def14a
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant n
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to § 240.14a-12 |
Meridian Interstate Bancorp, Inc.
(Name of 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)(1) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule
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Proposed maximum aggregate value of transaction: |
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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
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Form, Schedule or Registration Statement No.: |
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April 18, 2011
Dear Fellow Stockholder:
You are cordially invited to attend the 2011 annual meeting of
stockholders of Meridian Interstate Bancorp, Inc. The meeting
will be held at the Peabody office of East Boston Savings Bank,
67 Prospect Street, Peabody, Massachusetts on May 18, 2011
at 11:00 a.m., local time.
The notice of annual meeting and proxy statement appearing on
the following pages describe the formal business to be
transacted at the meeting. Officers of the Company, as well as a
representative of Wolf & Company, P.C., the
Companys independent registered public accounting firm,
will be present to respond to appropriate questions of
stockholders.
It is important that your shares are represented at this
meeting, whether or not you attend the meeting in person and
regardless of the number of shares you own. To make sure your
shares are represented, we urge you to complete and mail the
enclosed proxy card promptly. If you attend the meeting, you may
vote in person even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
Richard J. Gavegnano
Chairman of the Board
and
Chief Executive
Officer
TABLE OF CONTENTS
10 Meridian Street
East Boston, Massachusetts 02128
(617) 567-1500
NOTICE OF 2010 ANNUAL MEETING OF STOCKHOLDERS
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TIME AND DATE |
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11:00 a.m. on May 18, 2011 |
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PLACE |
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Peabody Office of East Boston Savings Bank
67 Prospect Street
Peabody, Massachusetts 01960 |
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ITEMS OF BUSINESS |
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(1) To elect five directors to serve for a term of three
years.
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(2) To ratify the selection of Wolf &
Company, P.C. as our independent registered public
accounting firm for fiscal year 2011.
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(3) To consider a non-binding proposal to approve our
executive compensation as described in the proxy statement.
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(4) To consider a non-binding proposal with respect to the
frequency that stockholders will vote on our executive
compensation.
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(5) To transact such other business as may properly come
before the meeting and any adjournment or postponement thereof.
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RECORD DATE |
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To vote, you must have been a stockholder at the close of
business on March 31, 2011. |
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PROXY VOTING |
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It is important that your shares be represented and voted at the
meeting. You can vote your shares by completing and returning
the proxy card or voting instruction card sent to you. Voting
instructions are printed on your proxy or voting instruction
card and included in the accompanying proxy statement. You can
revoke a proxy at any time before its exercise at the meeting by
following the instructions in the proxy statement. |
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Vincent D. Basile
Corporate Secretary
April 18, 2011 |
Meridian
Interstate Bancorp, Inc.
Proxy
Statement
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Meridian
Interstate Bancorp, Inc. (the Company or
Meridian Interstate Bancorp) to be used at the
annual meeting of stockholders of the Company. The Company is
the holding company for East Boston Savings Bank (the
Bank). The annual meeting will be held at the
Peabody office of East Boston Savings Bank, 67 Prospect Street,
Peabody, Massachusetts on Wednesday, May 18, 2011 at
11:00 a.m., local time. This proxy statement and the
enclosed proxy card are being mailed to stockholders of record
on or about April 18, 2011.
Voting
and Proxy Procedure
Who Can
Vote at the Meeting
You are entitled to vote your Company common stock if the
records of the Company show that you held your shares as of the
close of business on March 31, 2011. If your shares are
held in a stock brokerage account or by a bank or other nominee,
you are considered the beneficial owner of shares held in
street name and these proxy materials are being
forwarded to you by your broker or nominee. As the beneficial
owner, you have the right to direct your