore, and he is Chair of the Executive Board of Directors of the Lynn Business Partnership. Mr. Antonakes earned his B.A. from Penn State University, an MBA from Salem State University, and a Ph.D. in Law and Public Policy from Northeastern University.
Gregory P. Buscone - Executive Vice President, Senior Commercial Banking Officer of Eastern Bank
Gregory P. Buscone is Executive Vice President, Senior Commercial Banking Officer of Eastern Bank, a position he has held since March 2019. Mr. Buscone joined Eastern in 2017 as Senior Vice President and Regional Group Head in Commercial Banking with responsibility for Eastern’s Commercial & Industrial lending portfolio, which expanded its Asset Based Lending team in 2018. Prior to joining Eastern, Mr. Buscone spent 17 years at Citizens Bank, serving as a Senior Vice President and Market Manager for Massachusetts Middle Market and Specialized Lending. Active in the community, he is the Treasurer and a member of the Board of Directors of Bay Cove Human Services and the Associated Industries of Massachusetts, where he also chairs its Diversity, Equity and Inclusion Committee. He earned his B.A. degree from the College of the Holy Cross and his MBA degree from Northeastern University.
Martha A. Dean - Executive Vice President, Senior Operations Director of Eastern Bank
Martha A. Dean is Executive Vice President, Senior Operations Director of Eastern Bank, a role she has held since March 2021. She joined Eastern in December 2014 as Senior Vice President of Operational Risk Management and in July 2018, was promoted to Senior Vice President of Operations. Her prior experience includes Chief Operations and Risk Officer at Centreville Savings Bank; Chief Operating Officer at Grafton Suburban Credit Union; Chief Operations Officer and Chief Information Officer at Wainwright Bank; and Chief Operations Officer at Commonwealth National Bank, a de novo bank where she had the experience of building a brand new bank, brand and strategy to meet the financial needs of a community. She is a Board member of Operation ABLE, a nonprofit organization that provides training programs and employment services to job seekers from economically, racially and occupationally diverse backgrounds. She holds a bachelor's degree from Worcester State University.
Barbara J. Heinemann - Executive Vice President, Consumer Banking of Eastern Bank
Ms. Heinemann is Executive Vice President of Consumer Banking at Eastern Bank. She joined Eastern in 2001. She has served in her current role since 2017 and oversees Retail Banking, Private Banking, Mortgage Banking and the Customer Service Center, bringing more than 35 years of experience to her role. Ms. Heinemann was previously the Executive Vice President of Enterprise Risk Management overseeing Corporate Security, Corporate Compliance, Bank Secrecy Act Compliance, Information Security and Operational Risk Management Departments from 2014 to 2017. Prior to that she held the title of Executive Vice President, Chief Information Officer at Eastern with responsibilities for the Technology and Operations Divisions, and prior to that held various leadership positions within our Operations Department. Before joining Eastern, Ms. Heinemann spent more than 13 years with Cambridgeport Bank, where she was Director of Retail Banking and then served as Senior Vice President of Technology & Operations for seven years in addition to managing numerous enterprise-wide initiatives. She serves as a trustee of the North Shore Community College and holds Board seats on the North Shore Community College Foundation Board, the New England Automated Clearing House (“NEACH”) Board, the NEACH Payments Group Board, and the Burbank Reading YMCA Board of Advisors. She earned an MBA from the University of Maryland and graduated from America's Community Bankers' National School of Banking at Fairfield University, and the Massachusetts Bankers' Association School of Financial Studies at Babson College.
Kathleen C. Henry - Executive Vice President, General Counsel and Corporate Secretary of Eastern Bankshares, Inc.; Executive Vice President, General Counsel, Corporate Secretary and Chief Human Resources Officer of Eastern Bank
Ms. Henry is Executive Vice President, General Counsel and Corporate Secretary of Eastern Bankshares, Inc. and Executive Vice President, General Counsel, Corporate Secretary and Chief Human Resources Officer of Eastern Bank. Ms. Henry joined Eastern Bank in 2016 as General Counsel and Corporate Secretary as a Senior Vice President and was promoted to Executive Vice President in 2018. She oversees a legal team responsible for managing the legal affairs of Eastern Bankshares, Inc. and its affiliates, including Eastern Bank and Eastern Insurance Group LLC. She also serves as the primary legal advisor to Eastern’s Board of Directors, Chief Executive Officer and senior management. She is responsible for serving as Secretary to the Boards of Directors of Eastern Bankshares, Inc. and Eastern Bank, directing all governance activities for Eastern Bankshares, Inc., Eastern Bank and their respective subsidiaries. Ms. Henry began serving as Chief Human Resource Officer in November 2020 and is part of the leadership team focused on diversity, equity and inclusion. Before joining Eastern, she was General Counsel and before that Deputy General Counsel of Plymouth Rock Assurance Corporation and a litigation partner at Choate, Hall & Stewart LLP. Ms. Henry serves on the board of directors of the Political Asylum Representation Project, on the Advisory Board for the Northeastern University School of Law’s Women in the Law Conference, and as trustee of the Boston Bar Foundation. She earned a B.A. in journalism from Boston University and a J.D. from Northeastern University School of Law.
Timothy J. Lodge - President and Chief Executive Officer, Eastern Insurance Group LLC
Timothy J. Lodge is the President and Chief Executive Officer of Eastern Insurance Group LLC (“EIG”), a wholly owned subsidiary of Eastern Bank, a role he has held since January 1, 2022. He previously served as Executive Vice President, Director of Commercial Lines for EIG from August 2019 to December 2021. Mr. Lodge joined EIG in July 2013 as Senior Vice President, Commercial Lines Sales Executive, and was promoted to Senior Vice President, Commercial Lines Sales Director in July 2017. He subsequently served as Executive Vice President, Commercial Lines Sales Director from February 2019 to May 2019 and served as Executive Vice President, Commercial Lines Director of Major Accounts from May 2019 to August 2019. Mr. Lodge earned a bachelor's degree from Fairfield University.
Matthew A. Osborne - Executive Vice President, Senior Commercial Banking Officer of Eastern Bank
Matthew A. Osborne is Executive Vice President, Senior Commercial Banking Officer responsible for the bank’s Commercial Real Estate and Community Development teams, a position he has held since March 2019. He is responsible for services that include investor commercial real estate, non-profit, affordable housing, higher education, and tax credit sponsored financing. Mr. Osborne joined Eastern Bank in February 1998 after beginning his career with The Hibernia Savings Bank in Quincy. From 1998 until his promotion to Senior Commercial Banking Officer in March 2019, he moved from a Commercial Real Estate ("CRE") Lender to a CRE Team Leader/Group Head. Mr. Osborne is actively engaged across the South Shore, and he serves as a board member with both the Metro South Chamber of Commerce and the South Shore Hospital Charitable Foundation. He is a founding member of the Brockton Partnership, a group dedicated to furthering economic development in the City of Brockton. He earned his B.A. degree from Boston College.
Nancy Huntington Stager - President and Chief Executive Officer of the Eastern Bank Foundation; Executive Vice President of Eastern Bank
Ms. Stager is President and Chief Executive Officer of the Eastern Bank Foundation, an affiliate of the Company, and is Executive Vice President of Eastern Bank. Ms. Stager joined Eastern Bank in 1995 as Senior Vice President, Chief Human Resources Officer, and was promoted to Executive Vice President in 2008. She served as Chief Human Resources Officer until November 2020. Ms. Stager has led the Eastern Bank Foundation since 2001 and was appointed its first President and Chief Executive Officer in July 2019. In this role, she leads Eastern's philanthropy, volunteerism programming, and civic advocacy. Ms. Stager leads efforts to provide financial assistance and volunteers to support non-profit organizations across Eastern Bank’s
market area and serves as a leading advocate for social justice issues in line with Eastern Bank’s advocacy platform. Ms. Stager serves on a number of community boards across the Greater Boston area, including as a member of the Board of Directors of Mill Cities Community Investments, a community development financial institution with a mission of providing financing to low- and moderate-income families, developers of residential projects, and small businesses. She is also a founding partner and Treasurer of the Massachusetts LGBT Chamber of Commerce. Ms. Stager earned a B.S. in Industrial and Labor Relations from Cornell University.
Daniel J. Sullivan - Executive Vice President, Chief Credit Officer of Eastern Bank
Mr. Sullivan is Executive Vice President and Chief Credit Officer of Eastern Bank. Mr. Sullivan joined Eastern Bank in 1996 as Director of Managed Assets and was promoted to Chief Credit Officer in 2001. He oversees all credit underwriting, credit
training, managed assets and default management for the Bank. He also serves as chair of the Credit Policy and Credit Committee, where credit policies and larger credit requests are approved. In addition, he oversees all loan portfolio reviews. Prior to joining Eastern Bank, Mr. Sullivan was a vice president at Shawmut Bank, where he worked in loan workout and as a commercial relationship manager. Mr. Sullivan is an active member of the Risk Management Association (“RMA”) at the national and local levels and is certified by the RMA in credit risk management. He earned a B.S. in Economics from the University of Lowell.
Donald M. Westermann - Executive Vice President, Chief Information Officer of Eastern Bank
Mr. Westermann is an Executive Vice President and the Chief Information Officer at Eastern Bank. He joined Eastern in 2007 as Senior Vice President, Technology Engineering & Operations, a position he held until 2010. He served as Senior Vice President, Chief Technology Officer from 2010 to 2015, when he was promoted to Executive Vice President, Chief Information Officer. Currently, he leads the Technology, Operations and Eastern Labs Teams and is responsible for all aspects of the technology, operations and innovation strategy for Eastern, including digital, cyber-security, innovation, software engineering, data management, and delivery. Prior to joining Eastern, Mr. Westermann served as a Senior Manager with Grant Thornton and before that served as a consultant with Arthur Andersen, in each case in positions focused on technology and management information systems. Mr. Westermann earned a B.S. in Business Administration and Management Information Systems from Villanova University and an MBA from the Sloan School of Management of the Massachusetts Institute of Technology.
Sujata Yadav - Executive Vice President, Chief Marketing Officer of Eastern Bank
Sujata Yadav is Executive Vice President, Chief Marketing Officer of Eastern Bank, a role she has held since August 2021. Ms. Yadav joined Eastern as Senior Vice President, Consumer Lending Director in 2017, where she was responsible for delivering Eastern Bank's first, fully integrated online platforms for unsecured lending and home equity. Her responsibilities were expanded in 2019 to include product marketing and analytics, which have improved Eastern’s product marketing and performance measurement capabilities. Prior to Eastern, Ms. Yadav worked at Citibank N.A. for 14 years in both national and international leadership roles across the consumer bank, where she had responsibility for integrated omni-channel marketing, product development and portfolio optimization strategies. She has a bachelor's degree in Commerce from the University of Rajasthan and an MBA from IIM (Indian Institute of Management), Lucknow. Ms. Yadav serves on the the Boards of Directors for the United Way of Mass Bay and Merrimack Valley and the Boston Ad Club and also serves on the Board of Advisors for Winchester Hospital.
COMPENSATION DISCUSSION AND ANALYSIS
Overview
This Compensation Discussion and Analysis (“CD&A”) describes the objectives and elements of the Company’s executive compensation program and discusses the 20202022 compensation earned by our NEOsNamed Executive Officers ("NEOs") listed below.It also explains the rationale for the Compensation and Human Capital Management ("C&HCM") Committee’s 20202022 executive compensation decisions. Our NEOs for 2022 were:
The year 2020 was unprecedented in our 200+ year history as we transitioned to a publicly traded company in the midst of a global pandemic. As an emerging growth company (“EGC”), we are not required to include a CD&A section in our annual proxy statement; however, the Company is committed to providing robust compensation disclosures. Under SEC rules for EGCs, we are including executive compensation for the following three NEOs:
| | | | | |
| Executive Officer | Title |
| Robert F. Rivers | Chief Executive Officer and Chair of the Board of Directors, Eastern Bankshares, Inc.; Chief Executive Officer and Chair of the Board of Directors, Eastern Bank |
| Quincy L. Miller | President, andEastern Bankshares, Inc.; Vice Chair and President, Eastern Bank |
| James B. Fitzgerald | Chief Administrative Officer, Chief Financial Officer and Treasurer, Eastern Bankshares, Inc.; Vice Chair, Chief Administrative Officer & Treasurerand Chief Financial Officer, Eastern Bank |
| Donald M. Westermann | Executive Vice President, Chief Information Officer of Eastern Bank |
| Kathleen C. Henry | Executive Vice President, General Counsel and Corporate Secretary of Eastern Bankshares, Inc.; Executive Vice President, General Counsel, Corporate Secretary and Chief Human Resources Officer, Eastern Bank |
| |
Executive Summary
Business Overview
We areEastern Bank is a Massachusetts-chartered bank that has served the banking needs of our customers since 1818. 2020Our diversified products and services include lending, deposit, wealth management, and insurance products. Our approximately 2,000 employees serve consumers and businesses through over 120 locations in eastern Massachusetts, southern and coastal New Hampshire, and Rhode Island.
In 2022, we posted record net income of $199.8 million, which was 29% higher than the previous record we had set in 2021 of $154.7 million. This result was bolstered by a milestone yearnumber of significant achievements in 2022 with regard to our history ascore business and key initiatives, including the continued integration of Century Bancorp, Inc., which we converted from a mutualacquired in November 2021; record levels of commercial loan and home equity originations; continued strong asset quality; the acquisition of two insurance agencies; continued strong employee engagement; record achievements in diversity hiring and supplier diversity, which were key strategic focus areas for 2022; and upgrades to a publicly traded company. Our business philosophy remains unchanged:and enhancements of our technology platforms.
With regard to operate as a diversified financial services enterprise providing a broad array of banking and other financial services primarilyloans, our overall loan portfolio increased 10.5% to retail, commercial and small business customers. Highlights from 2020 include:
•We had total assets of $16.0 billion and $11.6$13.6 billion at December 31, 2020 and 2019, respectively.
•We manage our business under two business segments: our banking business, which contributed $495.0 million (which is 83.7%, of our total income for the year ended December 31, 2020), and our insurance agency business, which contributed $96.7 million (which is 16.3%, of our total income for the year ended December 31, 2020). Our banking business consists of a full range of banking, lending (commercial, residential and consumer), savings and small business offerings, including our wealth management and trust operations that we conduct through our Eastern Wealth Management division.
•Net income for 2020 (computed in accordance with generally accepted accounting principles in the United States ("GAAP")) was $22.7 million, as compared to $135.1 million for 2019. Net income for 2020 and 2019 included items that are considered noncore, which are excluded for purposes of assessing operating earnings. Net operating earnings, a non-GAAP financial measure, for 2020 were $102.1 million compared to net operating earnings of $129.7 million for 2019, representing a 21.3% decrease. This decrease was largely driven by an increase in the provision for credit losses and a decrease in net interest income, both of which are attributed to the COVID-19 pandemic.
•Total income for 2020 was $579.6 million, net of interest expense.
•Deposits increased by $2.6 billion, or 27.3%, to $12.22022, up from $12.3 billion at December 31, 2020 from $9.62021. Our commercial real estate loan portfolio increased 14% to $5.2 billion atfor 2022; residential real estate loans increased 27.7% to $2.5 billion; and consumer home equity loans increased 7.9% to $1.2 billion.
Additionally, despite a competitive labor market, we achieved record racial diversity in our hiring, with people of color comprising 47% of our new hires throughout 2022. Also, 60% of our new hires were women in 2022, and women overall comprised 66% of our workforce as of December 31, 2019. This increase was primarily2022. We increased our spend to suppliers who identify as diverse by 41% in 2022 ($12,896,328) compared to 2021 ($9,124,156).
Notably, our achievements in 2022 were accomplished against the resultbackdrop of an increase in demand deposits of $1.4 billion, an increase in interest checking deposits of $566.2 million,a particularly challenging and an increase in moneycompetitive environment for the banking industry due to factors such as widespread market deposits of $429.5 million. The average cost of deposits fell from 0.29% in 2019 to 0.10% in 2020.
Our Compensation Committee uses operating net income, also known as net operating earnings,uncertainties, a financial measure that is derived from net income calculated in accordance with GAAP, as a key measure of the performance of our NEOs as it relates to our short-term incentive compensation as described below. This non-GAAP financial measure is not meant to be considered superior to or a substitute for net income prepared in accordance with GAAP. We believe this measure allows us to compare results consistently between periodshighly competitive labor market, and to exclude certain items that may not be indicative of our core business, operating results or future outlook. A reconciliation of net operating earnings presented aboveinflationary pressures and resulting federal monetary activity, including increases to the most comparable GAAP financial measure is included in Annex A to this Proxy Statement.federal funds interest rate throughout 2022.
Compensation Highlights
20202022 Executive Compensation Program Decisions At-A-Glance
Our compensation program includes three main components: base salary, short-term cash incentives, and long-term equity compensation. Short-term cash incentives are granted under our Management Incentive Plan ("MIP"), pursuant to which
recipients are offered target award opportunities based on job responsibilities and market data. Long-term equity incentives are granted pursuant to our 2021 Equity Plan, which was approved by shareholders in November 2021. Historically, we also had granted cash awards under a legacy long-term cash-based incentive plan that predated our initial public offering ("IPO") in October 2020. The last awards under this cash-based legacy plan were granted in 2019, and the legacy plan was subsequently frozen in 2020. As a result, no long-term incentives were awarded to our executive leadership team in either 2020 or 2021. Highlights of our programs are below. See “Our 2022 Executive Compensation Program decisions were made whilein Detail” within this CD&A section for more information.
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| Base Salary | For fiscal year 2022, the C&HCM Committee approved no base salary increase for Mr. Rivers, 2.6% increases for Messrs. Miller and Fitzgerald, and 3% increases for Ms. Henry and Mr. Westermann. |
| Short-Term Incentives | Based on 2022 performance, each of our NEOs received a short-term incentives payout equal to 109% of target under our MIP, aligned with overall company performance. Total payouts for 2022 performance were $976,100 for Mr. Rivers, $385,900 for each of Messrs. Miller and Fitzgerald, and $227,300 for each of Ms. Henry and Mr. Westermann. |
Long-Term
Incentives | Initial equity grants: In February 2022, the C&HCM Committee approved the grant of equity incentive compensation awards to the Company’s executive officers, including the NEOs, using a target mix of 50% performance stock units (“PSUs”) and 50% time-based restricted stock units (“RSUs”). These awards, granted under the 2021 Equity Plan, were the first long-term incentive awards granted to any of our NEOs since 2019. They represent an important step in the transition of our legacy approach of granting 100% cash-based long-term incentive awards to our new approach of 100% equity-based long-term incentive awards (see “Transition of Long-Term Incentive Compensation” below for details).
Legacy Cash-Based LTIP Awards: The Legacy LTIP awards granted to our NEOs in 2018 (“2018 LTIP Awards”) had no value when they matured on December 31, 2022. Accordingly, our NEOs received no long term award payment in 2022. |
Transition of Long-Term Incentive Compensation: From Cash to Equity
The C&HCM Committee is committed to putting forth market-competitive compensation programs that support the Company was still a mutual holding companybusiness strategy and thusalign the 2020 Executive Compensation Program itself does not reflect equity awards. The Compensationinterests of our executives and shareholders. In 2021, the C&HCM Committee worked with the support ofmanagement and its independent compensation consultant to design and implement a new market-competitive, equity-based long-term incentive plan (“Equity LTIP”). Awards were first made to NEOs under the new plan in 2022, following shareholder approval of the 2021 Equity Plan in November 2021. As we disclosed last year, the Company:
•Froze the legacy, cash-based LTIP, which we had offered as a mutual bank before we went public, and adopted a new, shareholder-approved equity incentive plan in accordance with applicable SEC and Nasdaq rules.
•Did not provide any grants of cash or equity-based long-term compensation awards in 2020 or 2021 to any executive officers.
With this as the backdrop, the C&HCM Committee determined that the initial equity awards granted to senior management in 2022 would be delivered in part to “make-up” for the two years of missed awards. These awards were also intended to recognize significant efforts and achievement in connection with our IPO in October 2020; the Company’s acquisition of Century in November 2021; and other critical Company milestones achieved between 2019 and 2022. Accordingly, the size and terms of the 2022 equity awards reflected such considerations.
The C&HCM Committee also determined the new equity awards would be structured to reflect its commitment to putting forth a long-term incentive program that incentivizes executives to execute on longer-term financial goals that drive shareholder value creation and support the Company’s leadership retention objectives, making half of the grant at target contingent on the achievement of pre-established performance goals. The 2022 award was structured as follows:
| | | | | | | | |
| Equity Vehicle | Weight | Design At-A-Glance |
| Performance Share Units (PSUs) | 50%
(at Target)
| Rewards achievement of financial goals measured over a three-year performance period (January 1, 2022-December 31, 2024) and puts appropriate focus on long-term alignment of pay and performance.
•Half of the target PSU opportunity (25% of the total equity award) is based on the Company's total shareholder return (“TSR”) performance relative to the performance of the KRX Banks* over the performance period. •Half of the target PSU opportunity is based on the growth of the Company's operating earnings per share (“EPS”) relative to that of the KRX Banks* over the performance period.
The number of earned PSUs can range between 25% (threshold) and 150% (maximum) of the target award. If the Company's performance is below the threshold achievement level, no PSUs will be earned.
|
| Restricted Stock Units (RSUs) | 50% | RSUs will vest in equal installments over a five-year period tied to the anniversary of the grant date, March 1, 2022. |
*"KRX Banks" is defined in the "Long-Term Incentive Compensation" subsection within this CD&A.
The structural change to our long-term incentive awards, from historic cash-based awards to an equity-based approach, creates a temporary reporting anomaly in the Summary Compensation Table. Specifically, legacy cash awards must be disclosed in the final year of the performance period (when earned), while stock-based awards are disclosed in the year of the grant. Thus, so long as legacy LTIP cash grants are outstanding, we must report two cycles of long-term incentive awards in one year: the earned payout from the prior legacy cash LTIP cycle; and the grant date fair value of equity awards under the new stock-based structure.
For 2022, however, since the legacy cash LTIP cycle maturing in 2022 was determined to have no value, our NEOs' 2022 compensation will not reflect this anomaly. Following the 2023 plan year and the 2024 proxy statement, this overlap of historic cash LTIP payouts and current equity awards reported in the Summary Compensation Table will cease, as the final performance cycle under the legacy plan for cash awards that were granted in 2019 will be completed at the time, Willis Towers Watson,end of 2023.
2023 Executive Compensation Program Structure
Furthering its commitment to put forth a market-competitive, shareholder-aligned executive compensation program, in early 2023, the C&HCM Committee made the following decisions pertaining to the 2020 Executive Compensation Program in accordance with its desire to attract, retain and motivate our highly skilled, talented executives:setting compensation opportunities for 2023.
| | | | | |
| Base Salary | NEOs’ salaries were adjusted between 4.5% and 4.7% as partNo base salary increases for any of the annual executive compensation reviewNEOs. |
| Short-Term Incentives | Annual target award opportunities, which are based in part on peera percentage of base salary, job responsibilities and market data, as provided by Willis Towers Watson.did not increase from 2022. |
Annual Short-Term Long-Term Incentives | Short Term IncentivesLong-term equity incentive awards were structured using the same 50% PSU / 50% RSU equity vehicle mix as 2022. Total target award opportunities, like under the MIP, are based on a percentage of base salary, job responsibilities and market data, and were approved for the NEOs were below target and ranged from 64% of salary for Mr. Rivers and 42% of salary for Messrs. Miller and Fitzgerald.These awards reflect both the financial performance of the Company in 2020, which was challenged2023 as a result of the COVID-19 pandemic, and the strong individual performances of the NEOs in successfully driving a number of key strategic initiatives.follows:
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One-Time Discretionary
Awards | As a result of leading Eastern Bank’s response to the Paycheck Protection Program and its successful IPO, Messrs. Miller and Fitzgerald received one-time discretionary cash awards of $110,000 and $220,000 respectively. |
Long-Term
Incentives | No long-term incentive grants were awarded in 2020.Long-term incentive plan grants made in 2016 that matured on December 31, 2020 were paid in 2021. Long-term incentive plan awards are designed to reward NEOs for executing on longer term financial performance (measured as growth in capital and more recently, retained earnings) and safety and soundness objectives in support of the Company’s strategic plan.
|
Employment Agreements | No changes were made to the employment agreements the Company has in place with Messrs. Rivers and Miller.Change in control agreements, reflecting a double trigger, were put in place with the Named Executives Officers (and senior executive team) as part of the Company's Conversion (as defined below).
|
| | | | | | | | | | | |
| Named Executive Officer | Fiscal Year 2023 Salary | LTI Target Award Opportunity (as a % of Salary) | LTI Target Award Opportunity ($) |
| Robert F. Rivers * | $995,000 | 100% | $995,000 |
| Quincy L. Miller | $590,000 | 60% | $354,000 |
| James B. Fitzgerald | $590,000 | 60% | $354,000 |
| Donald M. Westermann | $463,500 | 40% | $185,400 |
| Kathleen C. Henry | $463,500 | 40% | $185,400 |
Future Executive Compensation Program Decisions
Now that*This is the third consecutive year with no increase to the CEO's base salary, as the Company has completed the conversion from a mutual to a publicly traded company (the "Conversion"), the Compensation Committee has begun reviewing certain aspects of its executive compensation program to better align with public company compensation programsincreasingly focused on performance and shareholder value creation. Cash-based long-term incentive grants were not made in 2020 or 2021 in anticipation that the Company may adopt equity-based long-term incentive plans subject to shareholder approval. The Compensation Committee did not increase salaries in 2021 for the NEOs. In making any changes to the Executive Compensation program, the Compensation Committee has received input from management to ensure the changes align with the Company’s compensation philosophy of attracting, retaining and motivating high-caliber executives to achieve the short-term and long-term goals of the Company while creating long-term shareholder value. The table below illustrates the evolution of the key components of our executive compensation program as we continue to mature as a public company.
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Evolution of Key Components of Our NEO Compensation |
As a Mutual Bank | | As a Public Company | |
☑ Base Salary | ☑ SERP or Benefit Equalization Plan (BEP) | ☑ Base Salary | ☑ Benefit Equalization Plan (BEP) |
☑ Short-Term Incentives | ☑ Defined Benefit Pension Plan | ☑ Short-Term Incentives | ☑ Defined Benefit Pension Plan |
☑ Long-Term Incentives | ☑ 401(k) Plan | ☑ Equity Incentive Compensation* | ☑ 401(k) Plan |
| | ☑ ESOP |
* Assuming shareholder approval of the 2021 Equity Plancompensation.
Revisions to Annual Short-Term Incentive Program
On May 3, 2021,The charts below show the Company adoptedtarget pay mix for our CEO, Mr. Rivers, and our other NEOs for fiscal year 2023. These charts illustrate that a new annual short-term management incentive plan (the “New MIP”), which was approvedmajority of CEO target total direct compensation is variable at 65.5%. The average target total direct compensation for our other NEOs is 51.1% variable. Variable compensation is represented by the Compensation Committee and reviewed by the Board of Directors. The purpose of the New MIP is to enable the Company to grant annual performance-based cash incentive awards to eligible participants pursuant to the terms of the plan and is effective January 1, 2021. In connection with adoption of the New MIP, the Compensation Committee voted to terminate the Company’s existing annualboth short-term incentive plan (“Prior MIP”) as of January 1, 2021. For more information about the Prior MIP(MIP) and the New MIP, see "Our 2020 Executivelong-term incentive (equity grants) at target.
2023 CEO Compensation Program in Detail — Annual Short-Term Incentive Plan" within this(at Target) 2023 Other NEO Compensation Discussion and Analysis section.(at Target)
Amendment of SERP
On July 22, 2021, the Compensation Committee reviewed the Company's Supplemental Executive Retirement Plan ("SERP"), as described further below, and approved an amendment (“SERP Amendment”) to freeze the SERP. For more information about the SERP and the SERP Amendment, see "Our 2020 Executive Compensation Program in Detail — Other Benefit Plans — Amendment to SERP" within this Compensation Discussion and Analysis section.
Equity Incentive Compensation
As described more fully in "Proposal 1 - Approval of Eastern Bankshares, Inc. 2021 Equity Incentive Plan" of this proxy statement, the Company is seeking shareholder approval of the 2021 Equity Plan which, if approved, will enable the Company to offer equity incentive compensation awards as a component of its executive compensation pay mix. As further described in such section, the Compensation Committee expects to make one-time awards to certain members of management in 2022, including our CEO and NEOs, in recognition of their contributions to the Company's IPO.
The Compensation Committee also expects to set individual targets in connection with annual equity incentive compensation awards to the Company's executive officers, which the Compensation Committee anticipates will include both time-based and performance-based awards. The first such awards will be made no earlier than 2023.
For the one-time awards and any equity award to executive officers, including the CEO and any NEOs, the Compensation Committee expects that at least 50% of such equity incentive compensation awards will be performance-based, because it believes that a blended approach will align with the Company's pay-for-performance principles and provide appropriate incentives for long-term shareholder value creation while also serving as a retention tool for the Company. The use of performance-based awards will put appropriate focus on long-term alignment and pay relative both to market peers and shareholder returns.
Shareholder Advisory Votes on Executive Compensation
The Company highly values input from its shareholders and the Compensation Committee plans to incorporate this feedback when making compensation decisions going forward. At its 2021our 2022 annual meeting of shareholders, ("2021 Annual Meeting"),we received strong support for our NEO compensation program, as 96.2% of the Company voluntarily sought an advisory say-on-pay vote and antotal votes cast on the advisory vote on say-on-pay voted to hold such say-on-pay votes on an annual basis, though neither is a requirement as an EGC. Atapprove the 2021 Annual Meeting, our shareholders recommended that say-on-pay votes occur every year.proposal. The CompensationC&HCM Committee has considered, and each year will consider, the results of the prior advisory vote as it reviews and determines the total compensation packages for our NEOs in the current year. In 2021, we received support for our NEOThe Company highly values input from its shareholders, and the C&HCM Committee plans to incorporate this feedback when making compensation program, as 95% of the total votes cast on the advisory vote on say-on-pay voted to approve the proposal.decisions going forward.
Compensation Governance Practices
The Company has in place the following executive compensation best practices and policies which promote sound compensation governance and are in the best interests of our shareholders:
| | | | | |
| What We DO | What We Don’t Do |
☑ Long-time independent Compensation Committee
(including prior to being a publicly-traded company)Heavy emphasis on variable compensation and performance-based incentives | ☒ No guaranteed incentive payments |
☑ Performance-based variable compensation through formal incentive programsStock ownership guidelines | ☒ No uncapped non-sales incentive plans |
☑ Annual incentive plan risk assessments | ☒ No significant/excessive perquisites |
☑ Benchmarking against a relevant peer group | ☒ No tax gross-ups |
| ☑ Double trigger for change in control payments | ☒ No significant/excessive perquisites |
| ☑ Clawback policy | ☒ No tax gross-ups |
| ☑ Anti-hedging and pledging provisions | ☒ No severance benefits exceeding 3x base salary and annual cash bonus |
☑ Clawback policyAnnual incentive plan risk assessments | |
☑ Anti-hedging and pledging provisions | |
☑ Stock ownership guidelines | |
| ☑ Independent compensation consultant | |
| ☑ Annual say-on-pay vote | |
What Guides Our Program
Philosophy and Objectives of Executive Compensation
Our executive compensation philosophy is to attract, motivate, and retain the executive talent we need to achieve the short-term and long-term goals of the Company while creating long-term shareholder value through the implementation of
sound compensation principles and policies. These principles include paying for performance, ensuring equity, fairness and non-discrimination in pay and compensation risk mitigation.
Principal Elements of Compensation
Our executive compensation program is comprised of fourhas three key elements:base salary, annual short-term incentive awards, and long-term incentive awards, and benefits.awards.
| | | | | | | | |
| Element of 2022 NEO Compensation | How it is Paid | Key Objectives |
| Base Salary | Cash (Fixed) | Driven primarily by a NEO’s demonstrated value to the Company and market competitiveness, base salaries are reviewed annually and are set to attract and retain highly skilled, talented executivesexecutives. |
Annual Short-Term Incentive (“STI”) Awards | Cash (Variable) | Incentivizes a NEO to achieve short term (annual) financial and strategic goals, with much greater weighting towarda pool funded by Company performance than individual performance whenon key metrics determining award size, along with individual targets and performance. |
Long-Term Incentive (“LTI”) Awards*Awards | Cash*Equity (Variable) | Most recently granted in 2019, LTI awards provideProvides incentives for NEOsexecutives to execute on longer termlonger-term financial performance (growth in capitalgoals that drive shareholder value creation and more recently, retained earnings) and safety and soundness objectives in support of the
Company’s strategic plan |
Benefits | Cash & Other | NEOs participate in a defined benefit pension plan, a 401(k) plan, an Employee Stock Ownership Plan (“ESOP”), limited perquisites and other personal benefits. Retirement benefits provide the ability for retirement savings and were the primary vehicle for long-term compensation as a mutual company. Perquisites were limited to those that assist the NEOs in the fulfillment of their dutiestalent retention objectives. |
* Grants under the LTI Plan were last made in 2019. No grants were made in 2020 or anticipated in 2021.
In connection with our IPO, the Company adopted the ESOP, as described below, and our NEOs received their first stock allocation under the ESOP for fiscal year 2020 in March of 2021. The ESOP is not an incentive plan. Rather, shares purchased by the ESOP’s trustee for a particular year are allocated among eligible ESOP participants on the basis of each participant’s proportional share of compensation relative to the compensation of all participants. The size of an individual annual stock allocation to an ESOP participant is limited by applicable IRS rules.
Pay Mix
Our executive compensation includes a mix of base salary, STI grants and grant payouts from the now-frozen cash-based LTI plan. The Company does not have a formal policy regarding the allocation of compensation for its NEOs among these three core compensation elements. A material portion of the targeted total compensation opportunity for each of our NEOs is directly tied to the financial performance of the Company relative to the applicable compensation plan and relative to the peer group noted below. The CEO’s compensation has a greater emphasis on variable compensation than that of the other two NEOs because his actions have a greater influence on the performance of the Company as a whole. For 2020, a significant amount of total direct compensation was variable: 67.5% for the CEO, 64.9% for Mr. Miller and 67.1% for Mr. Fitzgerald.
2020 CEO Compensation
Process for Determining Executive Officer Compensation
The Role of the Compensation and Human Capital Management Committee
The CompensationC&HCM Committee is composed entirely of non-employee directors who meet the Nasdaq standards for independence, including the heightened standards applicable to compensation committee members. The CompensationC&HCM Committee oversees executive compensation of our executive officers, including our NEOs, and is comprised of independent, non-employee members of the Board of Directors.NEOs. The CompensationC&HCM Committee regularly reviews the structure of our executive compensation program to ensure it aligns with Company strategy, philosophy, market practices, risk tolerance and, now that the Company is publicly traded, the interests of our shareholders. The CompensationC&HCM Committee reviews compensation and performance of peer companies (detailed below) as it considers executive compensation. The CompensationC&HCM Committee’s specific responsibilities are set forth in its charter, which can be found on the Company’s Investor Relations website at investor.easternbank.com under “Governance Documents” in the “Corporate Governance” section.The CompensationC&HCM Committee approves all NEO compensation, other than that of our CEO, including base salary, short term incentives and long-termlong term incentives. The CompensationC&HCM Committee also recommends our CEO’s compensation, which is approved by the independent members of the Board.
The Role of Management
Select senior members of our management team attend regular meetings of the CompensationC&HCM Committee at which executive compensation, Company performance, peer group, market and competitive compensation levels and compensation policies and practices are discussed, including in executive session without other management members present. However, only members of the CompensationC&HCM Committee vote on decisions about NEOcompensation for our NEOs (other than our CEO), and the independent members of our Board of Directors vote on our CEO's compensation. Our CEO is not involved in decisions or deliberations about his own compensation, but he does make recommendations regarding non-CEO executive compensation in consultation with the CompensationC&HCM Committee.
The Role of Our Independent Compensation Consultant
The CompensationC&HCM Committee has the authority to engage its own advisors to assist it in carrying out its responsibilities. As part of its oversight of executive compensation and director compensation, the CompensationC&HCM Committee seeks input from its independent compensation consultant. In connection with 20202022 executive compensation decisions, the CompensationC&HCM Committee engaged Willis TowersPearl Meyer to advise the CompensationC&HCM Committee on the amount and form of executive compensation. In December 2020, the Compensation Committee engaged Pearl Meyer as its new independent compensation consultant. In the instance of either firm, theThe independent compensation consultant reports directly to the CompensationC&HCM Committee and does not provide any other services to the Company. The CompensationC&HCM Committee has conducted an independence assessment of both Willis Towers and Pearl Meyer in accordance with SEC and Nasdaq listing rules. Based on this review and in reliance upon a letter from eachthe firm confirming its respective independence based on factors set forth in the Nasdaq rules for compensation committee advisors, the CompensationC&HCM Committee determined that each firmPearl Meyer is an independent advisor.
The Role of Peer Market Data
WithWe believe that a competitive pay package is a critical tool in our efforts to attract and retain qualified executives. The C&HCM Committee’s goal is to ensure that we continue to measure our compensation practices against organizations that compete with us for key executives, which are considered important benchmarks in our industry, and that are comparable in size and scope to our business.
The C&HCM Committee uses a criteria-based approach in selecting peer companies. The criteria include banks and thrifts on a national exchange, geography (U.S.-based and major metropolitan areas), financial institutions of similar size (assets and revenue ranging from 0.5x to 2.0x the assistanceCompany’s size), similar loan mix, and comparable market capitalization. For purposes of its independentsetting 2022 compensation consultant, the Compensation Committee utilizes a peer group of publicly traded companies to benchmark executive compensation programs and practices and compare key performance metrics. For 2020,levels, our compensation peer group included the following 1619 companies, all of which arewere publicly traded commercial banks:banks at the time of their selection to our peer group:
| | | | | | | | |
| Ameris Bancorp. | Fulton Financial Corporation | PacWest Bancorp, Inc. |
| Atlantic Union Bankshares Corporation | CVBGlacier Bancorp, Inc. | Pinnacle Financial CorporationPartners, Inc. |
| BankUnited, Inc. | Independent Bank Corp. | South State Corporation |
| Cathay General Bancorp | Independent Bank Group, Inc. | Umpqua Holdings Corporation |
| Columbia Banking System, Inc. | Investors Bancorp Inc. | Valley National Bancorp |
| F.N.B. Corporation | Old National Bancorp. | |
| First Midwest Bancorp, Inc. | Pacific Premier Bancorp, Inc. | |
In 2022, the C&HCM Committee, with the assistance of Pearl Meyer, refreshed the Company's peer group, removing four companies for reasons due to merger and acquisition activity and replacing them with four peers that meet our criteria. As part of this review and update, the peer group used for 2023 compensation decisions was modified as follows:
| | | | | |
Banc of California,Removed | Added |
| Columbia Banking System, Inc. | Bank OZK |
| First Midwest Bancorp, Inc. | Provident Financial Services, Inc.Simmons First National Corporation |
Berkshire HillsInvestors Bancorp, Inc. | Fulton Financial CorporationUnited Bankshares, Inc. |
| Umpqua Holdings Corporation |
Boston Private Financial Holdings | Independent Bank Corp. | Webster Financial Corporation |
United Community Bank SystemBanks, Inc. | Investors Bancorp Inc. | |
Columbia Banking Systems, Inc. | NBT Bancorp Inc. | |
The Compensation Committee uses a criteria-based approach in selecting peer companies.The criteria includes: financial institutions of similar size (asset size ranging from .5x to 2.5x the Company’s size); similar major business line mix; location (East or West coasts or in major metropolitan areas where talent acquisition and compensation can be more competitive); and those that compete with the Company for business and talent.
In addition to peer group data, the CompensationC&HCM Committee also considers other factors when setting NEO compensation, including the skill sets of the NEOs, their individual performances, Company performance, retention risk, their tenure with the Company and succession planning.
Our 20202022 Executive Compensation Program in Detail
Base Salary
As noted above, baseBase salaries of our NEOs are set at a level to maintain market competitiveness in attracting and retaining highly skilled, talented executives. Base salaries of NEOs are reviewed annually by the CompensationC&HCM Committee (or by the independent members of the Board of Directors, as to the CEO) and any increases are driven primarily by a NEO’s demonstrated value to the organization and tenure in the position, as well as internal equity and market competitiveness. Merit increases are awarded based on individual performance, and are made in accordance with a merit budget, which is determined annually based on market conditions and the Company’s overall budget. Separate merit increases may be established for different positions or levels, based on market conditions.competitiveness considerations. For fiscal year 2020, the Compensation Committee approved2022, no base salary increase was approved for Mr. Rivers; 2.6% increases for each of the NEOs as indicated below, effective March 1, 2020. For fiscal year 2021, the Compensation Committee haswere approved no salary increases for the NEOs.
| | | | | | | | | | | |
| Fiscal Year
2019 Salary | Fiscal Year
2020 Salary | Percentage Increase |
Robert F. Rivers
Chief Executive Officer and Chair of the Board of Directors | $950,000 | $995,000 | 4.7 | % |
Quincy L. Miller
President and Vice Chair | $550,000 | $575,000 | 4.5 | % |
James B. Fitzgerald
Chief Administrative Officer, Chief Financial Officer and Treasurer | $550,000 | $575,000 | 4.5 | % |
Annual Short-Term Incentive Plan
For 2020, our NEOs were eligible to earn annual performance-based cash incentives under the Company’s short-term incentive plan, called our Management Incentive Plan (“MIP”). For 2020, NEO MIP awards were weighted 70% on Company performance and 30% for individual performance. MIP awards were capped and could range from 0% to 120% of base salary for the CEO, and 0% to 80% of base salary for Messrs. Miller and Fitzgerald.Fitzgerald, and 3.0% increases were approved for Mr. Westermann and Ms. Henry.
| | | | | | | | | | | |
| Minimum % of
Base Salary (1) | Target % of
Base Salary (1) | Maximum % of
Base Salary (1) |
| Robert F. Rivers | 40 | % | 80 | % | 120 | % |
| Quincy L. Miller | 25 | % | 50 | % | 80 | % |
| James B. Fitzgerald | 25 | % | 50 | % | 80 | % |
(1)For purposes of MIP calculations, "Base Salary" refers to a NEO's year-end base salary rate
NEOs' awards were determined using two performance components: corporate performance and individual performance. Goals for each performance component were established annually by the Compensation Committee.
For 2020, the goals for the corporate performance component of the MIP included financial performance goals and key Company initiatives:
•Obtaining regulatory and corporator approval of the Conversion and IPO;
•Maintaining strong compliance ratings from the Company's regulators;
•Financial results of $102.1 million of after-tax core net income for the year (excluding costs associated with the IPO, including the donation of stock to the Eastern Bank Foundation (formerly known as the Eastern Bank Charitable Foundation), valued at $91.3 million, as well as certain other items), also known as operating net income or net operating earnings; and
•Successful operation as a public company.
For 2020, the Board of Directors determined that the three non-financial corporate performance goals had been met, with financial results of after-tax core net income below goal, resulting in a “2” performance rating.As such, the corporate performance component was funded at 85% of target.
The Compensation Committee established individual performance goals for each NEO at the beginning of 2020:
•Mr. Rivers – Received the highest individual performance rating, based on the results of the CEO performance evaluation, which considered his performance against the following four goals: (1) successful implementation of IPO/growth; (2) 2020 business plan; (3) organizational development; and (4) brand, community and industry leadership.
•Mr. Miller – Received the highest individual performance rating, based upon his outstanding leadership of Eastern Bank's Consumer and Business Banking and Wealth Management lines of business to strong results, highlighted by record mortgage loan production, and its tenth consecutive year as the top U.S. Small Business Administration lender in New England, despite COVID-19 pandemic-related challenges.
•Mr. Fitzgerald – Received the highest individual performance rating, based upon his leadership as Chief Administrative Officer, with significant accomplishments within the areas of Technology, Operations, and Facilities such as the transition of over 60% of employees to remote work environments and the completion of the upgrade of our online and mobile banking platforms.
For 2020, the Compensation Committee approved MIP awards as described below: | | | | | | | | | | | |
| Named Executive Officer | Fiscal Year 2021 Salary | Fiscal Year
2022 Salary | Percentage Increase |
Robert F. Rivers
Chief Executive Officer and Chair of the Board of Directors | $995,000 | $995,000 | 0 % |
Quincy L. Miller
President | $575,000 | $590,000 | 2.6 | % |
James B. Fitzgerald
Chief Administrative Officer, Chief Financial Officer and Treasurer | $575,000 | $590,000 | 2.6 | % |
Donald M. Westermann
Chief Information Officer, Eastern Bank | $450,000 | $463,500 | 3.0 | % |
Kathleen C. Henry
General Counsel and Corporate Secretary | $450,000 | $463,500 | 3.0 | % |
| | | | | | | | | | | | | | |
| Corporate | Individual | MIP Award Earned in 2020 ($) (1) | MIP Award as % of Base Salary (2) |
| Robert F. Rivers | $ | 278,600 | | $ | 358,200 | | $ | 637,000 | | 64 | % |
| Quincy L. Miller | $ | 101,000 | | $ | 138,000 | | $ | 239,000 | | 42 | % |
| James B. Fitzgerald | $ | 101,000 | | $ | 138,000 | | $ | 239,000 | | 42 | % |
(1)Final award amounts are rounded up to the nearest thousand
(2) For purposes of MIP calculations, "Base Salary" refers to a NEO's year-end base salary rate
As described above under "Future Executive Compensation Program Decisions — Revisions to Annual Short-Term Incentive Program", in May 2021 the Compensation Company terminated the Company's existing MIP, under which our NEOs' annual performance-based cash incentives were made for 2020, and approved the New MIP effective January 1, 2021.Plan
The New MIP provides for the payment of annual cash incentive awards to the Company’s CEO, its other NEOs, members of its management committee, and select management employees (“Participants”). The C&HCM Committee believes the MIP further aligns its executive officers' incentives with shareholder value creation. Each Plan Year (as defined below), a Participant is assigned a target award opportunity as a percentage of base salary, based in part on job responsibilities and market data. The table below summarizes the individual amountsannual incentive target opportunity for each NEO for 2022.
| | | | | | | | | | | |
| Named Executive Officer | Fiscal Year 2022 Salary | MIP Target Award Opportunity (as a % of Salary) (1) | MIP Target Award Opportunity ($) |
| Robert F. Rivers | $995,000 | 90% | $895,500 |
| Quincy L. Miller | $590,000 | 60% | $354,000 |
| James B. Fitzgerald | $590,000 | 60% | $354,000 |
| Donald M. Westermann | $463,500 | 45% | $208,575 |
| Kathleen C. Henry | $463,500 | 45% | $208,575 |
(1) For purposes of which will beMIP calculations, “Base Salary” refers to a NEO's year-end base salary rate.
Actual award payouts are determined by measurement against one or more corporate performance measures (“Company Performance Measures”) and individual performance goals over a performance measurement period, beginning January 1 and ending December 31 (“Plan Year”). Company Performance Measures will beare approved by the CompensationC&HCM Committee, and annual targets with respect to such performance measures will beare established by the Board of Directors. Potential Company Performance Measures include the Company’s operating net income for an applicable Plan Year, or other key measures, as deemed appropriate and approved by the Compensation Committee. Individual performance goals will beare established annually by each ParticipantNEO and approved by his or her manager, except that the individual performance goals of the CEO will be proposedare approved by the CompensationC&HCM Committee. For each Plan Year, each Participant will be assigned a target award amount as a percentage of base salary, based on job responsibilities and market data. For the CEO and the Company’s executive officers, target awards amounts shall be established by the Compensation Committee. Plan Awards (as defined below) to the CEO, and to the Company’s chief financial officer and president will be capped at 150% of target award amount and 160% of target award amount, respectively.
All awards granted under the New MIP with respect to a given Plan Year shall beare paid from a funding pool. For each Plan Year, the target funding pool (“Target Funding Pool”) shall beis an amount equal to the sum of all Participants’ target awards for the year. Following completion of a Plan Year, the CompensationC&HCM Committee shall determine the Company’s level ofdetermines performance against the applicable Company Performance Measures including whether minimum performance thresholds have been met, which thresholds the committee may establish for a given Plan Year in its discretion.met. The funding pool from which awards under the New MIP (“PlanMIP Awards”) are actually paid (“Actual Funding Pool”) in a given Plan Year shall be recommended by the Compensation Committee and approved by the Board of Directors and shall beis an amount that is based on the Target Funding Pool but which will beis adjusted based on the Company’s performance against the Company Performance Measures for such year. The CompensationC&HCM Committee may also adjust the level or nature of CorporateCompany Performance Measures to accommodate non-recurring events not contemplated when such measures were originally set, such as an acquisition by the Company, and shall havehas the sole discretion to adjust the Target Funding Pool and/or the Actual Funding Pool amounts upward or downward, based on market factors, corporate events, future performance outlook, or any other situation it may deem appropriate.
UnderIndividual awards under the New MIP are determined by (1) the Actual Funding Pool as approved by the C&HCM Committee based on performance against the Company Performance Measures, and (2) Participants’ overall achievement rating (on a scale of 1-5) in performance of their individual Plangoals, subject to payout ranges as a percentage of target and applicable limitations on payouts to the NEOs. Individual MIP Awards will beare paid out of the Actual Funding Pool. The PlanMIP Awards for the Company’s executive officers other than the CEO shall beare approved by the CompensationC&HCM Committee. The PlanMIP Award for the CEO shall beis approved by the independent members of the Board of Directors, upon recommendation from the CompensationC&HCM Committee. The
In connection with adoptionindependent members of the NewBoard and the C&HCM Committee, respectively, have discretion to modify the Actual Funding Pool payout for individuals based on the CEO's and the other NEOs' performance and achievement rating. For the NEOs in 2022, all received payouts based on the Actual Funding Pool at 109% of the Target Funding Pool, in alignment with 2022 Company performance results equal to 106% of the MIP Net Income Target (as defined below).
Company Performance Measure
For 2022, the Compensation Committee established a CorporateCompany Performance Measure for 2021, as measured by reference to the Company’s operatingwas net income for the fiscal year ended December 31, 2021.2022, as may be adjusted to accommodate non-recurring events (“MIP Net Income”). The CompensationC&HCM Committee chose operating net incomeMIP Net Income because it believes that it isprovides a useful metric in understanding the Company’s core earnings from its operationsperformance without the effects of certain events, items and transactions that management believes are unrelated to its core business operations.
The C&HCM Committee established a range of funding for the Actual Funding Pool based on the Company’s actual MIP Net Income results relative to a specified performance target (“MIP Net Income Target”). The range of funding for the Actual Funding Pool was scaled such that performance at 80% of MIP Net Income target (net income of $150.1 million) would yield a payout of 80% of target, performance at MIP Net Income Target of $187.6 million would yield a target or 100% payout, and are therefore not necessarily indicativeperformance at 115% of its current performance or financial position.
For 2021, the Compensationtarget (net income of $215.7 million) would yield a payout of 125% of target. The C&HCM Committee also established a minimum performance threshold of 80% of the target operating net incomeMIP Net Income Target to fund awards to our management committee, which includes our NEOs, and a minimum performance threshold of 50% of the target operating net incomeMIP Net Income Target to fund awards to the rest of New MIP participants. If such thresholds are not met,Participants. This scaled approach was intended to ensure that our financial results were the Pool is not funded, although the Compensation Committee retains discretion to adjust (upward or downward) the amountkey element of the Actual Funding Pool. Individual awards underfunding framework.
In 2022, the NewCompany generated $199.8 million in net income. Pursuant to the previously established funding ranges, the level of the Company’s achievement of MIP for 2021, including thoseNet Income represented performance equal to NEOs, will be106% of the MIP Net Income Target. Accordingly, the C&HCM Committee determined by (1) the
Actual Funding Pool as approved by the Compensation Committee based on performance againstthat the Corporate Performance Measure had been met, and (2) participants’the Actual Funding Pool was funded at a level that corresponded to 109% of the Target Funding Pool.
Individual Performance Goals
At the beginning of 2022, the C&HCM Committee established individual performance goals for the CEO, and each NEO likewise set individual performance goals that aligned with the CEO’s goals. For 2022, each of our NEOs’ individual performances were highly rated and contributed to the overall successful performance of the Company.
The C&HCM Committee also established MIP targets and maximums for the NEOs’ 2022 MIP awards early in 2022, subject to approval of independent members of the Board of Directors for the CEO. Notwithstanding such individual targets and maximums, our NEOs would not have received any MIP award if the Company’s performance achievement rating (on a scale of 1-5) in performanceMIP Net Income had been less than 80% of the MIP Net Income Target.
MIP Awards were granted to each NEO equal to 109% of their individual goals, subject to payout ranges as a percent of target set forthaward amounts, in alignment with overall Company performance on the New MIP documentCompany Performance Measure and the limitationActual Funding Pool level at 106% of the MIP Net Income Target. While the independent members of the Board of Directors and C&HCM Committee have discretion to adjust MIP Awards based on payoutsindividual performance, including for the CEO's and other NEOs' high performance ratings in 2022, respectively, they opted to align NEO's awards with overall Company performance. Accordingly, the CEO, andMIP awards described below were approved:
| | | | | | | | | | | |
| Named Executive Officer | MIP Award Earned in 2022 ($) (1) | MIP Award as % of Target Award | MIP Award as % of Base Salary (2) |
| Robert F. Rivers | $976,100 | 109% | 98 | % |
| Quincy L. Miller | $385,900 | 109% | 65 | % |
| James B. Fitzgerald | $385,900 | 109% | 65 | % |
| Donald M. Westermann | $227,300 | 109% | 49 | % |
| Kathleen C. Henry | $227,300 | 109% | 49 | % |
(1)For purposes of MIP calculations, “Base Salary” refers to the Company’s chief financial officer and president described above.a NEO's year-end base salary rate
Long-Term Incentive Compensation
The CompensationCompany's philosophy on long-term incentive compensation is to grant awards that provide incentives for NEOs to execute on longer term financial performance objectives.
2022 Equity-Based LTIP Awards
During 2022, the C&HCM Committee believescontinued its adoption of the New MIP is consistent with its focus on better aligning the Company’s short-termsteps to transition our historic cash-based long-term incentive compensation program to an equity-based program. As described under the “Transition of Long-Term Incentive Compensation: From Cash to Equity” section earlier in this CD&A, the C&HCM Committee determined the equity awards granted to senior management in 2022 would be delivered in part to “make-up” for the prior two years of missed long-term incentive awards. These initial awards were also intended to recognize the significant efforts and achievement in connection with the IPO, the Company’s acquisition of Century in November 2021, and other critical Company milestones achieved between 2019 and 2022. Accordingly, the size and terms of the 2022 awards reflected such considerations. The C&HCM Committee also determined the awards would be structured to reflect its executive officers withcommitment to putting forth a long-term incentive program that incentivizes executives to execute on longer-term financial goals that drive shareholder value creation.creation and supports the Company’s leadership retention objectives, delivering awards using a mix of performance-based and time-based equity vehicles. Following vesting, shares are delivered net of any shares withheld to meet the recipient's tax obligations. The 2022 awards were structured as follows:
Cash Bonuses | | | | | | | | |
| Equity Vehicle | Weight | Design At-A-Glance |
| Performance Share Units (PSUs) | 50%
(at Target)
| Rewards achievement of financial goals measured over a three-year performance period (January 1, 2022-December 31, 2024) and puts appropriate focus on long-term alignment and pay relative both to market peers and shareholder returns.
•Half of the target PSU opportunity (25% of the total equity award) is based on the Company's total shareholder return (“TSR”) performance relative to the performance of the KRX Banks*. •Half of the target PSU opportunity is based on the growth of the Company's operating earnings per share (“EPS”) relative to that of the KRX Banks*.
|
| Restricted Stock Units (RSUs) | 50% | RSUs will vest in equal installments over a five-year period tied to the anniversary of the grant date, March 1, 2022. |
In addition*“KRX” refers to the MIP award,KBW Regional Banking Index, an index that is designed to track the Compensation Committee approved a discretionary, one-time cash bonus for Mr. Millerperformance of $110,000regional banks and thrift institutions that are publicly traded in recognitionthe U.S. “KRX Banks” refers to the companies that comprise the KRX as of the leadership role he playedlast day of the performance period, excluding companies that have any of the following characteristics: (1) headquartered in Eastern Bank’s successful responsePuerto Rico; (2) announced target of a pending acquisition; and/or (3) less than three years of performance history or trading data.
The table below shows the target long-term incentive award values granted in fiscal year 2022 for each of the NEOs:
| | | | | | | | | | | |
| Named Executive Officer | PSUs (at Target) | RSUs | Total Value* |
| Robert F. Rivers | $2,250,000 | $2,250,000 | $4,500,000 |
| Quincy L. Miller | $1,500,000 | $1,500,000 | $3,000,000 |
| James B. Fitzgerald | $1,500,000 | $1,500,000 | $3,000,000 |
| Donald M. Westermann | $1,000,000 | $1,000,000 | $2,000,000 |
| Kathleen C. Henry | $1,000,000 | $1,000,000 | $2,000,000 |
* Actual award amounts for RSUs and PSUs at target levels were determined based on the closing price of Company common stock on the date of grant on March 1, 2022, which was $21.08 per unit. The Stock award values shown in the Summary Compensation table vary slightly from the above due to (i) actual units granted were in whole units only and (ii) award amounts for PSUs related to TSR performance were determined using the Monte Carlo valuation model.
A Closer Look at PSUs.
•PSUs will be eligible to become earned based on:
◦The Company’s total shareholder return (“TSR”) performance relative to the Small Business Administration’s Paycheck Protection Program ("PPP"), pursuant to whichperformance of the Bank made $1.2 billion in loans, resulting in $13.9 millionKRX Banks over the three-year performance period (January 1, 2022-December 31, 2024); and
•The growth of net fee income in 2020. The Compensation Committee also approved a one-time cash bonus for Mr. Fitzgerald of $220,000 in recognition of his considerable role in executing the Company's successful IPO in a difficult market environment affected byoperating earnings per share (“EPS”) relative to that of the global COVID-19 pandemic, which offering raised $1.7 billion in capital.KRX Banks over the three-year performance period (January 1, 2022-December 31, 2024).
•The number of PSUs that can be earned range between 25% (threshold) and 150% (maximum) of the target award.
Long-Term Incentive Plan•If the Company's performance is below the threshold achievement level, no PSUs will be earned.
Eastern’s Long-Term Incentive Plan (“LTIP”)
| | | | | | | | | | | |
| Performance Level (Relative Ranking) | PSUs Earned at the End of the Performance Period (% of Target) |
| TSR PSUs | EPS Growth PSUs |
| Less than 25th Percentile | (Below Threshold) | —% | —% |
| 25th Percentile | (Threshold) | 25% | 25% |
| 50th Percentile | (Target) | 100% | 100% |
| 75th Percentile or Higher | (Maximum) | 150% | 150% |
Note: Payouts are linearly interpolated for performance between threshold and maximum
Frozen LTIP Awards (Vesting and Payouts Under the Legacy LTIP)
The legacy LTIP is a cash-based deferred compensation plan that was designed to link incentive compensation of NEOs and (other selected executive and senior officers) to factors such as the growth of Eastern’s capital, net income, Eastern’s adjusted retained earnings, or after the IPO, Eastern’s retained earnings.
2020 Awards
other factors. The Compensation Committee did not make LTIP grantswas “frozen” in 2020, and does not plan to grantthe most recent awards under it were made in 2021, in anticipation2019. Under the terms of the Company's future adoption of equity-based long-term incentive plans, which will be subjectLTIP, our NEOs were eligible to shareholder approval.receive payouts in 2023 and 2024 for awards made in 2018 and 2019 (“Outstanding LTIP Awards”), respectively.
Vesting of Previous2018 LTIP Awards
Long-Term Incentive PlanAwards. 2018 LTIP awards (“LTIP awards”)were granted by the CompensationC&HCM Committee are based on targets for cash compensation over a five-year grantperformance cycle and represent a percentage of the NEO’s base salary in the year granted. For example,The target amounts represented 70% of 2018 base salary for the 2016 grant year, which awardsMr. Rivers, 60% of 2018 base salary for Messrs. Miller and Fitzgerald; and 40% of 2018 base salary for Mr. Westermann and Ms. Henry. The 2018 LTIP Awards matured December 31, 2020,2022 and were determined to have no value due to the target amountsLTIP calculation methodology using plan capital growth over the performance period. Specifically, plan capital growth includes, among other things, the change in accumulated other comprehensive income. Other comprehensive income includes the mark to market value of the available-for-sale securities portfolio, which was significantly impacted by rising interest rates in 2022. As a result, no payments were made to the NEOs in March 2023 for the 2018 LTIP grants.
2019 LTIP Awards. For the 2019 Awards, which mature December 31, 2023, a different LTIP calculation methodology was set at the time the award was granted such that those awards will primarily be based on growth of retained earnings over targeted levels, rather than on plan capital growth.
The table below shows the value of the 2018 LTIP Awards for Messrs. Rivers, Miller, Fitzgerald and Fitzgerald represented 60% of their 2016 base salary. The most recent LTIP awards were granted in 2019.
Generally, LTIP awards were made in JuneWestermann, and valued as of December 31 of each year in the five-year grant cycle for such award. LTIP awards generally are paid in a taxable lump sum, less applicable withholdings, in the calendar year following the last year of the five-year grant cycle. For example, the LTIP awards granted to our NEOs in June of 2016 matured on December 31, 2020 and were paid in March 2021 (including interest from the maturity date through the payment date).
The value of the remaining outstanding LTIP awards will continue to be based primarily upon growth in Eastern’s capital or adjusted retained earnings, as applicable, and will not be tied to the value of our common stock. In calculating the growth in capital and adjusted retained earnings for periods after the IPO for purposes of LTIP target amounts, our Board of Directors excludes the proceeds from the IPO, as well as a theoretical return on the reinvestment of such proceeds partially offset by any direct and indirect costs of the offering, including incremental expenses required by the Conversion in connection with the IPO. After the five-year grant cycle for an LTIP award ends and the final appreciation is determined based on the cumulative growth in Eastern’s capital or adjusted retained earnings, as applicable, the Board of Directors may apply a modifier in its discretion based on the Company's performance. The modifier can increase or decrease the value of the LTIP awards by up to 20%, as applied to the cumulative appreciation, to determine the final value of the LTIP awards then due to be paid. The two factors used by the Board of Directors to determine the application of the modifier are the Company’s performance during the prior five-year period relative to the group of peer banks and the Board of Directors’ assessment of management’s performance during the prior five-year period, using an assessment framework similar to the six-factor Uniform Financial Institutions Rating System commonly referred to as CAMELS ratings.
In March 2021, Messrs. Rivers, Miller and Fitzgerald received payments of $1,409,340, $704,670 and $704,670 respectively, for LTIP awards made in 2016 and that matured on December 31, 2020. These amounts include interest paid thereon from the maturation through the payment date. These payments reflect the Board of Directors' application of a +20% modifier recommended by the Compensation Committee based on both very strong Company performance as compared to peer
banks over the past five years and strong FDIC Improvement Act Safety & Soundness Exam ratings over the same period. The table below shows for Messrs. Rivers, Miller and Fitzgerald the amounts that we paid for LTIP awards that were granted in 2016 and matured on December 31, 2020 (paid in March 2021 and including interest),Ms. Henry, as well as the estimated values as of December 31, 20202022 of the 2019 Outstanding LTIP Awards. While the NEOs received no cash awards granted in 2017 through 2019. The value of LTIP awards granted in 2017 through 2019 will change, as described above,2022 based primarily on the cumulative growth2018 LTIP methodology, the NEOs may receive cash awards in our capital or adjusted retained earnings, as applicable. The2024 based on the applicable 2019 LTIP was “frozen” in 2020, such that no awards were made aftermethodology.
| | | | | | | | | | | |
| Named Executive Officer | Granted 2018
Payable in 2023 | Granted 2019
Payable in 2024 (1) | Total |
| Robert F. Rivers | $0 | $1,098,000 | $1,098,000 |
| Quincy L. Miller | $0 | $366,000 | $366,000 |
| James B. Fitzgerald | $0 | $366,000 | $366,000 |
| Donald M. Westermann | $0 | $183,000 | $183,000 |
| Kathleen C. Henry | $0 | $137,250 | $137,250 |
| | | |
(1)Values for the 2019 although payments for past LTIP awards will be provided in accordance with their terms. Outstanding LTIP awards are subject to three-year vesting with accelerated vesting for participants who satisfy retirement eligibility. Mr. Rivers and Mr. Fitzgerald are fully vested in all of their LTIP awards.
| | | | | | | | | | | | | | | | | |
| Long-Term Incentive Plan Payments (Grant Year / Payment Year) |
| Estimated Values as of December 31, 2020 |
| Granted 2016
Payable in 2021(1) | Granted 2017
Payable in 2022 (2) | Granted 2018
Payable in 2023 (2) | Granted 2019
Payable 2024 (2) | Total |
| Robert F. Rivers | $ | 1,409,340 | | $ | 1,482,000 | | $ | 1,090,720 | | $ | 430,800 | | $ | 4,412,860 | |
| Quincy L. Miller | $ | 704,670 | | $ | 494,000 | | $ | 401,000 | | $ | 143,600 | | $ | 1,743,270 | |
| James B. Fitzgerald | $ | 704,670 | | $ | 494,000 | | $ | 401,000 | | $ | 143,600 | | $ | 1,743,270 | |
(1)These amounts include interest paid thereon from the date of maturation through the date of payment.
(2)Values for LTIP awards payable in 2022-2024Awards are estimated as of December 31, 20202022 and subject to changemay increase under the terms of the LTIP.LTIP, especially to the extent that the Company's net income increases.
Other Compensation Practices, Policies and Guidelines
Stock Ownership Guidelines
The Company’s Board of Directors believes that the Company’s most senior executives (including its NEOs) should hold meaningful equity ownership positions in the Company, in part to align the NEOs’ interests with those of the Company’s shareholders.Under the management stock ownership guidelines, each NEO is required to hold shares of the Company’s stock as set forth below:
| | | | | |
| Title | Multiple of Annual Base Salary |
| Chief Executive Officer | Five (5) Times |
| President and the Chief Financial Officer/Chief Administrative Officer | Three (3) Times |
| All Other Executive Officers | Two (2) Times |
To attain this ownership threshold, each NEO will have the longer of five (5) years from (i) the date of implementation of the stock ownership guidelines (September 2021), or (ii) the date that a NEO becomes a member of the Company’s management committee. There shall be a one-year holding period for 50% of a NEO’s vested shares (except in order to satisfy tax withholding obligations or to satisfy payment of an option exercise price) until the NEO has met, and continues to meet, his or her applicable minimum holding requirement.
Holdings that satisfy a NEO’s stock ownership requirement include all outstanding shares held, shares held through a 401(k), savings and profit-sharing plans, and all unvested time-based RSUs awarded to a NEO. Unvested awards of PSUs, stock options, warrants or other rights not listed above exercisable for or convertible into shares of common stock do not count towards satisfying the ownership requirement unless and until shares under such awards are issued to a NEO.
Compliance with stock ownership guidelines is evaluated annually. A NEO is not required to purchase additional shares to satisfy the applicable ownership requirement in the event of a decline in the Company’s stock price, but the NEO is generally prohibited from selling or transferring shares until the minimum ownership requirement has been achieved, except as otherwise determined by the C&HCM Committee. As of December 31, 2022, all of our NEOs were in compliance with the stock ownership guidelines.
Clawback Policy
The Company has a formal Clawback Policy, which calls for the recovery of incentive-based compensation awards (whether cash or equity) to the NEOs, other executive officers and other covered employees if the relevant performance measure upon which the award is based is restated in a manner that would reduce the size of an award. The Clawback Policy empowers the C&HCM Committee to recover such excess compensation received during the three completed fiscal years preceding the date on which the Board of Directors determines an accounting restatement is required to be filed with the SEC to correct a material non-compliance with any financial reporting requirements under applicable securities laws.
In October 2022, the SEC adopted new, final rules on clawback recovery of executive compensation. The Company intends to review and revise its Clawback Policy as needed to comply with any forthcoming Nasdaq requirements that are adopted pursuant the new SEC rules.
Anti-Hedging and Anti-Pledging Policy
The Company has an Insider Trading Policy that, among other things, prohibits all our employees (including officers) and directors from engaging in hedging or other speculative transactions relating to shares of the Company’s stock. Prohibited transactions include short sales, derivative securities (such as put and call options, or other similar instruments) and other hedging transactions (such as equity swaps, prepaid variable forwards, or similar instruments), or any transactions that have or are designed to have the effect of hedging or offsetting any decrease in the market value of the Company’s securities. In addition, Section 16 officers and directors are generally prohibited from holding the Company’s securities in a margin account or otherwise pledging the Company’s securities as collateral for a loan.
No Tax Gross Ups
Our C&HCM Committee has determined that no tax gross-ups for purposes of excess parachute payments under Section 280G of the Code (“Section 280G”) shall be provided to our executives as part of our executive compensation program. The dollar amount of the severance payment due under our CiC Agreements (as defined and further described below) will not be reduced in order to avoid an excess parachute payment under Section 280G, except in circumstances in which the application of the excise tax under Section 4999 of the Code (“Section 4999”) on the full amount of severance and other compensation deemed to be an excess parachute payment under Section 280G would leave the executive with a lower net after-tax amount than having the severance and other compensation reduced to the extent necessary so the excise tax would not apply. In circumstances in which the amount of severance and other compensation deemed to be a parachute payment under Section 280G is not reduced, the executive would owe the excise tax under Section 4999 and would not be entitled to a gross-up or reimbursement of that excise tax payment under his or her CiC Agreement.
Double Trigger Change in Control Agreements
The Company entered into change in control agreements (“CiC Agreements”) with the NEOs and its most senior executive officers. With certain exceptions noted below, the CiC Agreements are substantially similar to each other, and provide that if, during a potential change in control period or within 18 months after the consummation of a change in control, the executive’s employment is involuntarily terminated for reasons other than for “cause,” disability or death, or the executive voluntary resigns for “good reason,” the executive would be entitled to a lump sum severance payment equal to a multiple of (a) his or her base salary, plus (b) the greater of the executive’s annual bonus for the year in which the termination occurred and the average of the executive’s bonuses for the three years immediately preceding the year in which the termination occurred. For Messrs. Rivers and Miller, the applicable multiplier is 300%; for each of the other executives (Messrs. Fitzgerald and Westermann and Ms. Henry), the multiplier is 200%. As noted above, any payment required under the CiC Agreements will be reduced to the extent necessary to avoid penalties under Section 280G, but only if such reduction would result in a higher after-tax amount to the executive. In exchange for the lump sum severance payments and other benefits, the CiC Agreements provide for certain post-employment obligations with respect to the executive’s ability to compete with the Company and solicit our employees or customers.
In addition, if the NEO was participating in the Company’s group health and dental plans immediately prior to the their termination and elects COBRA health continuation, then the Company shall pay to the NEO a monthly cash payment for 18 months or the NEO’s COBRA health continuation period, whichever ends earlier, in an amount equal to the monthly employer contribution that the Company would have made to provide health and dental insurance to the NEO if the NEO had remained employed by the Company. The Company will use commercially reasonable efforts to provide for such payments in a manner that allows the NEO to exclude such payments from income, unless the NEO’s COBRA health continuation period ends prior to the end of the eighteen-month payment period or the Company reasonably determines such payment to be discriminatory under Section 105(h) of the Code.
Severance Agreements
The provision of reasonable severance benefits can be important in recruiting and retaining key executives.Thus, the Company has in place separate agreements with two NEOs, Messrs. Rivers and Miller, governing certain terms of their employment with and separation from the Company in circumstances not involving a change in control of Eastern. Under the terms of those agreements, in the event an executive is terminated for cause, the executive will receive all earned but unpaid salary, all accrued but unused vacation pay, vested and accrued bonuses or other incentive compensation, and reimbursements for any reasonable, necessary and properly documented expenses. In the event of termination without cause, in addition to the payments outlined above, the Company will pay to the executive within 60 days of his termination a lump sum payment equal to 200% of his annual base compensation plus a prorated share of the annual incentive payment to which the executive would have been eligible under the MIP (described above) during the calendar year in which the termination date falls. The executive will also receive full vesting of benefits in existing grants under the Bank’s legacy LTIP. If Mr. Rivers elects COBRA coverage, Mr. Rivers will also receive 24 months of continued participation in Eastern group health and dental insurance plans, with Eastern Bank paying or reimbursing Mr. Rivers for the cost of such premiums, and Mr. Miller will receive a lump sum payment equivalent to 24x the amount of Eastern’s standard monthly contributions to Mr. Miller’s Eastern Bank group health and dental insurance premiums. The agreements provide for certain restrictive covenant obligations, which include each of Messrs. Rivers and Miller agreeing not to solicit customers and employees of Eastern Bank during their employment with Eastern Bank and continuing for a period ending 24 months following their termination of employment. In addition, Mr.Miller’s agreement also specifies that while he is employed, he will receive an annual base salary of not less than $450,000 (subject to adjustment), discretionary incentive and/or bonus compensation, and participation on generally applicable terms and conditions in other compensation and fringe benefit plans, an automobile allowance of $700 each month, and reimbursement of country club membership fees, if sought. Mr. Rivers’ agreement does not address compensation or benefits during employment.
Risk Assessments of Incentive Compensation Plans
The Company conducts a continuous review of compensation programs from design to actual results. This helps ensure that employees are not driven to take excessive risk that could have a significant negative impact on the Company’s annual results or future safety and soundness of the institution. The Company’s compensation philosophy is “risk-reflective,” meaning the pay structure and programs are created to appropriately reward the returns from acceptable risk-taking through optimal pay mix, performance metrics, calibration and timing. Employees eligible for incentives or commissions for new business are not permitted to make credit, investment, or consumer pricing decisions independently. The Company has no “highly-leveraged” incentive plans. Plan sponsors, who are those executives in charge of business lines in which incentive plans exist, are not eligible for awards under the plans they sponsor. All incentive and commission plans are tied to performance metrics related to revenue and/or profitability and all incentive plans have a trigger, where payments are not made if certain profitability hurdles are not met by the Company. Finally, all incentive plans undergo an annual incentive plan risk assessment
led by leaders from the Internal Audit, Enterprise Risk Management, Legal and Human Resources Departments, with the results reported to the C&HCM Committee.
Other Programs
Benefit PlansAnti-Hedging and Anti-Pledging Policy
401(k) Plan. Our 401(k) Plan allows executivesThe Company has an Insider Trading Policy that, among other things, prohibits all our employees (including officers) and directors from engaging in hedging or other plan participantsspeculative transactions relating to make elective deferrals of their compensation to the 401(k) Plan up to limits of the Internal Revenue Service ("IRS") and in 2020 the Company made a safe harbor contribution to eligible participants’ accounts equal to 3% of the participant’s plan compensation earned during the plan year subject to IRS limits.
Employee Stock Ownership Plan. In connection with the Company's IPO, Eastern Bank adopted the ESOP, an employee stock ownership plan, for eligible employees. At the time of the offering, the ESOP trustee purchased 14,940,652 shares of the Company’s common stock funded with a loan fromstock. Prohibited transactions include short sales, derivative securities (such as put and call options, or other similar instruments) and other hedging transactions (such as equity swaps, prepaid variable forwards, or similar instruments), or any transactions that have or are designed to have the Company. The loan will be repaid principally through Eastern Bank’s contribution toeffect of hedging or offsetting any decrease in the ESOP and dividends, if any, payable on common stock held by the ESOP over the termmarket value of the loan. The ESOP’s independent trustee holdsCompany’s securities. In addition, Section 16 officers and directors are generally prohibited from holding the shares purchased byCompany’s securities in a margin account or otherwise pledging the ESOP in an unallocated suspense account, and releases shares onCompany’s securities as collateral for a pro-rata basis as the loan is repaid. Released shares are allocated among participants on the basisloan.
No Tax Gross Ups
Our C&HCM Committee has determined that no tax gross-ups for purposes of each participant’s proportional share of compensation relative to the compensation of all participants. In December 2020, a portionexcess parachute payments under Section 280G of the loan was repaid, and in March 2021, the ESOP trustee allocated shares to eligible participants for the first time. The allocation was made in respect of the post-IPO portion of 2020. Mr. Rivers, Miller and Fitzgerald each received allocations of 104 shares (fractional shares have been rounded down). The Company expects that allocations will be made annually to eligible participants in accordance with the terms of the ESOP.
Defined Benefit Pension Plan. Eastern Bank provides pension benefits to its employees, including our NEOs, through membership in the Savings Bank Employees’ Retirement AssociationCode (“SBERA”Section 280G”). The plan is a noncontributory, defined benefit plan. Our annual contribution to the defined benefit plan is based upon standards established by the Pension Protection Act. Effective November 1, 2020, the defined benefit pension plan converted from a “traditional pension plan” with a benefit formula based on age, service and salary, to a “cash balance” defined benefit plan. This conversion is expected to result in cost savings for the Company.
Supplemental Executive Retirement Plan. Eastern maintains a SERP, in which Messrs. Rivers, Miller and Fitzgerald currently participate. Under the SERP, each executive becomes entitled to receive a benefit following his or her separation from service. During the executive’s service with the Company, his account is credited monthly by Eastern Bank at 20% of his salary and annually at 20% of his short-term incentive. A participating executive officer is entitled to a payout of his SERP account balance as a lump sum or in annual installments, as determined in accordance with the terms of the plan. Each executive’s SERP benefit vests over a 10-year period commencing at 50% after five years of service and 10% each year thereafter. However, a participant will be fully vested if retirement eligible or upon death or disability. Messrs. Rivers and Fitzgerald are fully vested due to being retirement eligible.
As described above under "Future Executive Compensation Program Decisions — Amendment to SERP", the Compensation Committee approved the SERP Amendment in July 2021. The SERP Amendment provides that the SERP shall freeze, effective as of December 31, 2021 (the "Plan Freeze Date"). Following adoption of the SERP Amendment, the monthly percentage contributed by the Company on an executive’s salary and short-term incentive compensation earned after the Plan Freeze Date shall be zero, except with respectprovided to compensation that is attributed to an executive’s service in 2021 that is paid on or before March 15, 2022 (“Residual Bonus Compensation”). The monthly percentage contribution on the Residual Bonus Compensation shall be the sameour executives as the percentage contribution credited to participants’ accounts prior to adoption of the SERP Amendment. Under the terms of the SERP Amendment, participants’ accounts shall continue to be administered in accordance with the SERP plan documents until their respective separations from service. The Compensation Committee believes its approval of the SERP Amendment is consistent with its decision to focus on long-term compensation programs that are more aligned with shareholder value creation.
Benefit Equalization Plan. Eastern Bank maintains a non-qualified benefit equalization plan (“BEP”) to provide a pension supplement to restore pension benefits for employees who are not eligible for the SERP and whose compensation exceeds the annual statutory compensation maximum that can be considered under the defined benefit plan, and/or exceeds the annual permitted pension benefit amount under the Internal Revenue Code. The benefit formula is the same as provided in the defined benefit pension plan, with an offset for benefits provided by that plan. Benefits generally are paid in a lump sum in the January following retirement or death. In connection with the conversion of the defined benefit pension plan to a cash balance plan, the BEP was also amended to a cash balance format on November 1, 2020. None of the NEOs participated in the BEP in 2020, as SERP participants are not eligible to participate in the BEP.
409A Deferred Compensation Plan. Eastern Bank maintains a 409A Deferred Compensation Plan (“409A Plan”) that allows directors and selected executives of Eastern Bank to defer compensation under a non-qualified deferred compensation plan. As of December 31, 2020, none of the NEOs participated in the 409A Plan. Amounts deferred are fully vested. Although employer contributions are permitted, none have been made to date.
Executive Perquisites
Executive perquisites are not a core componentpart of our executive compensation program. We do offer, however,The dollar amount of the severance payment due under our NEOs allowances for automobilesCiC Agreements (as defined and parking. Priorfurther described below) will not be reduced in order to 2021,avoid an excess parachute payment under Section 280G, except in circumstances in which the Company offeredapplication of the excise tax under Section 4999 of the Code (“Section 4999”) on the full amount of severance and other compensation deemed to be an excess parachute payment under Section 280G would leave the executive with a gas perquisitelower net after-tax amount than having the severance and other compensation reduced to NEOs, but determinedthe extent necessary so the excise tax would not apply. In circumstances in which the amount of severance and other compensation deemed to retire such perquisite in 2021. Our NEOs arebe a parachute payment under Section 280G is not reduced, the executive would owe the excise tax under Section 4999 and would not be entitled to a gross-up or reimbursement for costs associated with membership in a country club, but all of our NEOs declined to accept these club fees in 2020.that excise tax payment under his or her CiC Agreement.
Compensation Practices, Policies and Guidelines
Clawback Policy
The Compensation Committee believes that it is a compensation governance best practice and a reinforcement of the Company’s compensation philosophy to have in place a Clawback Policy, which calls for the recovery of incentive-based compensation awards (whether cash or equity) to the NEOs, other executive officers and other covered employees if the relevant performance measure upon which the award is based is restated in a manner that would reduce the size of an award. The Clawback Policy empowers the Compensation Committee to recover such excess compensation received during the three completed fiscal years preceding the date on which the Board of Directors determines an accounting restatement is required to be filed with the SEC to correct a material non-compliance with any financial reporting requirements under applicable securities laws.
Stock Ownership Guidelines
The Company’s Board of Directors believes that the Company’s most senior executives (including its NEOs) should hold meaningful equity ownership positions in the Company, in part to align the NEOs’ interests with those of the Company’s shareholders. Accordingly, in September 2021, the Board of Directors adopted the management stock ownership guidelines set forth below.
UnderDouble Trigger Change in Control Agreements
The Company entered into change in control agreements (“CiC Agreements”) with the management stock ownership guidelines,NEOs and its most senior executive officers. With certain exceptions noted below, the CiC Agreements are substantially similar to each NEOother, and provide that if, during a potential change in control period or within 18 months after the consummation of a change in control, the executive’s employment is requiredinvoluntarily terminated for reasons other than for “cause,” disability or death, or the executive voluntary resigns for “good reason,” the executive would be entitled to hold sharesa lump sum severance payment equal to a multiple of the Company’s stock as set forth below:
•The CEO shall hold five (5) times the value of his or her annual base salary in shares of the Company’s stock;
•The President and the Chief Financial Officer/Chief Administrative Officer shall hold three (3) times the value of his or her annual base salary in shares of the Company’s stock; and
•All other executive officers shall hold two (2) times the value of(a) his or her base salary, in sharesplus (b) the greater of the Company’s stock.
To attain this ownership threshold, each NEO will haveexecutive’s annual bonus for the longer of five (5) years from (i)year in which the date of implementationtermination occurred and the average of the stock ownership guidelines (September 2021), or (ii)executive’s bonuses for the date that a NEO becomes a memberthree years immediately preceding the year in which the termination occurred. For Messrs. Rivers and Miller, the applicable multiplier is 300%; for each of the Company’s management committee. There shallother executives (Messrs. Fitzgerald and Westermann and Ms. Henry), the multiplier is 200%. As noted above, any payment required under the CiC Agreements will be a one-year holding period for 50% of a NEO’s vested shares (except in order to satisfy tax withholding obligations or to satisfy payment of an option exercise price) until the NEO has met, and continues to meet, his or her applicable minimum holding requirement.
Holdings that satisfy a NEO’s stock ownership requirement include all outstanding shares held, shares held through a 401(k), savings and profit sharing plans, and,reduced to the extent necessary to avoid penalties under Section 280G, but only if such reduction would result in a higher after-tax amount to the 2021 Equity Plan receives shareholder approval, all unvested time-based RSUs awardedexecutive. In exchange for the lump sum severance payments and other benefits, the CiC Agreements provide for certain post-employment obligations with respect to the executive’s ability to compete with the Company and solicit our employees or customers.
In addition, if the NEO was participating in the Company’s group health and dental plans immediately prior to the their termination and elects COBRA health continuation, then the Company shall pay to the NEO a NEO. Assuming shareholder approvalmonthly cash payment for 18 months or the NEO’s COBRA health continuation period, whichever ends earlier, in an amount equal to the monthly employer contribution that the Company would have made to provide health and dental insurance to the NEO if the NEO had remained employed by the Company. The Company will use commercially reasonable efforts to provide for such payments in a manner that allows the NEO to exclude such payments from income, unless the NEO’s COBRA health continuation period ends prior to the end of the 2021 Equity Plan, unvested awardseighteen-month payment period or the Company reasonably determines such payment to be discriminatory under Section 105(h) of performance stock units, stock options, warrants or other rightsthe Code.
Severance Agreements
The provision of reasonable severance benefits can be important in recruiting and retaining key executives.Thus, the Company has in place separate agreements with two NEOs, Messrs. Rivers and Miller, governing certain terms of their employment with and separation from the Company in circumstances not listed above exercisable for or convertible into sharesinvolving a change in control of common stock will not count towards satisfyingEastern. Under the ownership requirement unless and until shares under such awards are actually issued to a NEO.
Compliance with stock ownership guidelines will be evaluated annually and for the first time asterms of January 1, 2022. A NEO is not required to purchase additional shares to satisfy the applicable ownership requirementthose agreements, in the event an executive is terminated for cause, the executive will receive all earned but unpaid salary, all accrued but unused vacation pay, vested and accrued bonuses or other incentive compensation, and reimbursements for any reasonable, necessary and properly documented expenses. In the event of termination without cause, in addition to the payments outlined above, the Company will pay to the executive within 60 days of his termination a declinelump sum payment equal to 200% of his annual base compensation plus a prorated share of the annual incentive payment to which the executive would have been eligible under the MIP (described above) during the calendar year in which the termination date falls. The executive will also receive full vesting of benefits in existing grants under the Bank’s legacy LTIP. If Mr. Rivers elects COBRA coverage, Mr. Rivers will also receive 24 months of continued participation in Eastern group health and dental insurance plans, with Eastern Bank paying or reimbursing Mr. Rivers for the cost of such premiums, and Mr. Miller will receive a lump sum payment equivalent to 24x the amount of Eastern’s standard monthly contributions to Mr. Miller’s Eastern Bank group health and dental insurance premiums. The agreements provide for certain restrictive covenant obligations, which include each of Messrs. Rivers and Miller agreeing not to solicit customers and employees of Eastern Bank during their employment with Eastern Bank and continuing for a period ending 24 months following their termination of employment. In addition, Mr.Miller’s agreement also specifies that while he is employed, he will receive an annual base salary of not less than $450,000 (subject to adjustment), discretionary incentive and/or bonus compensation, and participation on generally applicable terms and conditions in other compensation and fringe benefit plans, an automobile allowance of $700 each month, and reimbursement of country club membership fees, if sought. Mr. Rivers’ agreement does not address compensation or benefits during employment.
Risk Assessments of Incentive Compensation Plans
The Company conducts a continuous review of compensation programs from design to actual results. This helps ensure that employees are not driven to take excessive risk that could have a significant negative impact on the Company’s stock price, butannual results or future safety and soundness of the NEOinstitution. The Company’s compensation philosophy is generally prohibited“risk-reflective,” meaning the pay structure and programs are created to appropriately reward the returns from sellingacceptable risk-taking through optimal pay mix, performance metrics, calibration and timing. Employees eligible for incentives or transferring shares untilcommissions for new business are not permitted to make credit, investment, or consumer pricing decisions independently. The Company has no “highly-leveraged” incentive plans. Plan sponsors, who are those executives in charge of business lines in which incentive plans exist, are not eligible for awards under the minimum ownership requirement has been achieved, except as otherwise determinedplans they sponsor. All incentive and commission plans are tied to performance metrics related to revenue and/or profitability and all incentive plans have a trigger, where payments are not made if certain profitability hurdles are not met by the Compensation Committee.Company. Finally, all incentive plans undergo an annual incentive plan risk assessment
led by leaders from the Internal Audit, Enterprise Risk Management, Legal and Human Resources Departments, with the results reported to the C&HCM Committee.
Other Programs
Anti-Hedging and Anti-Pledging Policy
The Company has an Insider Trading Policy that, among other things, prohibits all of our employees (including officers) and directors from engaging in hedging or other speculative transactions relating to shares of the Company’s stock. Prohibited transactions include short sales, derivative securities (such as put and call options, or other similar instruments) and other hedging transactions (such as equity swaps, prepaid variable forwards, or similar instruments), or any transactions that have or are designed to have the effect of hedging or offsetting any decrease in the market value of the Company’s securities. In addition, Section 16 officers and directors are generally prohibited from holding the Company’s securities in a margin account or otherwise pledging the Company’s securities as collateral for a loan.
No Tax Gross Ups
Our CompensationC&HCM Committee has determined that no tax gross-ups for purposes of excess parachute payments under Section 280G ("Section 280G") of the Internal Revenue Code of 1986, as amended ("Code"(“Section 280G”) shall be provided to our executives as part of our executive compensation program. The dollar amount of the severance payment due under our CiC Agreements (as defined and further described below) will not be reduced in order to avoid an excess parachute payment under Section 280G, except in circumstances in which the application of the excise tax under Section 4999 of the Code (“Section 4999”) on the full amount of severance and other compensation deemed to be an excess parachute payment under Section 280G would leave the executive with a lower net after-tax amount than having the severance and other compensation reduced to the extent necessary so the excise tax would not apply. In circumstances in which the amount of severance and other compensation deemed to be a parachute payment under Section 280G is not reduced, the executive would owe the excise tax under Section 4999 and would not be entitled to a gross-up or reimbursement of that excise tax payment under his or her CiC Agreement.
Double Trigger Change in Control Agreements
In connection with the IPO in 2020, theThe Company entered into change in control agreements (“CiC Agreements”) with the NEOs and its most senior executive officers. With certain exceptions noted below, the CiC Agreements are substantially similar to each other, and provide that if, during a potential change in control period or within 18 months after the consummation of a change in control, the executive’s employment is involuntarily terminated for reasons other than for “cause,” disability or death, or the executive voluntary resigns for “good reason,” the executive would be entitled to a lump sum severance payment equal to a multiple of (a) his or her base salary, plus (b) the greater of the executive’s annual bonus for the
year in which the termination occurred and the average of the executive’s bonuses for the three (3) years immediately preceding the year in which the termination occurred. For Messrs. Rivers and Miller, the applicable multiplier is 300%; for each of the other executives including Mr.(Messrs. Fitzgerald and Westermann and Ms. Henry), the multiplier is 200%. As noted above, any payment required under the CiC Agreements will be reduced to the extent necessary to avoid penalties under Section 280G, but only if such reduction would result in a higher after-tax amount to the executive. In exchange for the lump sum severance payments and other benefits, the CiC Agreements provide for certain post-employment obligations with respect to the executive’s ability to compete with the Company and solicit our employees or customers.
In addition, if the NEO was participating in the Company’s group health and dental plans immediately prior to the their termination and elects COBRA health continuation, then the Company shall pay to the NEO a monthly cash payment for 18 months or the NEO’s COBRA health continuation period, whichever ends earlier, in an amount equal to the monthly employer contribution that the Company would have made to provide health and dental insurance to the NEO if the NEO had remained employed by the Company. The Company will use commercially reasonable efforts to provide for such payments in a manner that allows the NEO to exclude such payments from income, unless the NEO’s COBRA health continuation period ends prior to the end of the eighteen-month payment period or the Company reasonably determines such payment to be discriminatory under Section 105(h) of the Code.
Severance Agreements
The provision of reasonable severance benefits can be important in recruiting and retaining key executives.Thus, the Company has in place separate agreements with two NEOs, Messrs. Rivers and Miller, governing certain terms of their employment with and separation from the Company in circumstances not involving a change in control of Eastern. Under the terms of those agreements, in the event an executive is terminated for cause, the executive will receive all earned but unpaid salary, all accrued but unused vacation pay, vested and accrued bonuses or other incentive compensation, and reimbursements for any reasonable, necessary and properly documented expenses. In the event of termination without cause, in addition to the payments outlined above, the Company will pay to the executive within 60 days of his termination a lump sum payment equal to 200% of his annual base compensation plus a prorated share of the annual incentive payment to which the executive would have been eligible under the MIP (described above) during the calendar year in which the termination date falls. The executive will also receive full vesting of benefits in existing grants under Easternthe Bank’s legacy LTIP. If Mr. Rivers elects COBRA coverage, Mr. Rivers will also receive 24 months of continued participation in Eastern group health and dental insurance plans, with Eastern Bank paying or reimbursing Mr. Rivers for the cost of such premiums, and Mr. Miller will receive a lump sum payment equivalent to 24x the amount of Eastern’s standard monthly contributions to Mr. Miller’s Eastern Bank group health and dental insurance premiums. The agreements provide for certain restrictive covenant obligations, which include each of Messrs. Rivers and Miller agreeing not to solicit customers and employees of Eastern Bank during their employment with Eastern Bank and continuing for a period ending 24 months following their termination of employment. In addition, Mr.Miller’s agreement also specifies that while he is employed, he will receive an annual base salary of not less than $450,000 (subject to adjustment), discretionary incentive and/or bonus compensation, and participation on generally applicable terms and conditions in other compensation and fringe benefit plans, an automobile allowance of $700 each month, and reimbursement of country club membership fees, if sought. Mr. Rivers’ agreement does not address compensation or benefits during employment.
Risk Assessments of Incentive Compensation Plans
The Company conducts a continuous review of compensation programs from design to actual results. This helps ensure that employees are not driven to take excessive risk that could have a significant negative impact on the Company’s annual results or future safety and soundness of the institution. The Company’s compensation philosophy is “risk-reflective,” meaning the pay structure and programs are created to appropriately reward the returns from acceptable risk-taking through optimal pay mix, performance metrics, calibration and timing. Employees eligible for incentives or commissions for new business are not permitted to make credit, investment, or consumer pricing decisions independently. The Company has no “highly-leveraged” incentive plans. Plan sponsors, who are those executives in charge of business lines in which incentive plans exist, are not eligible for awards under the plans they sponsor. All incentive and commission plans are tied to performance metrics related to revenue and/or profitability and all incentive plans have a trigger, where payments are not made if certain profitability hurdles are not met by the Company. Finally, all incentive plans undergo an annual incentive plan risk assessment lead
led by leaders from the Internal Audit, Enterprise Risk Management, Legal and Human Resources Departments, with the results reported to the CompensationC&HCM Committee.
Other Programs
Benefit Plans
401(k) Plan. Our 401(k) Plan allows executives and other plan participants to make elective deferrals of their compensation to the 401(k) Plan up to limits of the Internal Revenue Service (“IRS“), and in 2022 the Company made a safe harbor contribution to eligible participants’ accounts equal to 3% of the participant’s plan compensation earned during the plan year subject to IRS limits.
Employee Stock Ownership Plan. Eastern Bank has an ESOP, an employee stock ownership plan, for eligible employees. Management believes the ESOP aligns the interests of all eligible employees – not just senior executives – with shareholders to create better alignment with total shareholder value.
At the time of the IPO, the ESOP trustee purchased 14,940,652 shares of the Company’s common stock funded with a loan from the Company (“ESOP Loan”). The ESOP Loan is repaid principally through Eastern Bank’s contribution to the ESOP and dividends payable on common stock held by the ESOP over the term of the loan. The ESOP’s independent trustee holds the shares purchased by the ESOP in an unallocated suspense account, and releases shares on a pro rata basis as the loan is repaid. Released shares are allocated among participants on the basis of each participant’s proportional share of compensation relative to the compensation of all participants. A participant cliff-vests in their benefits after three years of vesting service with Eastern Bank or a participating subsidiary. Credited service includes both calendar years of service from January 1, 2020 (the initial effective date of the ESOP) and years of vesting service that a participant has earned under the Bank’s defined benefit pension plan prior to the adoption of the ESOP. A participant also will become fully vested in their benefit upon normal retirement, early retirement, death or disability, a change in control, or termination of the ESOP. A vested participant is entitled to receive a distribution from the ESOP upon separation from service or, if earlier, plan termination. The ESOP permits a participant to direct the trustee as to how to vote the shares of common stock allocated to their account. The ESOP trustee votes unallocated shares and allocated shares for which participants do not provide voting instructions on a matter in the same ratio as those shares for which participants provide instructions, subject to fulfillment of the trustee’s fiduciary responsibilities.
In October 2022, a portion of the ESOP Loan was repaid, and in February 2023, the ESOP trustee allocated shares to eligible participants for 2022. The Company makes allocations annually to eligible participants in accordance with the terms of the ESOP. Each of Messrs. Rivers, Miller, Fitzgerald, Westermann and Ms. Henry received allocations of 875 shares (fractional shares have been rounded down) for 2022. Each of our NEOs is fully vested in his or her benefit under the ESOP.
Defined Benefit Pension Plan. Eastern Bank provides pension benefits (the "Pension Plan") to its employees, including our NEOs, through membership in the Savings Bank Employees’ Retirement Association. The Company's pension plan is a noncontributory, defined benefit plan. Our annual contribution to the defined benefit plan is based upon standards established by the Pension Protection Act. The contribution is based on an actuarial method intended to provide not only for benefits attributable to service to date but also for those expected to be earned in the future.
Frozen Supplemental Executive Retirement Plan. Eastern had historically offered a defined contribution supplemental executive retirement plan ("SERP"), in which Messrs. Rivers, Miller, and Fitzgerald participated. Benefit accruals were frozen for then-active participants as to compensation received for work performed after 2021, and the SERP was closed to new participants. Under the SERP, each participating executive is entitled to receive a benefit following his or her separation from service.
Benefit Equalization Plan. The Company maintains a non-qualified benefit equalization plan (“BEP”) to provide a pension supplement to restore pension benefits for employees whosecompensation exceeds the annual statutory compensation maximum that can be considered under the defined benefit plan, and/or exceeds the annual permitted pension benefit amount under the Internal Revenue Code of 1986, as amended (the “Code”). The benefit formula is the same as provided in the Pension Plan, with an offset for benefits provided by that plan. Benefits generally are paid in a lump sum in the January following retirement or death. All NEOs participated in the BEP in 2022, since Company contributions to SERP accounts for Messrs. Rivers, Miller and Fitzgerald ceased beginning with compensation for work performed in 2022.
409A Deferred Compensation Plans. The Company maintains two 409A deferred compensation plans — one for Eastern Bank employees (“409A Plan”) and one for Eastern Insurance Group LLC employees (“EIG SERP”). Each of these plans allow directors and selected executives to defer compensation under non-qualified deferred compensation plans. None of the NEOs participated in these plans in 2022.
Executive Perquisites. Executive perquisites are not a core component of our executive compensation program. We do offer, however, our NEOs allowances for automobiles and parking. Our NEOs are entitled to reimbursement for costs associated with membership in a country club, but all of our NEOs declined to accept these club fees in 2022.
COMPENSATION COMMITTEEAND HUMAN CAPITAL MANAGEMENT REPORT
The Compensation and Human Capital Management Committee of our Board of Directors has reviewed and discussed the preceding Compensation Discussion and Analysis with management. Based on such review and discussions, the Compensation and Human Capital Management Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.Proxy Statement.
By the Compensation and Human Capital Management Committee of the Board of Directors,
Peter K. Markell (Chair)
Deborah L. Jackson
Richard C. Bane
Paul M. Connolly
Joseph T. Chung
Luis A. Borgen
Paul D. Spiess
Compensation Committee Interlocks and Insider Participation
During 2020, none of our officers, former officers or employees served on our Compensation Committee. None of our executive officers serves or has served as a member of the board of directors, compensation committee, or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our Compensation Committee.
EXECUTIVE COMPENSATION
20202022 Summary Compensation Table
The table below sets forth the total compensation paid to, or earned by, our three NEOs for the years ended December 31, 20202022, 2021 and 20192020 in accordance with applicable SEC rules.
| | Summary Compensation Table | Summary Compensation Table | Summary Compensation Table |
| Name and Principal Position | Name and Principal Position | | Fiscal Year | | Salary (1) | | Bonus (2) | | Non-Equity Incentive Plan Compensation ($)(3)(4) | | All Other Compensation ($)(5) | | Total ($)(6) | Name and Principal Position | | Fiscal Year (1) | | Salary (2) | | Bonus (3) | | Non-Equity Incentive Plan Compensation (4)(5) | | Stock Awards (6) | | Change In Pension Value and Non-qualified Deferred Compensation Earnings (7) | All Other Compensation (8) | | Total (9) |
| | Robert F. Rivers | Robert F. Rivers | | 2020 | | $ | 987,500 | | | $ | — | | | $ | 2,046,340 | | | $ | 439,097 | | | $ | 3,472,937 | | Robert F. Rivers | | 2022 | | $ | 995,000 | | | $ | — | | | $ | 976,100 | | | $ | 4,503,726 | | | $ | 13,486 | | $ | 255,368 | | | $ | 6,743,680 | |
| Chief Executive Officer and Chair of the Board of Directors | Chief Executive Officer and Chair of the Board of Directors | | 2019 | | $ | 929,167 | | | $ | — | | | $ | 1,945,261 | | | $ | 408,459 | | | $ | 3,282,887 | | Chief Executive Officer and Chair of the Board of Directors | | 2021 | | $ | 995,000 | | | $ | — | | | $ | 2,757,136 | | | $ | — | | | $ | 86,687 | | $ | 369,720 | | | $ | 4,208,543 | |
| | | | 2020 | | $ | 987,500 | | | $ | — | | | $ | 2,046,340 | | | $ | — | | | $ | 200,363 | | $ | 439,097 | | | $ | 3,673,300 | |
| Quincy L. Miller | Quincy L. Miller | | 2020 | | $ | 570,833 | | | $ | 110,000 | | | $ | 943,670 | | | $ | 219,081 | | | $ | 1,843,584 | | Quincy L. Miller | | 2022 | | $ | 587,500 | | | $ | — | | | $ | 385,900 | | | $ | 3,002,449 | | | $ | 20,111 | | $ | 114,166 | | | $ | 4,110,126 | |
| President & Vice Chair | | 2019 | | $ | 545,833 | | | $ | — | | | $ | 412,000 | | | $ | 212,635 | | | $ | 1,170,468 | | |
| President | | President | | 2021 | | $ | 575,000 | | | $ | — | | | $ | 948,712 | | | $ | — | | | $ | 45,562 | | $ | 224,347 | | | $ | 1,793,621 | |
| | | | 2020 | | $ | 570,833 | | | $ | 110,000 | | | $ | 943,670 | | | $ | — | | | $ | 79,179 | | $ | 219,081 | | | $ | 1,922,763 | |
| James B. Fitzgerald | James B. Fitzgerald | | 2020 | | $ | 570,833 | | | $ | 220,000 | | | $ | 943,670 | | | $ | 220,885 | | | $ | 1,955,388 | | James B. Fitzgerald | | 2022 | | $ | 587,500 | | | $ | — | | | $ | 385,900 | | | $ | 3,002,449 | | | $ | 2,406 | | $ | 125,410 | | | $ | 4,103,665 | |
| Chief Financial Officer, Chief Administrative Officer and Treasurer | | 2019 | | $ | 545,833 | | | $ | — | | | $ | 798,783 | | | $ | 214,402 | | | $ | 1,559,018 | | |
| Chief Administrative Officer, Chief Financial Officer and Treasurer | | Chief Administrative Officer, Chief Financial Officer and Treasurer | | 2021 | | $ | 575,000 | | | $ | — | | | $ | 948,712 | | | $ | — | | | $ | 69,595 | | $ | 249,614 | | | $ | 1,842,921 | |
| | | | 2020 | | $ | 570,833 | | | $ | 220,000 | | | $ | 943,670 | | | $ | — | | | $ | 139,042 | | $ | 220,885 | | | $ | 2,094,430 | |
Donald M. Westermann Chief Information Officer | | Donald M. Westermann Chief Information Officer | | 2022 | | $ | 461,250 | | | $ | — | | | $ | 227,300 | | | $ | 2,001,646 | | | $ | — | | $ | 34,504 | | | $ | 2,724,700 | |
Kathleen C. Henry General Counsel and Corporate Secretary | | Kathleen C. Henry General Counsel and Corporate Secretary | | 2022 | | $ | 461,250 | | | $ | — | | | $ | 227,300 | | | $ | 2,001,646 | | | $ | 84,812 | | $ | 35,975 | | | $ | 2,810,983 | |
|
(1)Neither Mr. Westermann nor Ms. Henry were NEOs in 2021 or 2020. Their respective compensation is therefore only disclosed for the year ended December 31, 2022.
(1)(2)Represents base salary earned in 20202022, 2021 and 2019,2020, as applicable. Mr. Rivers' 2020 salary change was effective on March 1, 2020. For Messrs. Miller and Fitzgerald, 2022 and 2020 salary changes were effective March 1st of each year. Salary earned reflects January and February salary earnings at the prior rate, and March through December at the new effective salary rate.
(2)Represents a one-time discretionary cash bonus. (3)For Mr. Miller, the cash bonus he received for 2020 recognized his leadership with regard to the leadership role he playedCompany's participation in the Company’s response toPaycheck Protection Program of the PPP.Coronavirus Aid, Relief, and Economic Security (CARES) Act. For Mr. Fitzgerald, the cash bonus he received for 2020 recognized his considerable role in the successful execution of the Company’s IPO.
(3)(4)Represents cash awards earned under the Company’s MIP during 20202022, 2021 and 2019, respectively2020, and the amounts payable under thelegacy LTIP cash awards that matured on December 31, 20202021 and December 31, 2019,2020, respectively.
•MIP Awards: For Messrs. Rivers, Miller, Fitzgerald, Westermann and Ms. Henry, amounts earned under the MIP in 2022 were $976,100, $385,900, $385,900, $227,300 and $227,300, respectively. For Messrs. Rivers, Miller and Fitzgerald, amounts earned under the MIP in 2021 were $1,075,000, $388,000 and $388,000, respectively, and in 2020 were $637,000, $239,000 and $239,000, respectively, and in 2019, were $1,075,000, $412,000 and $412,000, respectively. Awards under the MIP are based on performance components outlined in the plan, which components are subject to modification at the discretion of the Chief Executive Officer during the plan year.
•Legacy LTIP Awards: For Messrs. Rivers, Miller and Fitzgerald, the amounts payable under thelegacy LTIP awards that were granted in 2017 and matured on December 31, 2021 were $1,682,136, $560,712 and $560,712 respectively. For Messrs. Rivers, Miller and Fitzgerald, LTIP awards granted in 2016 andthat matured on December 31, 2020 were $1,409,340, $704,670, and $704,670, respectively. For Messrs. Rivers and Fitzgerald, the amounts payable under theLegacy LTIP cash awards that were granted in 20152018 and matured on December 31, 20192022, were $870,261valued at $0, and $386,783, respectively. None of Mr. Miller’s LTIP awards matured on December 31, 2019. See the subsection titled “—Long-Term Incentive Plan” below for additional information regarding the estimated value as of December 31, 2020 of LTIP awards to Messrs. Rivers, Miller and Fitzgerald that will mature in 2021, 2022, and 2023, andthus no amounts are payableincluded in 2022 2023 and 2024, respectively.for the 2018 LTIP cash awards.
(4)(5)The amounts payable under LTIP awards that matured in 20202021 and 20192020 include interest paid thereon from December 31 of the year in which they matured through the dates of payment in March 2022 and March 2021, respectively. For awards that matured in 2021, the interest amounts were $636 for Mr. Rivers, $212 for Mr. Miller and July 2020, respectively.$212 for Mr. Fitzgerald. For awards that matured in 2020, the interest amounts were $540 for Mr. Rivers, $270 for Mr. Miller and $270 for Mr. Fitzgerald. For awards
(6)Represents the aggregate grant date fair value of RSUs and PSUs granted in 2022, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, which for RSUs was equal to the closing price of a share of Company common stock on the date of grant ($21.08 on March 1, 2022), multiplied by the number of RSUs in the grant; for the PSUs based on EPS as the performance measure, was equal to the closing price of a share of Company
common stock on the date of grant date ($21.08 on March 1, 2022), multiplied by the number of PSUs at target award levels; and for the PSUs based on TSR as the performance measure, was valued based on the probable outcome of applicable performance conditions using a Monte Carlo simulation model, which priced our common stock on the grant date at $21.15 per unit, multiplied by the number of PSUs at target award levels. If it is assumed that matured in 2019,that the interest amounts were $4,461maximum level of performance under the PSUs was achieved, the grant date fair value of the PSU portion of the grant would have been $3,380,596 for Mr. RiversRivers; $2,253,688 for each of Messrs. Miller and $1,982Fitzgerald; and $1,502,480 for each of Ms. Henry and Mr. Westermann.
(7)Represents the change in the value of the Pension Plan and BEP for all our NEOs, for the period from December 31, 2021 to December 31, 2022. No change in value of the Pension Plan is shown for Mr. Fitzgerald.Westermann for the applicable period, as his change in value would have reflected a negative amount of (-$199,432) and was thus excluded.
(5)(8)All Other Compensation in the table above includes the amounts for 20202022, 2021 and 2019,2020, as applicable, set forth in the following tabletable.
| | All Other Compensation | All Other Compensation | All Other Compensation |
| Named Executive Officer | Named Executive Officer | | Fiscal Year | | Perquisites (a) | | 401(k) Plan Defined Contribution
Plan (b) | | Employer SERP Contributions (c) | | Employer Allocations to ESOP (d) | | Total | Named Executive Officer | | Fiscal Year | | Perquisites (a) | | 401(k) Plan Defined Contribution
Plan (b) | | Employer SERP Contributions (c) | | Employer Allocations to ESOP (d) | | Total (e) |
| | Robert F. Rivers | Robert F. Rivers | | 2020 | | $ | 16,350 | | | $ | 8,550 | | | $ | 412,500 | | | $ | 1,697 | | | $ | 439,097 | | Robert F. Rivers | | 2022 | | $ | 16,109 | | | $ | 9,150 | | | $ | 215,000 | | | $ | 15,109 | | | $ | 255,368 | |
| | 2019 | | $ | 16,226 | | | $ | 8,400 | | | $ | 383,833 | | | $ | — | | | $ | 408,459 | | | | 2021 | | $ | 17,197 | | | $ | 8,700 | | | $ | 326,400 | | | $ | 17,423 | | | $ | 369,720 | |
| | | | 2020 | | $ | 16,350 | | | $ | 8,550 | | | $ | 412,500 | | | $ | 1,697 | | | $ | 439,097 | |
| Quincy L. Miller | Quincy L. Miller | | 2020 | | $ | 12,267 | | | $ | 8,550 | | | $ | 196,567 | | | $ | 1,697 | | | $ | 219,081 | | Quincy L. Miller | | 2022 | | $ | 12,307 | | | $ | 9,150 | | | $ | 77,600 | | | $ | 15,109 | | | $ | 114,166 | |
| | | | 2021 | | $ | 13,424 | | | $ | 8,700 | | | $ | 184,800 | | | $ | 17,423 | | | $ | 224,347 | |
| | 2019 | | $ | 11,068 | | | $ | 8,400 | | | $ | 193,167 | | | $ | — | | | $ | 212,635 | | | | 2020 | | $ | 12,267 | | | $ | 8,550 | | | $ | 196,567 | | | $ | 1,697 | | | $ | 219,081 | |
| James B. Fitzgerald | James B. Fitzgerald | | 2020 | | $ | 14,071 | | | $ | 8,550 | | | $ | 196,567 | | | $ | 1,697 | | | $ | 220,885 | | James B. Fitzgerald | | 2022 | | $ | 23,551 | | | $ | 9,150 | | | $ | 77,600 | | | $ | 15,109 | | | $ | 125,410 | |
| | 2019 | | $ | 12,835 | | | $ | 8,400 | | | $ | 193,167 | | | $ | — | | | $ | 214,402 | | | | 2021 | | $ | 16,691 | | | $ | 8,700 | | | $ | 206,800 | | | $ | 17,423 | | | $ | 249,614 | |
| | | | 2020 | | $ | 14,071 | | | $ | 8,550 | | | $ | 196,567 | | | $ | 1,697 | | | $ | 220,885 | |
| Donald M. Westermann | | Donald M. Westermann | | 2022 | | $ | 10,245 | | | $ | 9,150 | | | $ | — | | | $ | 15,109 | | | $ | 34,504 | |
| Kathleen C. Henry | | Kathleen C. Henry | | 2022 | | $ | 11,716 | | | $ | 9,150 | | | $ | — | | | $ | 15,109 | | | $ | 35,975 | |
(a)Amount includes automobile and parking and gas allowances and taxable imputed incomes.
(b)Represents employer contributions under our 401(k) Plan made on behalf of the NEO.
(c)Represents deemed employer SERP contributions made during 2022, 2021 and 2020, and 2019.as applicable. The SERP was frozen at the end of 2021; employer SERP contributions were made in 2022 related to compensation earned in 2021.
(d)Represents the value of an allocation of 104 shares of Company common stock pursuant to the terms of the Company’s ESOP in connection with the NEO’s service in fiscal year 2022, 2021 and 2020, multiplied by $16.31,as applicable. The value is calculated based on the closing price of Company common stock on December 31, 2020.the last day trading of the year. For 2022, the amount represents an allocation of 875 shares multiplied by $17.25, for 2021, the amount represents an allocation of 863 shares multiplied by $20.17, and for 2020, the amount represents an allocation of 104 shares multiplied by $16.31 (fractional shares are rounded down). The ESOP allocation for 2020 reflects a shortened period post-IPO. Dividends paid on shares allocated through the ESOP are automatically reinvested to acquire additional shares. For each NEO, as applicable, the share allocation for 2021 includes one additional share acquired through dividend reinvestment and, for 2022, the share allocation includes 19 additional shares acquired through dividend reinvestment.
(6)(e) Our NEOs' total compensation in the Summary Compensation Table does not include earnings on the SERP, our nonqualified defined contribution plan,in which Messrs. Rivers, Miller and Fitzgerald participate, because our NEOs do not receive any preferential or above-market investment earnings under such plan.plans. Under the terms of the SERP, the increase in the value of the benefit provided in our SERP increases (or decreases)or decreases based upon changes in one or more generally available investment benchmarks or strategies chosen by the respective participant. Earnings
Grant of Plan-Based Awards in 2022
The table below provides information regarding plan-based awards granted to our NEOs in 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated future payouts under equity incentive plan awards (1) | | |
| Named Executive Officer | Type of Award | Grant Date | Approval Date | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares of Stocks or Units (#) (2) | Grant Date Fair Value of Stock and Option Awards |
| Robert F. Rivers | RSU | 3/1/2022 | 2/28/2022 | - | - | - | 106,736 | $2,249,995 |
| PSU - EPS | 3/1/2022 | 2/28/2022 | 13,342 | 53,368 | 80,052 | - | $1,124,997 |
| PSU - TSR | 3/1/2022 | 2/28/2022 | 13,342 | 53,368 | 80,052 | - | $1,128,733 |
| Quincy L. Miller | RSU | 3/1/2022 | 2/14/2022 | - | - | - | 71,157 | $1,499,990 |
| PSU - EPS | 3/1/2022 | 2/14/2022 | 8,895 | 35,578 | 53,367 | - | $749,984 |
| PSU - TSR | 3/1/2022 | 2/14/2022 | 8,895 | 35,578 | 53,367 | - | $752,475 |
| James B. Fitzgerald | RSU | 3/1/2022 | 2/14/2022 | - | - | - | 71,157 | $1,499,990 |
| PSU - EPS | 3/1/2022 | 2/14/2022 | 8,895 | 35,578 | 53,367 | - | $749,984 |
| PSU - TSR | 3/1/2022 | 2/14/2022 | 8,895 | 35,578 | 53,367 | - | $752,475 |
| Donald M. Westermann | RSU | 3/1/2022 | 2/14/2022 | - | - | - | 47,438 | $999,993 |
| PSU - EPS | 3/1/2022 | 2/14/2022 | 5,930 | 23,719 | 35,579 | - | $499,997 |
| PSU - TSR | 3/1/2022 | 2/14/2022 | 5,930 | 23,719 | 35,579 | - | $501,657 |
| Kathleen C. Henry | RSU | 3/1/2022 | 2/14/2022 | - | - | - | 47,438 | $999,993 |
| PSU - EPS | 3/1/2022 | 2/14/2022 | 5,930 | 23,719 | 35,579 | - | $499,997 |
| PSU - TSR | 3/1/2022 | 2/14/2022 | 5,930 | 23,719 | 35,579 | - | $501,657 |
(1) Represents PSUs that will, for each grant of PSUs based on EPS or TSR performance measures, respectively, vest in one installment on or around March 1, 2025, subject to continued service and the satisfaction of applicable performance conditions. The number of PSUs to be earned is dependent on the Company's growth of its EPS and TSR performance, each relative to those of the KRX Banks, over the three-year performance period from January 1, 2022 through December 31, 2024. No PSUs will vest for performance below threshold levels.
(2) Represents RSUs that vest in five equal installments on the anniversaries of the grant date (March 1, 2022), subject to continued service.
Outstanding Equity Awards at 2022 Fiscal Year End
The following table provides information regarding PSUs and RSUs, as applicable, held by our NEOs on December 31, 2022.
| | | | | | | | | | | |
| Named Executive Officer | Equity Award Type (1) | Equity Incentive Plan awards: Number of underlying shares that have not yet vested | Equity Incentive Plan awards: Market Value of underlying shares that have not yet vested (2) |
Robert F. Rivers
| RSU | 106,736 | $ | 1,841,196 |
| PSU - EPS | 13,342 | $ | 230,150 |
| PSU - TSR | 13,342 | $ | 230,150 |
Quincy L. Miller
| RSU | 71,157 | $ | 1,227,458 |
| PSU - EPS | 8,895 | $ | 153,430 |
| PSU - TSR | 8,895 | $ | 153,430 |
James B. Fitzgerald
| RSU | 71,157 | $ | 1,227,458 |
| PSU - EPS | 8,895 | $ | 153,430 |
| PSU - TSR | 8,895 | $ | 153,430 |
| Donald M. Westermann | RSU | 47,438 | $ | 818,306 |
| PSU - EPS | 5,930 | $ | 102,288 |
| PSU - TSR | 5,930 | $ | 102,288 |
| Kathleen C. Henry | RSU | 47,438 | $ | 818,306 |
| PSU - EPS | 5,930 | $ | 102,288 |
| PSU - TSR | 5,930 | $ | 102,288 |
(1) Each RSU award will vest in five equal installments on the anniversaries of the grant date (March 1, 2022), subject to continued employment. PSUs based on EPS and TSR performance, respectively, will vest in one installment on or around March 1, 2025, subject to continued employment and the satisfaction of applicable performance conditions. The number of PSUs to be earned is dependent on the Company's growth of its EPS and TSR performance, respectively, each relative to those of the KRX Banks, over the three-year performance period from January 1, 2022 through December 31, 2024. PSU amounts for both EPS and TSR performance measure awards reflect threshold performance levels.
(2) The market value of RSUs and PSU EPS and PSU TSR performance measure awards are based on the closing price of $17.25 of Company common stock on December 30, 2022, the last trading day of 2022, multiplied by the number of underlying granted but unvested units.
Nonqualified Deferred Compensation
The Company's nonqualified deferred contribution plans allow certain highly compensated or management employees to defer portions of their current compensation, as specified in the applicable plan documents. These plans include the SERP and the 409A Plan (as described below). Distributions of account balances under such plans may be made only in accordance with the applicable plan documents. None of these plans provide our NEOs with any preferential or above-market earnings on their account balances. Rather, the value of the benefit provided by a plan increases or decreases based upon changes in one or more generally available investment benchmarks or strategies chosen by the respective participant.
Frozen Supplemental Executive Retirement Plan. Messrs. Rivers, Miller and Fitzgerald each received employer SERP contributions in 2022 for compensation earned in 2021. The plan was frozen effective as of December 31, 2021. Although participants’ accounts will continue to be administered in accordance with the fiscalSERP document until their respective separations from service, the Company ceased accruing for benefits for SERP participants on earnings received after December 31, 2021 (other than with respect to the compensation earned in 2021). Pursuant to the terms of the frozen SERP, prior to 2022 an executive's account was credited monthly with an amount equal to 20% of their salary and credited annually with an amount equal to 20% of their short-term incentives. Under the terms of the SERP, each executive participating in the SERP becomes entitled to receive a benefit following his separation from service with the Company. The SERP benefit vests over a 10-year period and account balances are payable as a lump sum or in annual installments, as determined in accordance with the terms of the plan. Each of Messrs. Rivers and Fitzgerald are fully vested due to being retirement eligible under the terms of the SERP, and Mr. Miller is 70% vested.
409A Deferred Compensation Plans. The Company's 409A Plan allows directors and selected executives to defer compensation under non-qualified deferred compensation plans. Under the 409A Plan, participants could defer up to 75% of base salary and up to 100% of any incentive compensation. The balances under these plans reflect compensation deferred in prior years and are payable as a lump sum or in annual installments, as determined in accordance with the terms of the applicable plan.
The table below sets forth the amounts of the contributions, earnings and value of the Company's nonqualified deferred compensation plans in which our NEOs participated during the year ended December 31, 2020 were $1,351,220 for Mr. Rivers, $222,539 for Mr. Miller and $682,719 for Mr. Fitzgerald. Earnings on2022.
| | | | | | | | | | | | | | | | | |
| Nonqualified Deferred Compensation |
| Named Executive Officer | Executive contributions | Employer contributions (1) | Aggregate earnings (2) | Aggregate withdrawals/distributions | Aggregate balance (3) |
| Robert F. Rivers | $0 | $215,157 | $(1,733,748) | $0 | $7,824,576 |
| Quincy L. Miller | $0 | $77,600 | $(315,261) | $0 | $1,431,960 |
| James B. Fitzgerald | $0 | $77,600 | $(1,161,541) | $0 | $2,793,539 |
| Donald M. Westermann | $0 | $0 | $(24,682) | $0 | $94,903 |
| Kathleen C. Henry | $0 | $0 | $0 | $0 | $0 |
(1) Amounts represent the Company's contributions to the SERP, as described above. The SERP was frozen at the end of 2021; employer SERP contributions were made in 2022 related to compensation earned for 2021.
(2) Represents the fiscal year endedchange in value for employee and Company contributions to the SERP and 409A Plan. As described above, neither of these plans provides for any preferential or above-market earnings on a participant's account balances.
(3) Amount shown is the sum of the value of a NEO's account balance in the SERP and 409A Plan as of December 31, 2019 were $1,206,105 for Mr. Rivers, $148,375 for Mr. Miller and $417,049 for Mr. Fitzgerald.2022, as applicable.
Pension Benefits
Defined Benefit Pension Plan. The Company provides pension benefits to its employees, including our NEOs, through membership in the Pension Plan. The Pension Plan is a noncontributory, defined benefit plan, and our annual contribution to this plan is based upon standards established by the Pension Protection Act. The Pension Plan is a cash balance format with compensation based on a participant's earnings reported on IRS Form W-2 for the applicable year. Participants vest in their account balances after three years of eligible service and the plan provides for payment in a lump sum or, if eligible, a life annuity at retirement. All of our NEOs are fully vested in their account balances under the Pension Plan.
Benefit Equalization Plan. The Company maintains the BEP, a non-qualified benefit equalization plan to provide a pension supplement to restore pension benefits for employees who were historically ineligible to participate in the SERP and whose compensation exceeds the annual statutory compensation maximum that can be considered under the Pension Plan, and/or exceeds the annual permitted pension benefit amount under the Code. The benefit formula for the BEP is the same as provided in the Pension Plan, with an offset for benefits provided by that plan. Benefits are generally paid in a lump sum in the January following retirement or death. Active participants in the SERP did not receive BEP benefits; Messrs. Rivers, Miller and Fitzgerald first became eligible for BEP in 2022.
The amounts reported in the table below equal the present value of the accumulated pension benefitbenefits at the end of fiscal 2020year 2022 for each of our NEOs. The Pension Plan is referred to as the “Defined Benefit Plan” in this table.
| | | | | | | | | | | | | | |
| Pension Benefits |
| Named Executive Officer | Plan Name | Number of Years of Credited Service | Present Value of Accumulated Benefit as of 12/31/2020 | Payments during last fiscal year |
| Robert F. Rivers | Total | | $ | 7,927,615 | | - |
| Defined Benefit Plan | 14.9 | $ | 718,707 | | - |
| SERP | 14.9 | $ | 7,208,908 | | - |
| Quincy L. Miller | Total | | $ | 1,336,942 | | - |
| Defined Benefit Plan | 4.8 | $ | 164,366 | | - |
| SERP | 4.8 | $ | 1,172,576 | | - |
| James B. Fitzgerald | Total | | $ | 3,241,331 | | - |
| Defined Benefit Plan | 8.7 | $ | 491,085 | | - |
| SERP | 8.7 | $ | 2,750,246 | | - |
| | | | | | | | | | | | | | |
| Pension Benefits |
| Named Executive Officer | Plan Name | Number of Years of Credited Service | Present Value of Accumulated Benefit as of 12/31/2022 | Payments during last fiscal year |
| Robert F. Rivers | Total | | $ | 818,880 | | $ | — | |
| Defined Benefit Plan | 16.9 | $ | 698,714 | | $ | — | |
| BEP | | $ | 120,166 | | $ | — | |
| Quincy L. Miller | Total | | $ | 230,039 | | $ | — | |
| Defined Benefit Plan | 6.8 | $ | 205,919 | | $ | — | |
| BEP | | $ | 24,120 | | $ | — | |
| James B. Fitzgerald | Total | | $ | 563,086 | | $ | — | |
| Defined Benefit Plan | 10.7 | $ | 529,357 | | $ | — | |
| BEP | | $ | 33,729 | | $ | — | |
| Donald M. Westermann | Total | | $ | 867,171 | | $ | — | |
| Defined Benefit Plan | 15.7 | $ | 385,588 | | $ | — | |
| BEP | | $ | 481,583 | | $ | — | |
| Kathleen C. Henry | Total | | $ | 497,402 | | $ | — | |
| Defined Benefit Plan | 6.3 | $ | 244,312 | | $ | — | |
| BEP | | $ | 253,090 | | $ | — | |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2022
Executive Severance Agreements.
As described above under “Severance Agreements” within the CD&A section of this Proxy Statement, each of Messrs. Rivers and Miller has entered into an executive severance agreement, which provide for certain benefits in the event that either is terminated without cause. Under each of these agreements, “cause” is defined as:
•any act of gross misconduct or gross negligence which results in material harm to the Company, whether monetarily or otherwise;
•any act of dishonesty, disloyalty or fraud which results in material harm to the Company, whether monetarily or otherwise;
•a conviction of, or plea of nolo contendere to, any felony or any crime involving moral turpitude; or
•a failure to perform a substantial portion of the duties of his position adequately for a period of more than 30 days after written notice from the Company describing such failure.
Under their respective executive severance agreements, each of Messrs. Rivers and Miller, if terminated without cause, will be entitled to the respective lump sum payment described above in the CD&A section, provided that each signs a release of claims against the Company, and which release becomes effective. Neither agreement provide for additional payments in the event of death or disability, other than what each is entitled to under other existing benefit plans, although each is entitled to the benefits described above if terminated for cause.
Double-Trigger Change in Control Agreements
As described further above under “Double-Trigger Change in Control Agreements” within the CD&A section of this Proxy Statement, each of our NEOs has entered into a double-trigger CiC Agreement. These agreements entitle the NEO to a lump sum payment described above in the event that their employment is terminated while a change in control event (as described below) has occurred and is pending, or within 18 months following a change in control event, and the reason for termination is for other than the NEO's death, disability or cause (as each of the latter terms are defined in the CiC Agreement), or is due to the NEO's own resignation for good reason (as defined below).
The CiC Agreement utilizes the following definitions:
A “change of control” is defined as the consummation of any of the following events:
•merger, consolidation or other business combination of the Company or Eastern Bank, after which either (A) our incumbent board of directors constitute less than two-thirds of the surviving board of directors (“Surviving Board”), or (B) less than 60% of the combined voting power of shares entitled to vote in an election of the Surviving Board is owned by persons who were shareholders of the Company prior to the merger, consolidation or other business combination;
•the acquisition by any person of 25% or more of our outstanding common stock or voting securities (unless such acquisition is by an entity under our common control);
•during any consecutive two year period, the failure of our incumbent directors to constitute a majority of our board of directors, with “incumbent directors” meaning directors who are members of our board of directors on the date of the agreement and members who are subsequently nominated or elected by a majority of the incumbent directors;
•the sale or other disposition of all or substantially all of our assets to any person, group or entity; and
•any other transaction that our board of directors deems to be a “change in control”.
The term “cause” is defined as:
•a material act of willful misconduct in connection with the performance of his/her duties, including, without limitation, misappropriation of the Company's funds or property;
•the conviction for, or plea of nolo contendere by the NEO to, any felony or a misdemeanor involving deceit, dishonesty, or fraud;
•the commission of any misconduct, whether or not related to the Company or its affiliates, that has caused, or would reasonably be expected to cause, material detriment or damage to the Company's or its affiliates’ reputation, business operation or relation with its employees, customers, vendors, suppliers or regulators;
•continued, willful and deliberate non-performance by duties (other than by reason of the NEO’s physical or mental illness, incapacity or disability) that has continued for more than 30 days following written notice providing the details of such non-performance;
• willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, or the deliberate destruction of or deliberate failure to preserve documents or other materials relevant to such investigation, or the willful inducement of others to fail to cooperate or to fail to produce documents or other materials; or
•removal or prohibition from participating in the conduct of the Company’s affairs by order issued under applicable law and regulations by a federal or state banking agency having authority over the Company.
The term “good reason” is defined as:
•a material diminution of the NEO's responsibilities, authorities or control from those exercise by the NEO immediately prior to the change in control event;
•any material reduction in the NEO's annual compensation or benefits (other than across-the-board reductions affecting all of the Company's executive officers);
•the relocation of the offices at which the NEO is employed to a location more than 25 miles from such office, or the requirement to be based at a location more than 25 miles from such office; or
•any material breach of the CiC Agreement by the Company.
Under the CiC Agreements, each of our NEOs will be entitled to the lump sum payment described above in “Double-Trigger Change in Control Agreements” within the CD&A section of this Proxy Statement in the event of a double-trigger change in control event, provided that each signs a separation agreement and release with the Company, which then becomes irrevocable. The CiC Agreement does not provide for additional payments in the event of death or disability, other than what a NEO is entitled to under other existing benefit plans. As described above under “No Tax Gross Ups,” the dollar amount of any severance payment due under the CiC Agreements will be reduced in certain circumstances in order to avoid an excess parachute payment under Section 280G.
Set forth below the table is a description of certain post-employment arrangements with our NEOs, including the severance benefits and change-in-control benefits to which they would have been entitled under applicable benefit plans as of December 31, 2022, if a termination of employment and/or a change-in-control had occurred on such date. None of our NEOs are entitled to receive payments if they are terminated for cause as of such date.
| | | | | | | | | | | | | | |
| Potential Payments upon Termination or Change-in-Control |
| Named Executive Officer | Without Cause/For Good Reason (1) | Death/Disability (2) | Retirement (3) | Change in Control
(Double Trigger) (4) |
| Robert F. Rivers | | | | |
| Salary | $ | 1,990,000 | | $ | — | | $ | — | | $ | 2,985,000 | |
| MIP | $ | 895,500 | | $ | 895,500 | | $ | 895,500 | | $ | 929,000 | |
| RSU | $ | — | | $ | 1,841,196 | | $ | — | | $ | 1,841,196 | |
| PSU - EPS | $ | — | | $ | — | | $ | — | | $ | 920,598 | |
| PSU - TSR | $ | — | | $ | — | | $ | — | | $ | 920,598 | |
| Medical | $ | 56,856 | | $ | — | | $ | — | | $ | 42,642 | |
| Quincy L. Miller | | | | |
| Salary | $ | 1,180,000 | | $ | — | | $ | — | | $ | 1,770,000 | |
| MIP | $ | 354,000 | | $ | 354,000 | | $ | 354,000 | | $ | 354,000 | |
| RSU | $ | — | | $ | 1,227,458 | | $ | — | | $ | 1,227,458 | |
| PSU - EPS | $ | — | | $ | — | | $ | — | | $ | 613,721 | |
| PSU - TSR | $ | — | | $ | — | | $ | — | | $ | 613,721 | |
| Medical | $ | — | | $ | — | | $ | — | | $ | — | |
| James B. Fitzgerald | | | | |
| Salary | $ | — | | $ | — | | $ | — | | $ | 1,180,000 | |
| MIP | $ | — | | $ | 354,000 | | $ | 354,000 | | $ | 354,000 | |
| RSU | $ | — | | $ | 1,227,458 | | $ | — | | $ | 1,227,458 | |
| PSU - EPS | $ | — | | $ | — | | $ | — | | $ | 613,721 | |
| PSU - TSR | $ | — | | $ | — | | $ | — | | $ | 613,721 | |
| Medical | $ | — | | $ | — | | $ | — | | $ | 29,729 | |
| Donald M. Westermann | | | | |
| Salary | $ | — | | $ | — | | $ | — | | $ | 927,000 | |
| MIP | $ | — | | $ | 208,575 | | $ | 208,575 | | $ | 259,000 | |
| RSU | $ | — | | $ | 818,306 | | $ | — | | $ | 818,306 | |
| PSU - EPS | $ | — | | $ | — | | $ | — | | $ | 409,153 | |
| PSU - TSR | $ | — | | $ | — | | $ | — | | $ | 409,153 | |
| Medical | $ | — | | $ | — | | $ | — | | $ | 45,297 | |
| Kathleen C. Henry | | | | |
| Salary | $ | — | | $ | — | | $ | — | | $ | 927,000 | |
| MIP | $ | — | | $ | 208,575 | | $ | 208,575 | | $ | 227,667 | |
| RSU | $ | — | | $ | 818,306 | | $ | — | | $ | 818,306 | |
| PSU - EPS | $ | — | | $ | — | | $ | — | | $ | 409,153 | |
| PSU - TSR | $ | — | | $ | — | | $ | — | | $ | 409,153 | |
| Medical | $ | — | | $ | — | | $ | — | | $ | 45,297 | |
(1) Represents amounts payable under the Executive Severance Agreements for Messrs. Rivers and Miller. Salary amounts represent 200% of a NEO's base salary rate as of December 31, 2022. The MIP amounts represent a NEO's target payout under the MIP for 2022. For Mr. Rivers, medical represents the Company's cost to provide medical and dental coverage for 24 months. Mr. Miller is not enrolled in the Company's medical or dental coverage and therefore is not entitled to severance amounts related to medical or dental under the terms of his executive severance agreements. No amount is included for equity compensation, as our equity award agreements generally provide for forfeiture upon termination or resignation except as otherwise set forth in this table, subject to certain Board and C&HCM Committee discretionary authority.
(2) MIP amounts represent an NEO's target payout under the MIP for 2022, and RSU amounts represent the closing price of Company common stock ($17.25) on December 31, 2022, multiplied by the number of units that would vest as accelerated upon the occurrence of the qualifying event. PSUs would not be eligible for vesting until a determination is made at the end of a three-year performance period as to whether the applicable performance conditions are met; PSUs therefore are not included for purposes of this table. A valuation of the PSUs at threshold performance levels for each NEO as of December 31, 2022, is provided in the "Outstanding Equity Awards at 2022 Fiscal Year End" table.
(3) Amounts represent an NEO's target payout under the MIP for 2022.
(4) All NEOs are covered by CiC Agreements. For Messrs. Rivers and Miller, salary amounts are 300% of the base salary rate at December 31, 2022, and for Messrs. Fitzgerald and Westermann and Ms. Henry, salary amounts are 200% of the base salary rate at December 31, 2022. For Messrs. Rivers and Westermann and Ms. Henry, the MIP amount is equal to the average of the MIP payouts for the preceding three (3) years (2019, 2020 and 2021), which amounts are greater than the 2022 target annual bonus. For Messrs. Miller and Fitzgerald, the MIP amount is equal to the 2022 MIP target amount, which is greater than the average of the preceding three (3) years bonus payments. Medical payment amounts for Messrs. Rivers, Fitzgerald, and Westermann and Ms. Henry represent the cost of providing 18 months of medical and dental coverage. Mr. Miller is not enrolled in the Company's medical or dental coverage and therefore is not entitled to severance amounts related to these items. RSU and PSU amounts represent the closing price of Company common stock ($17.25) on December 31, 2022, multiplied by the number of units that would accelerate upon the occurrence of a qualifying termination following a change in control.
In addition to the amounts set forth in the table above, each of our NEOs would also receive the vested value of their accounts in the plans included in the Nonqualified Deferred Compensation and Pension Benefits tables above, which may include the SERP, the 409A Plan, the Pension Plan and the BEP.
CEO Pay Ratio
The following information is provided in accordance with Item 402(u) of Regulation S-K of the Securities Act of 1933, as amended. The pay ratio is an estimate of our median employee's total compensation to that of our CEO, Mr. Rivers, for 2022, as disclosed in the Summary Compensation Table.
To determine our median employee for 2022, we used our employee population as of October 31, 2022, excluding the CEO. The date of October 31st was selected to represent our employee population for the majority of 2022. As of October 31, 2022, Eastern's employee population, consisting of all full-time, part-time and seasonal employees, was 2,158 individuals. The median of all base salaries (excluding the CEO) was reviewed to determine our median base salary as the consistently applied compensation measure.
With the median employee identified, this individual's 2022 total compensation was determined following the same measures used to determine Mr. Rivers's total compensation in the Summary Compensation Table. These factors include base salary, incentive(s), change in pension value and all other compensation.
•2022 total annual compensation for the median employee was $74,548
•2022 total annual compensation for Mr. Rivers, the CEO, was $6,743,680
•The result is a median employee to CEO pay ratio of 1:90.5
SEC guidelines for determining the median employee provide discretion to companies in adopting a variety of compensation measure(s) to apply to the analysis. We believe the pay ratio reported above is a reasonable estimate based on our records, but it may not be readily comparable to other companies due to factors such as location, compensation practices, exclusions, estimates or assumptions that other companies may apply.
Pay Versus Performance
In accordance with rules adopted by the SEC, we provide the following disclosure regarding executive "Compensation Actually Paid" or "CAP" (as calculated in accordance with SEC rules) and certain Company performance for the fiscal years listed below. Please refer to the "Compensation Discussion and Analysis" starting at Page 25 of this proxy statement for a more complete description of how executive compensation relates to Company performance and how the C&HCM Committee makes its decisions.
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Value of Initial Fixed $100 Investment Based on: | |
| Year # | SCT Total for PEO | "Compensation Actually Paid" to PEO (1) | Average SCT Total for Non-PEO NEOs (2) | Average "Compensation Actually Paid" to Non-PEO NEOs (1) (2) | Company TSR (3) | Peer Group TSR (4) | Net Income (thousands $) (5) |
| 2022 | $ | 6,743,680
| | $ | 5,859,893
| | $ | 3,437,369
| | $ | 2,918,229
| | $ | 147.04
| | $ | 171.46
| | $ | 199,759
| |
| 2021 | $ | 4,208,543
| | $ | 4,189,967
| | $ | 2,380,559
| | $ | 2,321,245
| | $ | 168.53
| | $ | 184.23
| | $ | 154,665
| |
| 2020 | $ | 3,673,300
| | $ | 3,411,841
| | $ | 2,008,597
| | $ | 1,908,292
| | $ | 134.24
| | $ | 134.82
| | $ | 22,738
| |
(1) Compensation Actually Paid to the Primary Executive Officer ("PEO") and Non-PEO NEOs reflects the totals from our Summary Compensation Table with the following adjustments:
•For each of the Pension Plan and BEP, the change in the actuarial present value was replaced with each plan's service cost.
•For equity incentive awards, the grant date fair values computed in accordance with FASB ASC Topic 718 were replaced with fair values as of December 31, 2022, as follows:
◦RSUs were valued based on the closing price of a share of Company common stock on December 31, 2022 ($17.25) instead of the March 1, 2022 grant date value ($21.08), multiplied by the number of RSUs outstanding.
◦PSUs based on EPS performance were valued based on the closing price of a share of Company common stock on December 31, 2022 ($17.25), instead of on the March 1, 2022 grant date value ($21.08), multiplied by the number of PSUs outstanding at target award levels.
◦PSUs based on TSR performance were valued based on the probable outcome of performance conditions using a Monte Carlo simulation model, which priced Company common stock at $12.26 per share as of December 31, 2022 (instead of the actual December 31, 2022 closing price of a share of Company common stock at $17.25), multiplied by the number of PSUs outstanding at target award levels.
•No equity awards were granted to our PEO or Non-PEO NEOs prior to 2022, and no equity awards were forfeited or both granted and vested in 2022. Thus, no adjustments were made for these items.
•Reconciliation for the variance between Summary Compensation Table data for the PEO and Non-PEO NEOs is included below this section in the 'Adjustments from Summary Compensation Table' for both the PEO and the Non-PEO NEOs respectively.
(2) Our Non-PEO NEOs included for each year are as follows:
•For 2022, our "Non-PEO NEOs" include our current NEOs, Messrs. Q. Miller, Fitzgerald, and Westermann and Ms. Henry.
•For 2021, our "Non-PEO NEOs" included Messrs. Q. Miller and Fitzgerald, as well as Jan A. Miller, our former Vice Chair and Chief Commercial Banking Officer, and John F. Koegel, the former President and CEO of Eastern Insurance Group LLC.
•For 2020, our "Non-PEO NEOs" were Messrs. Q. Miller and Fitzgerald.
(3) Company TSR reflects the value of a $100 investment made on October 15, 2020, the date the Company became a publicly listed company, through and including the end of the fiscal year for which our cumulative total shareholder return is provided.
(4) Peer Group TSR reflects the value of a $100 investment in the KRX beginning on October 15, 2020, through and including the end of the fiscal year for which our cumulative total shareholder return is provided.
(5) Under SEC rules, companies are required to provide data with respect to a “Company Selected Measure” which represents the most important financial measure that links CAP to company performance, and which is not otherwise required to be disclosed in this table. However, we do not have another financial measure that materially links CAP to company performance and, as such, we have omitted this column.
Adjustments from Summary Compensation Table for PEO
| | | | | | | | | | | |
| 2022 | 2021 | 2020 |
| Deduction for change in actuarial present values reported under the “Change in Pension Value and Non-qualified Deferred Compensation Earnings” column in the Summary Compensation Table | $ | (13,486) | | $ | (86,687) | | $ | (200,363) | |
| Increase for service cost of Pension Plan and BEP | $ | 217,339 | | $ | 68,111 | | $ | 53,504 | |
| Increase/deduction for prior service cost of Pension Plan and BEP | $ | — | | $ | — | | $ | (114,601) | |
| Deduction for amounts reported under the “Stock Awards” column in the Summary Compensation Table | $ | (4,503,726) | | $ | — | | $ | — | |
| Increase based on fair value of awards granted during year that remain unvested as of year-end, determined as of year-end | $ | 3,416,086 | | $ | — | | $ | — | |
| Total Adjustments | $ | (883,787) | | $ | (18,576) | | $ | (261,460) | |
Adjustment from Summary Compensation Table for Non-PEO NEOs
| | | | | | | | | | | |
| 2022 | 2021 | 2020 |
| Deduction for change in actuarial present values reported under the “Change in Pension Value and Non-qualified Deferred Compensation Earnings” column in the Summary Compensation Table | $ | (26,832) | | $ | (86,477) | | $ | (109,111) | |
| Increase for service cost of Pension Plan and BEP | $ | 111,932 | | $ | 27,163 | | $ | 30,488 | |
| Increase/deduction for prior service cost of Pension Plan and BEP | $ | — | | $ | — | | $ | (21,682) | |
| Deduction for amounts reported under the “Stock Awards” column in the Summary Compensation Table | $ | (2,502,048) | | $ | — | | $ | — | |
| Increase based on fair value of awards granted during year that remain unvested as of year-end, determined as of year-end | $ | 1,897,809 | | $ | — | | $ | — | |
| Total Adjustments | $ | (519,139) | | $ | (59,314) | | $ | (100,305) | |
Most Important Performance Measures
In our assessment, the most important performance measures used to link Compensation Actually Paid to Company performance are listed in the table below, not ranked in order of importance.
| | |
|
|
| Net Income |
| Total Shareholder Return |
|
Analysis of the Information Presented in the Pay versus Performance Table
In accordance with Item 401(v) of Regulation S-K, the Company is providing the following graphical descriptions of the relationships between information presented in the Pay versus Performance table.
Compensation Actually Paid vs. Net Income
Compensation Actually Paid vs. Total Shareholder Return
PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Compensation Discussion and Analysis beginning on page 25 of this Proxy Statement describes our executive compensation program and the compensation decisions that the Compensation and Human Capital Management Committee and Board of Directors made in 2022 with respect to the compensation of our NEOs. The Board of Directors is asking shareholders to cast a non-binding, advisory vote FOR the following resolution:
| | |
| RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED. |
As we describe in the Compensation Discussion and Analysis section of this Proxy Statement, our executive compensation is designed to closely align the interests of our NEOs with those of our shareholders on both a short-term and long-term basis, and to attract and retain key executives critical to our success.
We urge shareholders to read the Compensation Discussion and Analysis beginning on page 25 of this Proxy Statement and to review the 2022 Summary Compensation Table and related compensation tables and discussion, which provide detailed information on the Company’s executive compensation policies and practices. The Company is committed to ensuring it receives timely feedback from shareholders on their alignment with the Company's executive compensation practices.
Recommendation
Our Board of Directors recommends a vote FOR Proposal 2.
DIRECTOR COMPENSATION
For the year ended December 31, 2020,2022, each of our directors (other than the Chair of the Board) received an annual fee of $55,000 as a Board of Directors retainer of $55,000, an annual grant of restricted stock with a value approximately equal to $55,000, and annual committee member fees ranging from $5,000 to $6,250 in committee meeting fees.$10,000. The Audit, Compensation and Human Capital Management, Nominating and Governance and Risk Management committees are joint committees of the Board of Directors and the Board of Directors of Eastern Bank ("(“Bank Board"Board”). Directors also receive fees for their service on committees of the Bank Board, including its trust committee,and innovation committee,committees, and the Eastern Bank Charitable Foundation committee, which operates as the board of trustees of such foundation.the Foundation. Chairs of certain committees also received additional committee chair retainers.retainers ranging from $10,000 to $20,000, and the Lead Director receives an annual retainer of $40,000. In addition, directors received per meeting fees for attending meetings of Eastern Bank's board of advisors, board of ambassadors, annual meeting, and investment advisory committee.In 2020, the Board of Directors and various committees met more frequently than they had in past years, due to the Company’s IPO and the impact of the COVID-19 global pandemic, which resulted in additional meeting fees than paid in prior years. Directors who are also employees are not compensated orfor their service as directors.
Set forth below is a summary of the compensation received by each of our non-employee directors for the year ended December 31, 2020.2022.
| | Name | Name | | Fees Earned
($)(1) | | All Other Compensation
($) (2) | | Total ($)(3) | Name | | Fees Earned
($)(1) | | Stock Awards
($)(2) | | All Other Compensation
($)(3) | | Total ($)(4) |
| Richard C. Bane | Richard C. Bane | | $ | 129,600 | | | $ | 55,000 | | | $ | 184,600 | | Richard C. Bane | | $ | 124,800 | | | $ | 54,999 | | | $ | 5,719 | | | $ | 185,518 | |
| Luis Borgen | Luis Borgen | | $ | 102,100 | | | $ | 55,000 | | | $ | 157,100 | | Luis Borgen | | $ | 83,050 | | | $ | 54,999 | | | $ | 4,719 | | | $ | 142,768 | |
| Joseph T. Chung | Joseph T. Chung | | $ | 113,350 | | | $ | 55,000 | | | $ | 168,350 | | Joseph T. Chung | | $ | 105,800 | | | $ | 54,999 | | | $ | 5,719 | | | $ | 166,518 | |
| Paul M. Connolly | Paul M. Connolly | | $ | 123,600 | | | $ | 55,000 | | | $ | 178,600 | | Paul M. Connolly | | $ | 110,050 | | | $ | 54,999 | | | $ | 4,719 | | | $ | 169,768 | |
| Bari A. Harlam | Bari A. Harlam | | $ | 89,600 | | | $ | 55,000 | | | $ | 144,600 | | Bari A. Harlam | | $ | 82,300 | | | $ | 54,999 | | | $ | 5,719 | | | $ | 143,018 | |
| Diane S. Hessan | Diane S. Hessan | | $ | 97,100 | | | $ | 55,000 | | | $ | 152,100 | | Diane S. Hessan | | $ | 90,750 | | | $ | 54,999 | | | $ | 4,719 | | | $ | 150,468 | |
Richard E. Holbrook (4)(5) | Richard E. Holbrook (4)(5) | | $ | 103,600 | | | $ | — | | | $ | 103,600 | | Richard E. Holbrook (4)(5) | | $ | 91,300 | | | $ | 54,999 | | | $ | 5,719 | | | $ | 152,018 | |
| Deborah C. Jackson | Deborah C. Jackson | | $ | 138,350 | | | $ | 55,000 | | | $ | 193,350 | | Deborah C. Jackson | | $ | 131,800 | | | $ | 54,999 | | | $ | 5,719 | | | $ | 192,518 | |
| Peter K. Markell | Peter K. Markell | | $ | 127,600 | | | $ | 55,000 | | | $ | 182,600 | | Peter K. Markell | | $ | 121,800 | | | $ | 54,999 | | | $ | 5,719 | | | $ | 182,518 | |
Greg A. Shell | Greg A. Shell | | $ | 98,350 | | | $ | 55,000 | | | $ | 153,350 | | Greg A. Shell | | $ | 97,550 | | | $ | 54,999 | | | $ | 5,719 | | | $ | 158,268 | |
| Paul D. Spiess | Paul D. Spiess | | $ | 117,100 | | | $ | 55,000 | | | $ | 172,100 | | Paul D. Spiess | | $ | 101,050 | | | $ | 54,999 | | | $ | 5,219 | | | $ | 161,268 | |
(1)Represents total fees earned in 2020,2022, including fees deferred pursuant to the 409A Deferred Compensation Plan.
(2)Represents 2020 accruals under the Outside Directors’ Retainer Continuance Plan. Asaggregate grant date fair value of restricted stock awards computed in accordance with FASB ASC Topic 718, which was equal to the closing price of a former executiveshare of Eastern Bank Corporation, Mr.Company common stock on the date of grant, May 17, 2022, multiplied by the number of shares underlying the award.
(3)Represents accrued dividends paid in cash on or around November 30, 2022, upon the vesting of a portion of 2021 restricted stock awards that had been granted on November 30, 2021. Dividends paid for 2022 represent $4,719.22 for each director. Amounts for Messrs. Bane, Chung, Holbrook, is not eligibleMarkell, Shell, and Spiess and Mses. Harlam and Jackson also include matching contributions of up to $1,000 each paid in 2022 to charitable institutions in the name of the director pursuant to a matching charitable gift program offered through the Foundation. Non-employee directors may participate in this plan.program in connection with their service as directors; matching gifts are capped at $1,000 per director per year.
(3)(4)Our directors' total compensation in this table does not include earnings on the 409A Plan, a nonqualified defined contribution plan in which Messrs. Bane and Connolly and Ms. Harlam participate, because the participants do not receive any preferential or above-market earnings under such plan. Under the terms of the 409A Plan, the increase in the value of the benefit provided in the 409A Plan increases (or decreases) based upon changes in one or more generally available investment benchmarks or strategies chosen by the respective participant. Earnings on the 409A Plan for the fiscal year ended December 31, 2020 were $447,339 for Mr. Bane, $59,764 for Mr. Connolly and $76,634 for Ms. Harlam.
(4)(5)In addition to his fees earned as a director in 2020,2022, Mr. Holbrook also received $2,067,033 related to a 2016 grant under the LTIP which matured in 2020, and a $200,000 retirement-related payment in 20202022 in connection with his previous tenure as chief executive officerCEO of Eastern Bank. Mr. Holbrook's LTIP amount includes $793 in interest paid thereon from the date of maturation (December 31, 2020) through the date of payment. Mr. Holbrook retired as chairChair and chief executive officerCEO of Eastern Bank in 2016.
(6)Represents compensation received by our former director Mr. Greg A. Shell in connection with his Board service prior to his resignation effective December 2, 2022. Mr. Shell forfeited the unvested portion of his equity awards upon his resignation.
Outside Directors’ Retainer Continuance Plan. In addition to the fees outlined above, directors who have never been employees of Eastern Bank or an acquired company (“Outside Directors”) are eligible for an annual benefit after retirement or other separation from service (the “Outside Directors’ Retainer Continuance Plan” or “ODRC”). An amount equal to one year’s annual retainer is accrued for each Outside Director on an annual basis. At the time of payout, Outside Directors receive annual payments equal to the sum of all annual retainers paid to the Outside Director (disregarding meeting fees and other payments) divided by the number of years in the benefit period. The “benefit period” is the lesser of ten or the total years of service as an Outside Director. Beneficiaries of a deceased Outside Director receive the benefits to which the Outside Director was entitled and in the event that the deceased Outside Director had not yet started receiving payments under the plan, starting no earlier than the year in which the Outside Director would have attained the age of 50. In 2020, the Board of Directors voted to amend the ODRC to “freeze” it as of December 31, 2020, so that no further accruals will be made to the ODRC after that date. In
addition, the Board of Directors amended the ODRC to allow directors with less than five years of service to become immediately eligible and credited with service and retainers since their start date as a director.
Director Stock Ownership Guidelines.The Company’s Board of Directors believes that the Company’s directors, including the CEO, should hold meaningful equity ownership positions in the Company, in part to align directors’ interests with those of the Company’s shareholders. Accordingly, the Board of Directors has adopted the stock ownership guidelines set forth below, and further revised such guidelines in September 2021.
below. Each director is expected to achieve the applicable stock ownership threshold within five (5) years of either the date of initial implementation of thesethe stock ownership guidelines (June 2020) or the date the director is first elected to the Board of Directors, whichever is later:
•Non-employee directors shall hold five times the value of their cash retainers in shares of the Company’s stock;
•The CEO shall hold five times the value of his or her annual base salary in shares of the Company’s stock; and
•Any director who serves as an executive officer, other than the CEO, will be required to hold multiples of the value of his or her base salary in shares of the Company’s stock, depending on the position (and as set forth in the management stock ownership guidelines) and as established by the CompensationC&HCM Committee.
There is a one year holding period for 50% of a Director’sdirector’s vested shares until the applicable minimum holding requirement described above has been met. Holdings that satisfy a Director’sdirector’s stock ownership requirements include all outstanding shares held and to the extent the 2021 Equity Plan receives shareholder approval, all restricted stock awarded to a Director. Assuming shareholder approval of the 2021 Equity Plan, unvesteddirector. Unvested awards of performance stock units, stock options, warrants or other rights not listed above exercisable for or convertible into shares of common stock will not count towards satisfying the ownership requirement unless and until shares under such awards are actually issued to a Director.director.
Compliance with stock ownership guidelines is evaluated annually. A Directordirector is not required to purchase additional shares to satisfy the ownership requirement in the event of a decline in the Company’s stock price, but the Directordirector is generally prohibited from selling or transferring shares until the minimum ownership requirement has been achieved, except as otherwise determined by the CompensationC&HCM Committee. As of January 1, 2023, all of our non-employee directors were in compliance with our stock ownership guidelines.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Audit Fees
The following table summarizes the aggregate fees (including out-of-pocket expenses) billed for professional services rendered by Ernst & Young for fiscal years 2022 and 2021. All services were pre-approved by our Audit Committee in accordance with its charter, as described below in the section captioned “Pre-Approval Policy and Procedures.”
| | | | | | | | |
| Fee Category | Fiscal Year 2022 | Fiscal Year 2021 |
| Audit Fees (1) | $ | 1,966,200 | | $ | 2,026,200 | |
| Audit-Related Fees (2) | $ | 39,100 | | $ | 69,100 | |
| Tax Fees (3) | $ | 371,511 | | $ | 472,570 | |
| All Other Fees (4) | $ | — | | $ | — | |
| Total Fees | $ | 2,376,811 | | $ | 2,567,870 | |
(1) Audit fees consist of fees for the audit of our annual consolidated financial statements (including an assessment of our internal control over financial reporting), the review of interim consolidated financial statements included in our quarterly reports on Form 10-Q, and other professional services provided in connection with statutory and regulatory filings or engagements. For each of 2022 and 2021, these fees included audit work related to the adoption of the current expected credit losses methodology, also known as CECL, effective January 1, 2022. These fees also included expanded audit procedures or consultations with our management as to the accounting or disclosure treatment of transactions or events under the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, Financial Accounting Standards Board or other regulatory or standard-setting bodies. For 2021, these fees also included audit work related to our acquisition of Century Bancorp, Inc., which we acquired in November 2021.
(2) Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or the review of our financial statement and are not reported under "Audit Fees." Audit-related services provided by EY in 2022 and 2021 represented fees in connection with attestation services.
(3) Tax fees in 2022 and 2021 consist of fees for tax preparation and tax compliance and advisory services in connection with servicing our clients in our Eastern Wealth Management division.
(4) There were no other fees in 2022 or 2021.
Pre-Approval Policy and Procedures
In accordance with its charter, the Audit Committee of our Board of Directors pre-approves any engagement for audit services, audit-related, and non-audit services (including tax services) to be provided by our independent external auditor before the independent external auditor is engaged to render such services.
The Audit Committee may, and from time to time does, delegate its authority to pre-approve services to the Chair of such committee, provided that any such approvals are presented to the full committee at the next Audit Committee meeting.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the “Audit Committee”) is comprised of the five directors named below. Each member of the Audit Committee is an independent director (as independence is defined in the listing standards of the Nasdaq Global Select Market and Rule 10A-3 under the Exchange Act with respect to membership on audit committees).
The Audit Committee has adopted a written charter, which has been approved by the Board of Directors. The Audit Committee has reviewed and discussed the Company’s audited consolidated financial statements with management, which has primary responsibility for the preparation, presentation and integrity of the consolidated financial statements, and with the Company’s independent registered public accounting firm. The Company’s independent registered public accounting firm is responsible for auditing our Company’s financial statements and expressing opinions on the conformity of the Company’s audited consolidated financial statements with generally accepted accounting principles and on the Company’s internal controls over financial reporting. The Audit Committee is responsible for providing independent, objective oversight of these functions.
In the performance of the Audit Committee's oversight function, we have reviewed and discussed the audited financial statements of our company for the fiscal year ended December 31, 2022, with management and our independent registered public accounting firm, Ernst & Young LLP (“EY”). We also discussed with EY the reasonableness of significant judgments and the clarity of disclosures in the financial statements, the quality, not just the acceptability, of our Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards, including the matters required to be discussed pursuant to the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. EY has also provided the Audit Committee with their communications required by PCAOB rules and the Audit Committee has discussed with EY the firm’s independence. We have also considered whether the provision by EY of tax services in 2022 and 2021 is compatible with maintaining their independence.
Based on our review of the materials and discussions with management and the independent registered public accounting firm described in this report, the Audit Committee recommended to the Board of Directors that the audited financial statements for 2022 and 2021 be included in our Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for filing with the SEC, and the Audit Committee appointed EY as the Company's independent registered public accounting firm for 2023.
By the Audit Committee of the Board of Directors,
Richard C. Bane (chair)
Luis A. Borgen
Paul M. Connolly
Peter K. Markell
Paul D. Spiess
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of our Board of Directors has appointed Ernst & Young as our Company’s independent registered public accounting firm for the fiscal year ended December 31, 2023. EY has served as our Company’s independent registered public accounting firm since 2002. Although we are not required to seek shareholder ratification of this appointment, our Board of Directors decided to provide our shareholders with the opportunity to do so. If this proposal is not approved by our shareholders at the Annual Meeting, our Audit Committee will reconsider the appointment of EY. Even if the appointment of EY is ratified, our Audit Committee in its discretion may appoint a different independent registered public accounting firm at any time during the year.
Representatives of EY are expected to be present at the Annual Meeting. They will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from shareholders.
Recommendation
Our Board of Directors believes that the ratification of the appointment by the Audit Committee of Ernst & Young as our Company’s independent registered public accounting firm for the 2023 fiscal year is in the best interests of our Company and shareholders and recommends you vote FOR ratification in Proposal 3.
OTHER ACTION
We are not aware at this time of any other matters that will be presented for action at the SpecialAnnual Meeting. Should any such matters be presented, the proxies grant power to the proxy holders to vote shares represented by the proxies in the discretion of the proxy holders.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be included in the proxy statement and form of proxy relating to our 20222024 annual meeting of shareholders and to be presented at that meeting must be received by us for inclusion in the 2024 proxy statement and form of proxy no later than December 2, 2021.5, 2023. In addition, our Bylaws contain an advance notice provision that requires shareholders who desire to bring proposals before an annual meeting (which proposals are not to be included in our proxy statement and are submitted outside the processes of Rule 14a-8 of the Exchange Act) to comply with the advance notice provision. The advance notice provision requires that shareholders give timely written notice of their proposal to our Corporate Secretary. To be timely, notices must be delivered to our Corporate Secretary at our principal executive office not less than 90 nor more than 120 days before the first anniversary of the prior year’s annual meeting of shareholders. Accordingly, a shareholder who intends to present a proposal at the 20222024 annual meeting of shareholders must provide written notice of the proposal to our Corporate Secretary after January 17, 202216, 2024 and before February 16, 2022.15, 2024. Proposals received at any other time will not be voted on at the meeting. Shareholders who wish to nominate director candidates for the shareholders to consider must include in the notice the additional information specified in our Bylaws including, among other things, the candidate’s name, biographical data and qualifications. Exchange Act Rule 14a-19(b) also requires additional information be included in director nomination notices, including a statement that the shareholder intends to solicit the holders of shares representing at least 67% of the voting power of shares entitled to vote on the election of directors. If a shareholder makes a timely notification, the proxies that we solicit for the meeting may still exercise discretionary voting authority on the proposal, consistent with the proxy rules of the SEC.
SOLICITATION STATEMENT
The Board of Directors of Eastern Bankshares, Inc. is soliciting proxies, and the Company pays for distributing and soliciting proxies. Copies of proxy materials will be supplied to brokers, dealers, banks and voting trustees, or their nominees, for the purpose of soliciting proxies from beneficial owners, and we will reimburse such record holders for their reasonable fees and expenses in forwarding proxy materials to shareholders. The Company has retained Innisfree M&A Incorporated, a proxy solicitation firm, to assist in the solicitation of proxies for a fee of $25,000, plus reimbursement of expenses and processing fees and charges. The Company will bear the entire cost of the proxy solicitor. The proxy solicitor will solicit proxies through mail, telephone, the Internet or other means.
Shareholders who elect to vote through the Internet or by telephone may incur costs such as telecommunication and Internet access charges for which the shareholder is solely responsible. The telephone and Internet voting facilities for shareholders of record will close when the polls close at 11:59 p.m. Eastern Time on Sunday, November 28, 2021. The Internet voting facility will be re-opened during the Special Meeting for shareholders of record that have registered for, chosen to participate in, and plan to vote their shares virtually.Annual Meeting.
Boston, Massachusetts
October 15, 2021April 3, 2023
FORWARD-LOOKING STATEMENTS
When we use the terms "we"“we”, "us"“us”, "our,"“our,” and the "Company,"“Company,” we mean Eastern Bankshares, Inc., a Massachusetts corporation, and its consolidated subsidiaries, taken as a whole, unless the context otherwise indicates.
Certain statements contained in this Proxy Statement that are not historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements, which are based on certain current assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions.
Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. Our actual results could differ materially from those projected in the forward-looking statements as a result of, among others, factors:
•the continued negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations;pandemic;
•the length and extent of the economic contraction as a result of the COVID-19 pandemic; continued deterioration in employment levels and other general business and economic conditions on a national basis and in the local markets in which we operate;
•changes in customer behavior;
•the possibility that future credit losses, loan defaults and charge-off rates are higher than expected due to changes in economic assumptions or adverse economic developments;
•turbulence in the capital and debt markets;
•changes in the rate of inflation of prices and goods and services in our market and nationally, and changes in expectations regarding future interest rates;inflationary or recessionary pressures;
•changes in interest rates;
•decreases in the value of securities and other assets;
•decreases in deposit levels necessitating increased borrowing to fund loans and investments;
•competitive pressures from other financial institutions;institutions or changes to customer behavior;
•operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics;
•changes in regulation;regulations and laws;
•reputational risks relating to our participation in the Paycheck Protection Program and other pandemic-related legislative and regulatory initiatives and programs;
•changes in accounting standards and practices;
•the risk that goodwill and intangibles recorded in our financial statements will become impaired;
•risks related to the implementation of acquisitions, dispositions, and restructurings, including the risk that acquisitionssuch activities may not produce results at levels or within time frames originally anticipated;
•the risk that we may not be successful in the implementation of our business strategy;
•changes in assumptions used in making such forward-looking statements;
•and other risks and uncertainties detailed in Part I, Item 1A "Risk Factors"Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020,2022, as may be updated by Part II, Item 1A "Risk Factors"Factors” in our Quarterly Reports on Form 10-Q, as may be filed with the SEC from time to time.
Forward-looking statements speak only as of the date on which they are made. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.
ANNEX A
Non-GAAP Financial Measures
| | | | | | | | | | | | | | |
| | For the Year Ended December 31, |
| | 2020 | | 2019 |
| | (Dollars in thousands) |
| Net income (GAAP) | | $ | 22,738 | | | $ | 135,098 | |
|
| Non-GAAP adjustments: | | | | |
| Noninterest income components: | | | | |
| Income losses from investments held in rabbi trusts | | (10,337) | | | (9,866) | |
| Gains on sales of securities available for sale, net | | (288) | | | (2,016) | |
| Gains on sale of other assets | | 20 | | | 15 | |
| Noninterest expense components: | | | | |
| Rabbi trust employee benefit expenses | | 4,789 | | | 4,604 | |
| Impairment charge on tax credit investments | | 10,779 | | | — | |
| Indirect IPO costs (1) | | 1,199 | | | — | |
| Gain on sale of other real estate owned | | (606) | | | — | |
| Merger and acquisition expenses | | 90 | | | — | |
| Stock donation to the Foundation | | 91,287 | | | — | |
| Total impact of non-GAAP adjustments | | 96,933 | | | (7,263) | |
| Less net tax benefit associated with non-GAAP adjustment (2) | | 17,537 | | | 1,861 | |
| Non-GAAP adjustments, net of tax | | $ | 79,396 | | | $ | (5,402) | |
| Operating net income (non-GAAP) | | $ | 102,134 | | | $ | 129,696 | |
(1)Reflects costs associated with our IPO that are indirectly related to the offering and therefore were not recorded as a reduction of capital.
(2)The net tax (expense) benefit associated with these items is determined by assessing whether each item is included or excluded from net taxable income and applying our combined statutory tax rate only to those items included in net taxable income.
Operating net income, which we also refer to as net operating earnings, is a non-GAAP financial measure. Non-GAAP financial measures are not meant to be considered superior to or a substitute for the results of operations prepared in accordance with GAAP. In addition, this non-GAAP financial measure has limitations associated with its use as compared to the most directly comparable GAAP measure, in that it may be different from, and therefore not comparable to, similar measures used by other companies and to the performance of our competitors. Such measure is also used by us in our financial and operating decision-making and for compensation purposes. We also believe this information is responsive to investors' requests and gives them an additional measure of our performance.
We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measure, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our core business, operating results, or future outlook. We believe that the inclusion of such measure helps investors to gain an understanding of our underlying operations and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts. Such measure is also used by us in our financial and operating decision-making and for compensation purposes.
Appendix A
EASTERN BANKSHARES, INC.
2021 EQUITY INCENTIVE PLAN
ARTICLE 1 — GENERAL
Section 1.1. Purpose, Effective Date and Term. The purpose of the Eastern Bankshares, Inc. 2021 Equity Incentive Plan (the “Plan”) is to promote the long-term financial success of Eastern Bankshares, Inc. (the “Company”), and its Subsidiaries, including Eastern Bank (the “Bank”), by providing a means to attract, retain and reward individuals who contribute to that success and to further align their interests with those of the Company’s shareholders through the ownership of additional shares of common stock of the Company and/or through compensation tied to the value of the Company’s common stock. The “Effective Date” of the Plan shall be the date on which the Plan satisfies the applicable shareholder approval requirements. The Plan shall remain in effect as long as any Awards are outstanding; provided, however, that no Awards may be granted under the Plan after the day immediately before the ten-year anniversary date of the Effective Date.
Section 1.2. Administration. The Plan shall be administered by the Compensation Committee of the Board of Directors (the “Committee”) in accordance with Section 5.1.
Section 1.3. Participation. Each individual who is granted or holds an Award in accordance with the terms of the Plan shall be a Participant in the Plan (a “Participant”). The grant of Awards shall be limited to Employees, Directors and Service Providers of the Company or any Subsidiary.
Section 1.4. Definitions. Capitalized terms used in this Plan are defined in Article 8 and elsewhere in this Plan.
ARTICLE 2 — AWARDS
Section 2.1. General. Any Award under the Plan may be granted singularly or in combination with another Award or other Awards. Each Award under the Plan shall be subject to the terms and conditions of the Plan and any additional terms, conditions, limitations and restrictions as the Committee shall provide with respect to the Award and as evidenced in an Award Agreement. In the event of a conflict between the terms of an Award Agreement and the Plan, the terms of the Plan will control. Subject to the provisions of Section 2.2(d), an Award may be granted as an alternative to or replacement of an existing Award under the Plan or any other plan of the Company or any Subsidiary or as the form of payment for grants or rights earned or due under any other compensation plan or arrangement of the Company or any Subsidiary, including without limitation the plan of any entity acquired by the Company or any Subsidiary. The types of Awards that may be granted under the Plan include Stock Options, Restricted Stock and Restricted Stock Units, and any Award may be granted as a Performance Award.
Section 2.2. Stock Options. A Stock Option is a grant that represents the right to purchase shares of Stock at an established Exercise Price.
(a) Grant of Stock Options. Each Stock Option shall be evidenced by an Award Agreement that specifies: (i) the number of shares of Stock covered by the Stock Option; (ii) the date of grant of the Stock Option and the Exercise Price; (iii) the vesting period or conditions to vesting or exercisability (whether time- and/or performance-based); and (iv) any other terms and conditions not inconsistent with the Plan, including the effect of termination of a Participant’s employment or Service, as the Committee may, in its discretion, prescribe. Any Stock Option may be either an Incentive Stock Option that is intended to satisfy the requirements applicable to an “Incentive Stock Option” (or “ISO”) described in Code Section 422(b), or a Non-Qualified Option that is not intended to be an ISO; provided, however, that no ISOs may be granted: (i) after the day immediately prior to the ten-year anniversary of the Effective Date or the date on which the Plan is approved by the Board of Directors, whichever is earlier; or (ii) to a non-Employee. Unless otherwise specifically provided by its terms, any Stock Option granted to an Employee under this Plan shall be an ISO to the maximum extent permitted. Any ISO granted under this Plan that does not qualify as an ISO for any reason (whether at the time of grant or as the result of a subsequent event) shall be deemed to be a Non-Qualified Option. In addition, any ISO granted under this Plan may be unilaterally modified by the Committee to disqualify it from ISO treatment, so that it becomes a Non-Qualified Option; provided, however, that any such modification shall be ineffective if it causes the Option to be subject to Code Section 409A (unless, as modified, the Option complies with Code Section 409A). The maximum number of Shares that can be issued as ISOs under the Plan is set forth in Section 3.2 hereof.
(b) Other Terms and Conditions. A Stock Option shall be exercisable in accordance with its terms and conditions and during the periods established by the Committee. In no event, however, shall a Stock Option expire later than ten
(10) years after the date of its grant (or five (5) years with respect to ISOs granted to a 10% Shareholder). The Exercise Price of each Stock Option shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant (or, if greater, the par value of a share of Stock); provided, however, that the Exercise Price of an ISO shall not be less than 110% of Fair Market Value of a share of Stock on the date of grant if granted to a 10% Shareholder; provided further, that the Exercise Price may be higher or lower in the case of Stock Options granted or exchanged in replacement of existing Awards held by an employee or director of an acquired entity. The payment of the Exercise Price shall be by cash or, subject to limitations imposed by applicable law, by any other means as the Committee may from time to time permit, including: (i) by tendering, either actually or constructively by attestation, shares of Stock valued at Fair Market Value as of the day of exercise; (ii) by irrevocably authorizing a third party, acceptable to the Committee, to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Stock Option and to remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from the exercise; (iii) by a net settlement of the Stock Option, using a portion of the shares of Stock obtained on exercise in payment of the Exercise Price (and if applicable, any tax withholding); (iv) by personal, certified or cashier’s check; (v) by other property deemed acceptable by the Committee; or (vi) by any combination thereof. The total number of shares of Stock that may be acquired upon the exercise of a Stock Option shall be rounded down to the nearest whole share, with cash-in-lieu paid by the Company, at its discretion, for the value of any fractional share.
(c) Prohibition of Cash Buy-Outs of Underwater Stock Options. Under no circumstances will any Stock Option with an Exercise Price as of an applicable date that is greater than the Fair Market Value of a share of Stock as of the same date that was granted under the Plan be bought back by the Company without shareholder approval.
(d) Prohibition Against Repricing. Except for adjustments pursuant to Section 3.4, and reductions of the Exercise Price approved by the Company’s shareholders, neither the Committee nor the Board of Directors shall have the right or authority to make any adjustment or amendment that reduces or would have the effect of reducing the Exercise Price of a Stock Option previously granted under the Plan, whether through amendment, cancellation (including cancellation in exchange for a cash payment in excess of the Award’s in-the-money value or in exchange for Options or other Awards), replacement grants, or other means.
Section 2.3 Restricted Stock.
(a) Grant of Restricted Stock. A Restricted Stock Award is a grant of a share or shares of Stock for no consideration or such minimum consideration as may be required by applicable law, subject to a time-based vesting schedule or the satisfaction of market conditions or performance conditions. Each Restricted Stock Award shall be evidenced by an Award Agreement that specifies (i) the number of shares of Stock covered by the Restricted Stock Award; (ii) the date of grant of the Restricted Stock Award; (iii) the vesting period (whether time- and/or performance-based); and (iv) any other terms and conditions not inconsistent with the Plan, including the effect of termination of a Participant’s employment or Service. All Restricted Stock Awards shall be in the form of issued and outstanding shares of Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine, including electronically and/or solely on the books and records maintained by the transfer agent. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock (including that the Restricted Stock may not be sold, encumbered, hypothecated or otherwise transferred except in accordance with the terms of the Plan and Award Agreement) and/or that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.
(b) Terms and Conditions. Each Restricted Stock Award shall be subject to the following terms and conditions:
(i) Rights and Restrictions. Restricted Stock Awards shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, or as otherwise provided in the Plan. The restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Committee may determine at the date of grant or thereafter. A Participant granted Restricted Stock shall have all of the rights of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends thereon provided, however, that dividends payable with respect to Restricted Stock Awards (whether paid in cash or shares of Stock) shall be subject to the same vesting conditions applicable to the Restricted Stock and shall, if vested, be delivered or paid at the same time as the restrictions on the Restricted Stock to which they relate lapse.
(ii) Tender Offers and Merger Elections. Each Participant to whom a Restricted Stock Award is granted shall have the right to respond, or to direct the response, with respect to the related shares of Restricted Stock, to any tender offer, exchange offer, cash/stock merger consideration election or other offer made to, or elections made by, the holders of shares of Stock. The direction for any of the shares of Restricted Stock shall be given by proxy or ballot if the Participant is the beneficial owner of the shares of Restricted
Stock for voting purposes or, if the Participant is not the beneficial owner for voting purposes, by completing and filing, with the inspector of elections, the trustee or such other person who shall be independent of the Company, as the Committee shall designate in the direction, a written direction in the form and manner prescribed by the Committee. If no direction is given, then the shares of Restricted Stock shall not be tendered.
Section 2.4. Restricted Stock Units.
(a) Grant of Restricted Stock Unit Awards. A Restricted Stock Unit is an Award, the value of which is denominated in shares of Stock that will be paid in Stock, including Restricted Stock, cash (measured based upon the value of a share of Stock) or a combination thereof, at the end of a specified period. A Restricted Stock Unit is subject to a vesting schedule or the satisfaction of market conditions or performance conditions. Each Restricted Stock Unit shall be evidenced by an Award Agreement that specifies: (i) the number of Restricted Stock Units covered by the Award; (ii) the date of grant of the Restricted Stock Units; (iii) the Restriction Period and the vesting period (whether time- and/or performance-based); and (iv) any other terms and conditions not inconsistent with the Plan, including the effect of termination of a Participant’s employment or Service.
(b) Other Terms and Conditions. Each Restricted Stock Unit Award shall be subject to the following terms and conditions:
(i) The Committee shall impose any other conditions and/or restrictions on any Restricted Stock Unit Award as it may deem advisable, including, without limitation, a requirement that Participants pay a stipulated purchase price for each Restricted Stock Unit, time-based restrictions and vesting following the attainment of performance measures, restrictions under applicable laws or under the requirements of any Exchange or market upon which shares of Stock may be listed, or holding requirements or sale restrictions placed by the Company upon vesting of Restricted Stock Units.
(ii) The conditions for grant or vesting and the other provisions of Restricted Stock Units (including without limitation any applicable performance measures) need not be the same with respect to each recipient. An Award of Restricted Stock Units shall be settled as and when the Restricted Stock Units vest or, in the case of Restricted Stock Units subject to performance measures, after the Committee has determined that the performance goals have been satisfied.
(iii) Subject to the provisions of the Plan and the applicable Award Agreement, during the period, if any, set by the Committee, commencing on the date of grant of the Restricted Stock Unit for which the Participant’s continued Service is required (the “Restriction Period”), and until the later of (A) the expiration of the Restriction Period and (B) the date the applicable performance measures (if any) are satisfied, the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber Restricted Stock Units.
(iv) A Participant shall have no voting rights with respect to any Restricted Stock Units. No dividends shall be paid on Restricted Stock Units. In the sole discretion of the Committee, exercised at the time of grant, Dividend Equivalent Rights may be assigned to Restricted Stock Units. A Dividend Equivalent Right, if any, shall be paid at the same time as the shares of Stock or cash subject to the Restricted Stock Unit are distributed to the Participant and is otherwise subject to the same rights and restrictions as the underlying Restricted Stock Unit.
Section 2.5. Vesting of Awards. The Committee shall specify the vesting schedule or market or performance conditions of each Award at the time of grant. Notwithstanding anything to the contrary herein, at least ninety-five percent (95%) of the Awards available under the Plan shall vest no earlier than one (1) year after the date of grant, unless accelerated due to death, Disability, or an Involuntary Termination at or following a Change in Control.
Section 2.6. Deferred Compensation. Subject to approval by the Committee before an election is made, an Award of Restricted Stock Units may be deferred pursuant to a valid deferral election made by a Participant. If a deferral election is made by a Participant, the Award Agreement shall specify the terms of the deferral and shall constitute the deferral plan pursuant to the requirements of Code Section 409A. If any Award would be considered “deferred compensation” as defined under Code Section 409A (“Deferred Compensation”), the Committee reserves the absolute right (including the right to delegate such right) to unilaterally amend the Plan or the Award Agreement, without the consent of the Participant, to maintain exemption from, or to comply with, Code Section 409A. Any amendment by the Committee to the Plan or an Award Agreement pursuant to this Section 2.6 shall maintain, to the extent practicable, the original intent of the applicable provision without violating Code Section 409A. A Participant’s acceptance of any Award under the Plan constitutes acknowledgement and consent to the rights of the Committee, without further consideration or action. Any discretionary authority retained by the Committee pursuant to
the terms of this Plan or pursuant to an Award Agreement shall not apply to an Award that is determined to constitute Deferred Compensation, if the discretionary authority would contravene Code Section 409A.
Section 2.7. Effect of Termination of Service on Awards. The Committee shall establish the effect of a Termination of Service on the continuation of rights and benefits available under an Award and, in so doing, may make distinctions based upon, among other things, the reason(s) for the Termination of Service and type of Award. Unless otherwise specified by the Committee and set forth in an Award Agreement or as set forth in an employment or severance agreement entered into by and between the Company and/or a Subsidiary and the Participant, the following provisions shall apply to each Award granted under this Plan:
(a) Upon a Participant’s Termination of Service for any reason other than due to Disability, death, Retirement or for Cause, Stock Options shall be exercisable only as to the portion of the Award that was immediately exercisable by the Participant at the date of termination, and the Stock Options may be exercised only for a period of three (3) months following termination and any Restricted Stock Award or Restricted Stock Unit that has not vested as of the date of Termination of Service shall expire and be forfeited.
(b) In the event of a Termination of Service for Cause, all Stock Options granted to a Participant that have not been exercised (whether or not vested) and all Restricted Stock Awards and Restricted Stock Units granted to a Participant that have not vested shall expire and be forfeited.
(c) Upon Termination of Service for reason of Disability or death, any Service-based Stock Options shall be fully exercisable, whether or not then exercisable, and all Service-based Restricted Stock Awards and Restricted Stock Units shall vest as to all shares subject to an outstanding Award, whether or not otherwise immediately vested, at the date of Termination of Service. Upon Termination of Service for reason of Disability or death, any Awards that vest based on the achievement of performance targets shall vest, pro-rata, by multiplying (i) the number of Awards that would be obtained based on achievement at target (or if actual achievement of the performance measures is greater than the target level, at the actual achievement level) as of the date of Disability or death, by (ii) a fraction, the numerator of which is the number of whole months the Participant was in Service during the performance period and the denominator of which is the number of months in the performance period. Stock Options may be exercised for a period of one (1) year following a Termination of Service due to death or Disability; provided, however, that no Stock Option shall be eligible for treatment as an ISO if the Stock Option is exercised more than one year following Termination of Service due to Disability and provided, further, in order to obtain ISO treatment for Stock Options exercised by heirs or devisees of an optionee, the optionee’s death must have occurred while employed or within three (3) months following Termination of Service.
(d) In the event of Termination of Service due to Retirement, a Participant’s vested Stock Options shall be exercisable for one (1) year following Termination of Service. No Stock Option shall be eligible for treatment as an ISO if the Stock Option is exercised more than three (3) months following Termination of Service due to Retirement. Any Stock Option, Restricted Stock Award or Restricted Stock Unit that has not vested as of the date of Termination of Service shall expire and be forfeited.
(e) Notwithstanding anything herein to the contrary, no Stock Option shall be exercisable beyond the last day of the original term of the Stock Option.
(f) Notwithstanding the provisions of this Section 2.7, the effect of a Change in Control on the vesting/exercisability of Stock Options, Restricted Stock Awards and Restricted Stock Units is set forth in Article 4.
Section 2.8. Holding Period for Vested Awards. As a condition of receipt of an Award, the Award Agreement may require a Participant to agree to hold a vested Award or shares of Stock received upon exercise of a Stock Option for a period of time specified in the Award Agreement (“Holding Period”). In connection with the foregoing, a Participant may be required to retain direct ownership of Covered Shares until the earlier of (i) the expiration of the Holding Period following the date of vesting or (ii) such person’s termination of employment with the Company and any Subsidiary. The foregoing limitation, if applicable, shall not apply to the extent that an Award vests due to death, Disability or an Involuntary Termination at or following a Change in Control, or to the extent that (x) a Participant directs the Company to withhold or the Company elects to withhold shares of Stock with respect to the vesting or exercise, or, in lieu thereof, to retain, or to sell without notice, a sufficient number of shares of Stock to cover the amount required to be withheld or (y) a Participant exercises a Stock Option by a net settlement, and in the case of (x) and (y) herein, only to the extent of the shares are withheld for tax purposes or for purposes of the net settlement.
ARTICLE 3 — SHARES SUBJECT TO PLAN
Section 3.1. Available Shares. The shares of Stock with respect to which Awards may be made under the Plan shall be shares currently authorized but unissued, currently held or, to the extent permitted by applicable law, subsequently acquired by the Company, including shares purchased in the open market or in private transactions.
Section 3.2. Share Limitations.
(a) Share Reserve. Subject to the following provisions of this Section 3.2, the maximum number of shares of Stock that may be delivered to Participants and their beneficiaries under the Plan shall be equal to 26,146,141 shares of Stock. The maximum number of shares of Stock that may be delivered pursuant to the exercise of Stock Options (all of which may be granted as ISOs) is 18,675,815 shares of Stock, which represents 10.0% of the number of shares issued in connection with the conversion of Eastern Bank Corporation, a mutual holding company to stock form as the Company and the related stock issuance of the Company (the “Conversion”). The maximum number of shares of Stock that may be issued as Restricted Stock Awards and Restricted Stock Units is 7,470,326 shares of Stock, which represents 4.0% of the number of shares issued in connection with the Conversion. The aggregate number of shares available for grant under this Plan and the number of shares of Stock subject to outstanding awards shall be subject to adjustment as provided in Section 3.4. Notwithstanding the foregoing, the Company may grant Restricted Stock or Restricted Stock Units in excess of the limit set forth above, provided, that each share of Restricted Stock and/or each Restricted Stock Unit (or any other full value Award, including any Performance Award in the form of Restricted Stock or Restricted Stock Units), that is issued under the Plan from the pool in excess of the above limit shall reduce the number of Stock Options that are available by three (3), provided, however, that if a share of Restricted Stock or a Restricted Stock Unit is forfeited from the pool under conditions that would allow it to be regranted, the number of Stock Options that could thereafter be granted will also be increased by three (3), rounded down to the nearest whole Stock Option.
(b) Computation of Shares Available. For purposes of this Section 3.2 and in connection with the granting of a Stock Option, Restricted Stock or Restricted Stock Unit, the number of shares of Stock available for the grant shall be reduced by the number of shares previously granted, subject to the following. To the extent any shares of Stock covered by an Award (including Restricted Stock Awards and Restricted Stock Units) under the Plan are not delivered to a Participant or beneficiary for any reason, including because the Award is forfeited or canceled or because a Stock Option is not exercised, then the shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan. To the extent that: (i) a Stock Option is exercised by using an actual or constructive exchange of shares of Stock to pay the Exercise Price; (ii) shares of Stock are withheld to satisfy tax withholding upon exercise or vesting of an Award granted hereunder; or (iii) shares are withheld to satisfy the Exercise Price of Stock Options in a net settlement of Stock Options, then the number of shares of Stock available shall be reduced by the gross number of Stock Options exercised or Stock returned to satisfy tax withholding, rather than by the net number of shares of Stock issued.
Section 3.3. Limitations on Grants to Employees and Directors.
(a) Award Limitations. No individual Employee shall receive Awards representing more than twenty-five percent (25%) of the Stock available for issuance under the Plan. Non-Employee Directors (i.e., directors who are not also Employees of the Company or any Subsidiary) shall not receive, individually, Awards representing more than five percent of the Stock available for issuance under the Plan, and in the aggregate, shall not receive more than thirty percent (30%) of the Stock available for issuance as Awards under the Plan.
(b) Initial Grant to Non-Employee Directors. Each non-Employee Director of the Board of Directors of the Company who is in the Service of the Company on the Effective Date of the Plan shall automatically be granted an Award of Restricted Stock on the day following the Effective Date, with an aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) approximately equal to, but not greater than, $1,250,000, without further action of the Committee or the Board. This grant will vest in approximately equal installments over a five-year period, subject to acceleration in the event of death, Disability or an Involuntary Termination at or following a Change in Control.
(c) Awards Subject to Adjustment. The aggregate number of shares available for grant under this Plan and the number of shares subject to outstanding Awards, including the limit on the number of Awards available for grant under this Plan described in this Section 3.3, shall be subject to adjustment as provided in Section 3.4.
Section 3.4. Corporate Transactions.
(a) General. In the event any recapitalization, reclassification, forward or reverse stock split, reorganization, merger, consolidation, spin-off, combination, or exchange of shares of Stock or other securities, stock dividend or other special and nonrecurring dividend or distribution (whether in the form of cash, securities or other property), liquidation, dissolution, or increase or decrease in the number of shares of Stock without consideration, or similar corporate transaction or event, affects the shares of Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan and/or under any Award granted under the Plan, then the Committee shall, in an equitable manner, adjust any or all of: (i) the number and kind of securities deemed to be available thereafter for grants of Stock Options, Restricted Stock Awards and Restricted Stock Units in the aggregate to all Participants and individually to any one Participant; (ii) the number and kind of securities that may be delivered or deliverable in respect of outstanding Stock Options, Restricted
Stock Awards and Restricted Stock Units; and (iii) the Exercise Price of Stock Options. In addition, the Committee is authorized to adjust the terms and conditions of, and the criteria included in, Stock Options, Restricted Stock Awards and Restricted Stock Units (including, without limitation, cancellation of any such Awards in exchange for the in-the-money value, if any, of the vested portion thereof, or substitution or exchange of any such Awards for similar awards denominated in stock of a successor or other entity) in recognition of unusual or nonrecurring events (including, without limitation, acquisitions and dispositions of businesses or assets) affecting the Company or any parent or Subsidiary or the financial statements of the Company or any parent or Subsidiary, or in response to changes in applicable laws, regulations, or accounting principles.
(b) Merger in Which Company is Not Surviving Entity. In the event of any merger, consolidation, or other business reorganization (including, but not limited to, a Change in Control) in which the Company is not the surviving entity, any Stock Options granted under the Plan which remain outstanding shall be converted into Stock Options to purchase voting common equity securities of the business entity which survives the merger, consolidation or other business reorganization having substantially the same terms and conditions as the outstanding Stock Options under this Plan and reflecting the same economic benefit (as measured by the difference between the aggregate Exercise Price and the value exchanged for outstanding shares of Stock in the merger, consolidation or other business reorganization), all as determined by the Committee before the consummation of the merger, consolidation or other business reorganization. Similarly, any Restricted Stock or Restricted Stock Units which remain outstanding shall be assumed by and become Restricted Stock and/or Restricted Stock Units of the business entity which survives the merger, consolidation or other business reorganization. If the acquiring entity fails or refuses to assume the Company’s outstanding Awards, any Service-based Awards shall vest immediately at or immediately before the effective time of the merger, consolidation or other business reorganization. Any Awards subject to performance-based vesting conditions shall vest in the same manner as required under Section 4.1(c) hereof at the time of the merger, consolidation or other business reorganization, as if the holder thereof incurred an Involuntary Termination of Service on that date. Unless another treatment is specified in the documents governing the merger, consolidation or other business organization, in the case of vested Restricted Stock or Restricted Stock Units, holders thereof shall receive on the effective date of the transaction, the same value as received by a holder of a share of Stock, multiplied by the number of Restricted Stock or Restricted Stock Units held, and in the case of a holder of Stock Options, the holder shall receive the difference, in cash, between the aggregate Exercise Price of the holder’s outstanding Stock Options and the value exchanged for outstanding shares of Stock in the merger, consolidation or other business reorganization.
Section 3.5. Delivery of Shares. Delivery of shares of Stock or other amounts under the Plan shall be subject to the following:
(a) Compliance with Applicable Laws. Notwithstanding any other provision of the Plan, the Company shall have no obligation to deliver any shares of Stock or make any other distribution of benefits under the Plan unless the delivery or distribution complies with all applicable laws (including, the requirements of the Securities Act), and the applicable requirements of any Exchange or similar entity.
(b) Certificates. To the extent that the Plan provides for the issuance of shares of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any Exchange.
ARTICLE 4 — CHANGE IN CONTROL
Section 4.1. Consequence of a Change in Control. Subject to the provisions of Section 2.5 (relating to vesting and acceleration) and Section 3.4 (relating to the adjustment of shares), and except as otherwise provided in the Plan or determined by the Committee and set forth in an Award Agreement:
(a) At the time of an Involuntary Termination at or following a Change in Control, all service-based Stock Options then held by the Participant shall become fully earned and exercisable (subject to the expiration provisions otherwise applicable to the Stock Option). All Stock Options may be exercised for a period of one (1) year following the Participant’s Involuntary Termination, provided, however, that no Stock Option shall be eligible for treatment as an ISO if the Stock Option is exercised more than three (3) months following a termination of employment.
(b) At the time of an Involuntary Termination at or following a Change in Control, all Service-based Awards of Restricted Stock and Restricted Stock Units shall become fully vested immediately.
(c) In the event of an Involuntary Termination at or following a Change in Control, unless otherwise specified in the Award Agreement, any Performance Award will vest based on the greater of the target level of performance or actual annualized performance measured as of the most recent completed fiscal quarter.
Section 4.2. Definition of Change in Control. For purposes of this Plan, the term “Change in Control” shall mean the consummation by the Company or the Bank, in a single transaction or series of related transactions, of any of the following:
(a) Merger. The merger, consolidation or other business combination or similar reorganization of the Company or the Bank, whether in one or a series of related steps (the “Combination”), if, immediately following the
effectiveness of the Combination, either (A) less than two-thirds of the board directors or other governing body (the “Surviving Board”) of the entity paying the transaction consideration in such Combination, whether cash and/or securities, is composed of individuals who, immediately prior to effectiveness of the Combination, were serving on the board of directors or other governing body of the Company or the Bank, or (B) less than sixty percent (60%) of the combined voting power of the securities having the right to vote in an election of the Surviving Board is beneficially owned (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, by persons who, immediately prior to effectiveness of such Combination, were shareholders of the Company or the Bank;
(b) Acquisition of Significant Share Ownership. A person or persons acting in concert, other than the Company, has or have become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of twenty-five percent (25%) or more of the combined voting power of the securities having the right to vote in an election of the board of directors of the Company or the Bank (“Voting Securities”); provided, however, that this clause (b) shall not apply to beneficial ownership of the Company’s or the Bank’s Voting Securities held by an entity of which the Company directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding Voting Securities;
(c) Change in Board Composition. During any period of two consecutive years, individuals who constitute the Board of Directors (or, if the Company ceases to be the beneficial owner (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of a majority of the Voting Securities of the Bank, the Bank) at the beginning of such two-year period cease for any reason to constitute at least a majority of the board of Directors of the Company or the Bank, as applicable; provided, however, that for purposes of this sentence, an individual shall be deemed to have been a Director at the beginning of such period if such individual was elected, or nominated for election, by the board of Directors of the Company or the Bank, as applicable, by a vote of at least two-thirds of the Directors who were Directors at the beginning of the two-year period or were so elected or nominated by such Directors; or
(d) Sale of Assets. The sale of all or substantially all of the assets of the Company or the Bank to any person, group or entity. In addition, if an Award constitutes Deferred Compensation, and the settlement of, or distribution of benefits under, the Award is to be triggered solely by a Change in Control, then with respect to the Award, a Change in Control shall be defined as required under Code Section 409A, as in effect at the time of the transaction.
ARTICLE 5 — COMMITTEE
Section 5.1. Administration. The Plan shall be administered by the Committee, which shall be composed of at least two Disinterested Board Members. Any members of the Committee who do not qualify as Disinterested Board Members shall abstain from participating in any discussion or decision to make or administer Awards that are made to Participants who at the time of consideration for such Award are persons subject to the short-swing profit rules of Section 16 of the Exchange Act. The Board of Directors (or if necessary to maintain compliance with the applicable listing standards, those members of the Board of Directors who are “independent directors” under the corporate governance statutes or rules of any national Exchange on which the Company lists, has listed or seeks to list its securities) may, in their discretion, take any action and exercise any power, privilege or discretion conferred on the Committee under the Plan with the same force and effect under the Plan as if done or exercised by the Committee.
Section 5.2. Powers of Committee. The administration of the Plan by the Committee shall be subject to the following:
(a) The Committee shall have the authority and discretion to select those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares of Stock covered by the Awards, to establish the terms, conditions, features (including automatic exercise in accordance with Section 7.18), performance criteria, restrictions (including without limitation, provisions relating to non-competition, non-solicitation and confidentiality), and other provisions of such Awards (subject to the restrictions imposed by Article 6), to cancel or suspend Awards and to reduce, eliminate or accelerate any restrictions or vesting requirements applicable to an Award at any time after the grant of the Award; provided, however, that the Committee shall not exercise its discretion to accelerate an Award within the first year following the date of grant if the exercise of such discretion would result in more than five percent (5%) of the aggregate awards under the Plan vesting in less than one year from the date of grant as provided for in Section 2.5, or to extend the time period to exercise a Stock Option, unless the extension is consistent with Code Section 409A.
(b) The Committee shall have the authority and discretion to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.
(c) The Committee shall have the authority to define terms not otherwise defined herein.
(d) In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the charter and bylaws of the Company and applicable corporate law.
(e) The Committee shall have the authority to: (i) suspend a Participant’s right to exercise a Stock Option during a blackout period (or similar restricted period) (a “Blackout Period”) or to exercise in a particular manner (i.e., such as a “cashless exercise” or “broker-assisted exercise”) to the extent that the Committee deems it necessary or in the best interests of the Company in order to comply with the securities laws and regulations issued by the SEC; and (ii) to extend the period to exercise a Stock Option by a period of time equal to the Blackout Period, provided that the extension does not violate Section 409A of the Code, the Incentive Stock Option requirements or applicable laws and regulations.
Section 5.3. Delegation by Committee. Except to the extent prohibited by applicable law, the applicable rules of an Exchange upon which the Company lists its shares or the Plan, or as necessary to comply with the exemptive provisions of Rule 16b-3 promulgated under the Exchange Act, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it, including: (a) delegating to a committee of one or more members of the Board of Directors who are not “non-employee directors,” within the meaning of Rule 16b-3, the authority to grant Awards under the Plan to eligible persons who are not then subject to Section 16 of the Exchange Act; or (b) delegating to a committee of one or more members of the Board of Directors who would be eligible to serve on the Compensation Committee of the Company pursuant to the listing requirements imposed by any national securities exchange on which the Company lists, has listed or seeks to list its securities, the authority to grant awards under the Plan. The acts of the delegates shall be treated hereunder as acts of the Committee and the delegates shall report regularly to the Committee regarding the exercise of delegated duties and responsibilities and any Awards so granted. Any such allocation or delegation may be revoked by the Committee at any time.
Section 5.4. Information to be Furnished to Committee. As may be permitted by applicable law, the Company and its Subsidiaries shall furnish the Committee with data and information it determines may be required for it to discharge its duties. The records of the Company and its Subsidiaries as to a Participant’s employment, termination of employment, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined by the Committee to be manifestly incorrect. Subject to applicable law, Participants and other persons entitled to benefits under the Plan must furnish the Committee any evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
Section 5.5. Committee Action. The Committee shall hold meetings, and may make administrative rules and regulations, as it may deem proper. A majority of the members of the Committee shall constitute a quorum, and the action of a majority of the members of the Committee present at a meeting at which a quorum is present, as well as actions taken pursuant to the unanimous written consent of all of the members of the Committee without holding a meeting, shall be deemed to be actions of the Committee. Subject to Section 5.1, all actions of the Committee, including interpretations of provisions of the Plan, shall be final and conclusive and shall be binding upon the Company, Participants and all other interested parties. Any person dealing with the Committee shall be fully protected in relying upon any written notice, instruction, direction or other communication signed by a member of the Committee or by a representative of the Committee authorized to sign the same in its behalf.
ARTICLE 6 — AMENDMENT AND TERMINATION
Section 6.1. General. The Board of Directors may, as permitted by law, at any time, amend or terminate the Plan, and the Board of Directors or the Committee may amend any Award Agreement, provided, however, that no amendment or termination (except as provided in Sections 2.6, 3.4 and 6.2) may cause the Award to violate Code Section 409A, may cause the repricing of a Stock Option, or, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely impair the rights of any Participant or beneficiary under any Award before the date the amendment is adopted by the Board of Directors; provided, however, that, no amendment may (a) materially increase the benefits accruing to Participants under the Plan, (b) materially increase the aggregate number of securities which may be issued under the Plan, other than pursuant to Section 3.4, or (c) materially modify the requirements for participation in the Plan, unless the amendment is approved by the Company’s shareholders.
Section 6.2. Amendment to Conform to Law and Accounting Changes. Notwithstanding any provision in this Plan or any Award Agreement to the contrary, the Committee may amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of: (i) conforming the Plan or the Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Code Section 409A); or (ii) avoiding an accounting treatment resulting from an accounting pronouncement or interpretation thereof issued by the SEC or by the Financial Accounting Standards Board (the “FASB”) after the adoption of the Plan or the making of the Award affected thereby, which, in the sole discretion of the Committee, may materially and adversely affect the financial condition or results of operations of the Company. By accepting an Award under this Plan, each Participant agrees and consents to any amendment made pursuant to this Section 6.2 to any Award granted under the Plan without further consideration or action.
ARTICLE 7 — GENERAL TERMS
Section 7.1. No Implied Rights.
(a) No Rights to Specific Assets. Neither a Participant nor any other person shall by reason of participation in the Plan acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including any
specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right, evidenced by an Award Agreement, to the shares of Stock or amounts, if any, payable or distributable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(b) No Contractual Right to Employment or Future Awards. The Plan does not constitute a contract of employment, and selection as a Participant will not give any participating Employee the right to be retained in the employ of the Company or any Subsidiary or any right or claim to any benefit under the Plan, unless the right or claim has specifically accrued under the terms of the Plan. No individual shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to receive a future Award under the Plan.
(c) No Rights as a Shareholder. Except as otherwise provided in the Plan or in an Award Agreement, no Award shall confer upon the holder thereof any rights as a shareholder of the Company before the date on which the individual fulfills all conditions for receipt of such rights.
Section 7.2. Transferability. Except as otherwise so provided by the Committee, Stock Options under the Plan are not transferable except: (i) as designated by the Participant by will or by the laws of descent and distribution; (ii) to a trust established by the Participant, if under Code Section 671 and applicable state law, the Participant is considered the sole beneficial owner of the Stock Option while held in trust; or (iii) between spouses incident to a divorce or pursuant to a domestic relations order, provided, however, in the case of a transfer within the meaning of Section 7.2(iii), the Stock Option shall not qualify as an ISO as of the day of the transfer. The Committee shall have the discretion to permit the transfer of vested Stock Options (other than ISOs) under the Plan; provided, however, that such transfers shall be limited to Immediate Family Members of Participants, trusts and partnerships established for the primary benefit of Immediate Family Members or to charitable organizations, and; provided, further, that the transfers are not made for consideration to the Participant.
Awards of Restricted Stock shall not be transferable, except in the event of death, before the time that the Awards vest in the Participant. A Restricted Stock Unit Award is not transferable, except in the event of death, before the time that the Restricted Stock Unit Award vests in the Participant and the property in which the Restricted Stock Unit is denominated is distributed to the Participant or the Participant’s Beneficiary.
A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.
Section 7.3. Designation of Beneficiaries. A Participant may file with the Company a written designation of a beneficiary or beneficiaries under this Plan and may from time to time revoke or amend any such designation. Any designation of beneficiary under this Plan shall be controlling over any other disposition, testamentary or otherwise (unless the disposition is pursuant to a domestic relations order); provided, however, that if the Committee is in doubt as to the entitlement of any beneficiary to any Award, the Committee may determine to recognize only the legal representative of the Participant, in which case the Company, the Committee and the members thereof shall not be under any further liability to anyone.
Section 7.4. Non-Exclusivity. Neither the adoption of this Plan by the Board of Directors nor the submission of the Plan to the shareholders of the Company for approval (and any subsequent approval by the shareholders of the Company) shall be construed as creating any limitations on the power of the Board of Directors or the Committee to adopt other incentive arrangements as may deemed desirable, including, without limitation, the granting of Restricted Stock Awards, Restricted Stock Units and/or Stock Options and such arrangements may be either generally applicable or applicable only in specific cases.
Section 7.5. Eligibility for Form and Time of Elections/Notification Under Code Section 83(b). Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be filed with the Company at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require. Notwithstanding anything herein to the contrary, the Committee may, on the date of grant or at a later date, as applicable, prohibit an individual from making an election under Code Section 83(b). If the Committee has not prohibited an individual from making this election, an individual who makes this election shall notify the Committee of the election within ten (10) days of filing notice of the election with the Internal Revenue Service or as otherwise required by the Committee. This requirement is in addition to any filing and notification required under the regulations issued under the authority of Code Section 83(b).
Section 7.6. Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other written information upon which the person is acting considers pertinent and reliable, and signed, made or presented by the proper party or parties.
Section 7.7. Tax Withholding.
(a) Payment by Participant. Each Participant shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the Participant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. The Company's obligation to deliver evidence of book entry (or stock certificates) to any Participant is subject to and conditioned on tax withholding obligations being satisfied by the Participant.
(b) Payment in Stock. The Committee may require the Company's tax withholding obligation to be satisfied, in whole or in part, by the Company withholding from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate or such lesser amount as is necessary to avoid liability accounting treatment. For purposes of share withholding, the Fair Market Value of withheld shares shall be determined in the same manner as the value of Stock includible in income of the Participants.
Section 7.8. Action by Company or Subsidiary. Any action required or permitted to be taken by the Company or any Subsidiary shall be by resolution or unanimous written consent of its board of directors, or by action of one or more members of the board of directors (including a committee of the board of directors) who are duly authorized to act for the board of directors, or (except to the extent prohibited by applicable law or applicable rules of the Exchange on which the Company lists its securities) by a duly authorized officer of the Company or Subsidiary.
Section 7.9. Successors. All obligations of the Company under the Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of the successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business, stock, and/or assets of the Company.
Section 7.10. Indemnification. To the fullest extent permitted by law and the Company’s governing documents, each person who is or shall have been a member of the Committee, or of the Board of Directors, or an officer of the Company to whom authority was delegated in accordance with Section 5.3, shall be indemnified and held harmless by the Company against and from any loss (including amounts paid in settlement), cost, liability or expense (including reasonable attorneys’ fees) that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute or regulation. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s charter or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. The foregoing right to indemnification shall include the right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its final disposition, provided, however, that, if required by applicable law, an advancement of expenses shall be made only upon delivery to the Company of an undertaking, by or on behalf of such persons to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such person is not entitled to be indemnified for such expenses.
Section 7.11. No Fractional Shares. Unless otherwise permitted by the Committee, no fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award Agreement. The Committee shall determine whether cash or other property shall be issued or paid in lieu of fractional shares or whether the fractional shares or any rights thereto shall be forfeited or otherwise eliminated by rounding down.
Section 7.12. Governing Law. The Plan, all Awards granted hereunder, and all actions taken in connection herewith shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts without reference to principles of conflict of laws, except as superseded by applicable federal law. The federal and state courts located in the Commonwealth of Massachusetts shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of the Plan. By accepting any Award, each Participant and any other person claiming any rights under the Plan agrees to submit himself or herself and any legal action that brought with respect to the Plan, to the sole jurisdiction of such courts for the adjudication and resolution of any such disputes.
Section 7.13. Benefits Under Other Plans. Except as otherwise provided by the Committee or as set forth in a Qualified Retirement Plan, non-qualified plan or other benefit plan, Awards to a Participant (including the grant and the receipt of benefits) under the Plan shall be disregarded for purposes of determining the Participant’s benefits under, or contributions to, any Qualified Retirement Plan, non-qualified plan and any other benefit plans maintained by the Participant’s employer. The
term “Qualified Retirement Plan” means any plan of the Company or a Subsidiary that is intended to be qualified under Code Section 401(a).
Section 7.14. Validity. If any provision of this Plan is determined to be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts of the Plan, but this Plan shall be construed and enforced as if the illegal or invalid provision has never been included herein.
Section 7.15. Notice. Unless otherwise provided in an Award Agreement, all written notices and all other written communications to the Company provided for in the Plan or in any Award Agreement, shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid (provided that international mail shall be sent via overnight or two-day delivery), or sent by facsimile, email or prepaid overnight courier to the Company at its principal executive office. Notices, demands, claims and other communications shall be deemed given: (a) in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery; (b) in the case of certified or registered U.S. mail, five (5) days after deposit in the U.S. mail; or (c) in the case of facsimile or email, the date upon which the transmitting party received confirmation of receipt; provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received, provided they are actually received.
If a communication is not received, it shall only be deemed received upon the showing of an original of the applicable receipt, registration or confirmation from the applicable delivery service. Communications that are to be delivered by U.S. mail or by overnight service to the Company shall be directed to the attention of the Company’s Corporate Secretary, unless otherwise provided in the Award Agreement.
Section 7.16. Forfeiture Events. The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. These events include, but are not limited to, termination of employment for Cause, termination of the Participant’s provision of Services to the Company or any Subsidiary, violation of material Company or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct of the Participant that is detrimental to the business or reputation of the Company or any Subsidiary.
Section 7.17. Awards Subject to Company Policies and Restrictions.
(a) Clawback Policies. Awards granted hereunder are subject to any Clawback Policy maintained by the Company, whether pursuant to the provisions of Section 954 of the Dodd-Frank Act, implementing regulations thereunder, or otherwise. If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the federal securities laws, and the automatic forfeiture provisions under Section 304 of the Sarbanes-Oxley Act of 2002 apply as a result, any Participant who was an executive officer of the Company at the time of grant or at the time of restatement shall be subject to “clawback” as if the person were subject to Section 304 of the Sarbanes-Oxley Act of 2002.
(b) Trading Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to the Company’s insider trading policies and procedures, as in effect from time to time.
(c) Hedging/Pledging Policy Restrictions. Awards under the Plan shall be subject to the Company’s policies relating to hedging and pledging as such may be in effect from time to time.
Section 7.18. Automatic Exercise. In the sole discretion of the Committee exercised in accordance with Section 5.2(a), any Stock Options that are exercisable but unexercised as of the day immediately before the tenth anniversary of the date of grant (or other expiration date) may be automatically exercised, in accordance with procedures established for this purpose by the Committee, but only if the Exercise Price is less than the Fair Market Value of a share of Stock on that date and the automatic exercise will result in the issuance of at least one (1) whole share of Stock to the Participant after payment of the Exercise Price and any applicable tax withholding requirements. Payment of the Exercise Price of a Stock Option and any applicable tax withholding requirements with respect to Stock Options shall be made by a net settlement of the Stock Option whereby the number of shares of Stock to be issued upon exercise are reduced by a number of shares having a Fair Market Value on the date of exercise equal to the Exercise Price and any applicable tax withholding.
Section 7.19. Regulatory Requirements. The grant and settlement of Awards shall be conditioned upon and subject to compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations promulgated thereunder.
ARTICLE 8 — DEFINED TERMS
In addition to the other definitions contained herein, unless otherwise specifically provided in an Award Agreement, the following definitions shall apply:
“10% Shareholder” means an individual who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company.
“Award” means any Stock Option, Restricted Stock Award or Restricted Stock Unit or any other right or interest relating to Stock or cash, granted to a Participant under the Plan.
“Award Agreement” means the document (in whatever medium prescribed by the Committee and whether or not a signature is required or provided by a Participant) that evidences the terms and conditions of an Award. A copy of the Award Agreement shall be provided (or made available electronically) to each Participant.
“Board of Directors” means the Board of Directors of the Company.
“Cause” shall, with respect to any Participant, have the same meaning as “cause” or “for cause” (or any similar term) set forth in any employment, change in control, consulting, or other agreement for the performance of services or severance between the Participant and the Company or a Subsidiary or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) a material act of willful misconduct by the Participant in connection with the performance of his/her duties, including, without limitation, misappropriation of funds or property of the Company or a Subsidiary; (ii) the conviction of the Participant for, or plea of nolo contendere by the Participant to, any felony or a misdemeanor involving deceit, dishonesty, or fraud; (iii) the commission by the Participant of any misconduct, whether or not related to the Company or any of its affiliates, that has caused, or would reasonably be expected to cause, material detriment or damage to the Company’s or any of its affiliates’ reputation, business operation or relation with its employees, customers, vendors, suppliers or regulators; (iv) continued, willful and deliberate non-performance by the Participant of his/her duties (other than by reason of the Participant’s physical or mental illness, incapacity or disability) that has continued for more than thirty (30) days following written notice providing the details of such non-performance from the Chief Executive Officer of the Company or any Subsidiary, or his designee, as the case may be; (v) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company or a Subsidiary to cooperate, or the deliberate destruction of or deliberate failure to preserve documents or other materials that the Participant should reasonably know to be relevant to such investigation, after being instructed by the Company or a Subsidiary to preserve such documents, or the willful inducement of others to fail to cooperate or to fail to produce documents or other materials; or (vi) removal or prohibition of the Participant from participating in the conduct of the Company’s or a Subsidiary’s affairs by order issued under applicable law and regulations by a federal or state banking agency having authority over the Company or a Subsidiary. The good faith determination by the Committee of whether the Participant’s Service was terminated by the Company or a Subsidiary for “Cause” shall be final and binding for all purposes hereunder.
“Change in Control” has the meaning ascribed to it in Section 4.2.
“Code” means the Internal Revenue Code of 1986, as amended, and any rules, regulations and guidance promulgated thereunder, as modified from time to time.
“Covered Shares” means any shares acquired by a Participant pursuant to an Award granted under this Plan, net of taxes and transaction costs. For these purposes, “taxes and transaction costs” include, without limitation: (i) shares retained by the Company to satisfy tax withholding requirements attributable to such Awards, and (ii) any taxes payable by the Participant related to Awards which are in excess of the amounts withheld in accordance with clause “(i).”
“Director” means a member of the Board of Directors or of a board of directors of a Subsidiary.
If the Participant is a party to a written employment agreement (or other similar written agreement) with the Company or a Subsidiary that provides a definition of “Disability” or “Disabled,” then, for purposes of this Plan, the terms “Disability” or “Disabled” shall have meaning set forth in that agreement. In the absence of such a definition, “Disability” shall be defined in accordance with the Bank’s long-term disability plan. In the absence of a long-term disability plan or to the extent that an Award is subject to Code Section 409A, “Disability” or “Disabled” shall mean that a Participant has been determined to be disabled by the Social Security Administration. Except to the extent prohibited under Code Section 409A, if applicable, the Committee shall have discretion to determine if a Disability has occurred.
“Disinterested Board Member” means a member of the Board of Directors who: (i) is not a current Employee of the Company or a Subsidiary; (ii) is not a former employee of the Company or a Subsidiary who receives compensation for prior Services (other than benefits under a tax-qualified retirement plan) during the taxable year; (iii) has not been an officer of the Company or a Subsidiary for the past three (3) years; (iv) does not receive compensation from the Company or a Subsidiary,
either directly or indirectly, for services as a consultant or in any capacity other than as a Director except in an amount for which disclosure would not be required pursuant to Item 404 of SEC Regulation S-K in accordance with the proxy solicitation rules of the SEC, as amended or any successor provision thereto; and (v) does not possess an interest in any other transaction, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(a) of SEC Regulation S-K under the proxy solicitation rules of the SEC, as amended or any successor provision thereto. The term Disinterested Board Member shall be interpreted in a manner as shall be necessary to conform to the requirements of Rule 16b-3 promulgated under the Exchange Act and the corporate governance standards imposed on compensation committees under the listing requirements imposed by any Exchange on which the Company lists or seeks to list its securities.
“Dividend Equivalent Right” means the right, associated with a Restricted Stock Unit, to receive a payment, in cash or shares of Stock, as applicable, equal to the amount of dividends paid on a share Stock, as specified in the Award Agreement.
“Employee” means any person employed by the Company or a Subsidiary, including Directors who are employed by the Company or a Subsidiary.
“Exchange” means any national securities exchange on which the Stock may from time to time be listed or traded.
“Exchange Act” means the Securities Exchange Act of 1934, as amended and the rules, regulations and guidance promulgated thereunder, as modified from time to time.
“Exercise Price” means the price established with respect to a Stock Option pursuant to Section 2.2.
“Fair Market Value” on any date, means: (i) if the Stock is listed on an Exchange, national market system or automated quotation system, the closing sales price on that Exchange or over such system on that date or, in the absence of reported sales on that date, the closing sales price on the immediately preceding date on which sales were reported; or (ii) if the Stock is not listed on an Exchange, “Fair Market Value” shall mean a price determined by the Committee in good faith on the basis of objective criteria consistent with the requirements of Code Section 422 and applicable provisions of Code Section 409A.
A termination of employment by an Employee Participant shall be deemed a termination of employment for “Good Reason” as a result of the Participant’s resignation from the employ of the Company or any Subsidiary upon the occurrence of any of the following events:
(i) a material diminution, not consented to by the Participant, in the Participant’s responsibilities, authorities or duties, from the responsibilities, authorities or duties exercised by the Participant as of immediately prior to a Change in Control;
(ii) a material reduction in the Participant’s annual compensation or benefits, as in effect immediately prior to a Change in Control or as the same may be increased from time to time thereafter, except for across-the-board reductions similarly affecting all or substantially all of the Company’s executive officers;
(iii) the relocation of the Company’s office(s) at which the Participant is principally employed as of the date of a Change in Control (the “Current Offices”) to any other location more than 25 miles from the Current Offices, or the requirement by the Company or any affiliate for whom the Participant primarily works for the Participant to be based at a location more than 25 miles from the Current Offices, except for required travel on business to an extent substantially consistent with the Participant’s business travel obligations during the twelve (12)-month period immediately preceding the Change in Control.
Notwithstanding the foregoing, in the event an Award is subject to Code Section 409A, then “Good Reason” shall be defined in accordance with Code Section 409A, including the requirement that a Participant gives 60 days’ notice to the Company or the Subsidiary for whom the Participant is employed of the Good Reason condition and the Company or Subsidiary, as applicable, shall have 30 days to cure the Good Reason condition. Any distribution of an Award subject to Code Section 409A shall be subject to the distribution timing rules of Code Section 409A, including any delay in the distribution of such Award, which rules shall be set forth in the Award Agreement.
“Holding Period” has the meaning ascribed to it in Section 2.8.
“Immediate Family Member” means with respect to any Participant: (i) any of the Participant’s children, stepchildren, grandchildren, parents, stepparents, grandparents, spouses, former spouses, siblings, nieces, nephews, mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law or sisters-in-law, including relationships created by adoption; (ii) any natural person sharing the Participant’s household (other than as a tenant or employee, directly or indirectly, of the Participant); (iii) a trust in which any combination of the Participant and persons described in section (i) or (ii) above own more than fifty percent (50%) of the beneficial interests; (iv) a foundation in which any combination of the Participant and persons described in
sections (i) or (ii) above control management of the assets; or (v) any other corporation, partnership, limited liability company or other entity in which any combination of the Participant and persons described in sections (i) or (ii) above control more than fifty percent (50%) of the voting interests.
“Involuntary Termination” means the Termination of Service of a Participant by the Company or Subsidiary (other than termination for Cause) or termination of employment by an Employee Participant for Good Reason.
“Incentive Stock Option” or “ISO” has the meaning ascribed to it in Section 2.2.
“Non-Qualified Option” means the right to purchase shares of Stock that is either: (i) designated as a Non-Qualified Option; (ii) granted to a Participant who is not an Employee; or (iii) granted to an Employee but does not satisfy the requirements of Code Section 422.
“Performance Award” means an Award that vests in whole or in part upon the achievement of one or more specified performance measures, as determined by the Committee. The conditions for grant or vesting and the other provisions of a Performance Award (including without limitation any applicable performance measures) need not be the same with respect to each recipient. A Performance Award shall vest, or as to Restricted Stock Units be settled, after the Committee has determined that the performance goals have been satisfied. Performance measures may be based on the performance of the Company as a whole or on any one or more Subsidiaries or business units of the Company or a Subsidiary and may be measured relative to a peer group, an index or a business plan and may be considered as absolute measures or changes in measures. The terms of an Award may provide that partial achievement of performance measures may result in partial payment or vesting of the award or that the achievement of the performance measures may be measured over more than one period or fiscal year. In establishing any performance measures, the Committee may provide for the exclusion of the effects of the certain items, including but not limited to the following: (i) extraordinary, unusual, and/or nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) dividends declared on the Company’s stock; (iv) changes in tax or accounting principles, regulations or laws; or (v) expenses incurred in connection with a merger, branch acquisition or similar transaction. Subject to the preceding sentence, if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or the manner in which the Company or its Subsidiaries conducts its business or other events or circumstances render current performance measures to be unsuitable, the Committee may modify the performance measures, in whole or in part, as the Committee deems appropriate. Notwithstanding anything to the contrary herein, performance measures relating to any Award hereunder will be modified, to the extent applicable, to reflect a change in the outstanding shares of Stock of the Company by reason of any stock dividend or stock split, or a corporate transaction, such as a merger of the Company into another corporation, any separation of a corporation or any partial or complete liquidation by the Company or a Subsidiary. If a Participant is promoted, demoted or transferred to a different business unit during a performance period, the Committee may determine that the selected performance measures or applicable performance period are no longer appropriate, in which case, the Committee, in its sole discretion, may: (i) adjust, change or eliminate the performance measures or change the applicable performance period; or (ii) cause to be made a cash payment to the Participant in an amount determined by the Committee
“Restricted Stock” or “Restricted Stock Award” has the meaning ascribed to it in Section 2.3(a).
“Restricted Stock Unit” has the meaning ascribed to it in Section 2.4(a).
“Restriction Period” has the meaning set forth in Section 2.4(b)(iii).
“Retirement” or “Retired” means, unless otherwise specified in an Award Agreement, retirement from employment or service on or after attainment of age 65. Notwithstanding anything herein to the contrary, if an Employee or Director has not had a Termination of Service as defined in this Plan, the Employee or Director shall not be deemed to have Retired for purposes of forfeiture of non-vested Awards, vesting in Awards or reducing the exercise period of Options issued hereunder.
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended and the rules, regulations and guidance promulgated thereunder and modified from time to time.
“Service” means the uninterrupted provision of services as an Employee or Director of, or a Service Provider to, the Company or a Subsidiary, as the case may be, and shall include service as a director emeritus or advisory director. Service shall not be deemed interrupted in the case of (i) any approved leave of absence for military service or sickness, or for any other purpose approved by the Company or a Subsidiary, if the employee’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing, (ii) transfers among the Company, any Subsidiary, or any successor entities, in any capacity of Employee, Director or Service Provider, or (iii) any change in status as long as the individual remains in the service of the Company or a Subsidiary in any capacity of Employee, Director or Service Provider (except as otherwise provided in the Award Agreement).
“Service Provider” means any natural person (other than an Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Subsidiary to render consulting or advisory services to the Company or the Subsidiary and the services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.
“Stock” means the common stock of the Company, $0.01 par value per share.
“Stock Option” has the meaning ascribed to it in Section 2.2.
“Subsidiary(ies)” means any corporation, affiliate, bank or other entity which would be a subsidiary corporation with respect to the Company as defined in Code Section 424(f) and, other than with respect to an ISO, shall also mean any partnership or joint venture in which the Company and/or other Subsidiary owns more than 50% of the capital or profits interests.
“Termination of Service” means the first day occurring on or after a grant date on which the Participant ceases to be an Employee or Director (including a director emeritus or advisory director) of, or Service Provider to, the Company or any Subsidiary, regardless of the reason for such cessation, subject to the following:
(i) The Participant’s cessation of Service as an Employee shall not be deemed to occur by reason of the transfer of the Participant between the Company and a Subsidiary or between two Subsidiaries. Unless the Committee determines otherwise, an Employee Participant shall not be deemed to have a Termination of Service if such Participant remains in the Service of the Company or a Subsidiary as a Service Provider.
(ii) The Participant’s cessation as an Employee shall not be deemed to occur by reason of the Participant’s being on a bona fide leave of absence from the Company or a Subsidiary approved by the Company or Subsidiary otherwise receiving the Participant’s Services, provided the leave of absence does not exceed six (6) months, or if longer, so long as the Employee retains a right to reemployment with the Company or Subsidiary under an applicable statute or by contract. For these purposes, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Employee will return to perform Services for the Company or Subsidiary. If the period of leave exceeds six (6) months and the Employee does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first day immediately following the six-month period. For purposes of this sub-section, to the extent applicable, an Employee’s leave of absence shall be interpreted by the Committee in a manner consistent with Treasury Regulation Section 1.409A-1(h)(1).
(iii) If, as a result of a sale or other transaction, the Subsidiary for whom Participant is employed (or to whom the Participant is providing Services) ceases to be a Subsidiary, and the Participant is not, following the transaction, an Employee of the Company or an entity that is then a Subsidiary, then the occurrence of the transaction shall be treated as the Participant’s Termination of Service caused by the Participant being discharged by the entity by which the Participant is employed or to which the Participant is providing Services.
(iv) Except to the extent Code Section 409A may be applicable to an Award, and subject to the foregoing paragraphs of this sub-section, the Committee shall have discretion to determine if a Termination of Service has occurred and the date on which it occurred. If any Award under the Plan constitutes Deferred Compensation (as defined in Section 2.6), the term Termination of Service shall be interpreted by the Committee in a manner consistent with the definition of “Separation from Service” as defined under Code Section 409A and under Treasury Regulation Section 1.409A-1(h)(ii). For purposes of this Plan, a “Separation from Service” shall have occurred if the employer and Participant reasonably anticipate that no further Services will be performed by the Participant after the date of the Termination of Service (whether as an employee or as an independent contractor) or the level of further Services performed will be less than 50% of the average level of bona fide Services in the thirty-six (36) months immediately preceding the Termination of Service. If a Participant is a “Specified Employee,” as defined in Code Section 409A and any payment to be made hereunder shall be determined to be subject to Code Section 409A, then if required by Code Section 409A, the payment or a portion of the payment (to the minimum extent possible) shall be delayed and shall be paid on the first day of the seventh month following Participant’s Separation from Service.
(v) With respect to a Participant who is a Director, cessation as a Director will not be deemed to have occurred if the Participant continues as a director emeritus or advisory director. With respect to a Participant who is both an Employee and a Director, termination of employment as an Employee shall not constitute a Termination of Service for purposes of the Plan so long as the Participant continues to provide Service as a Director or director emeritus or advisory director.
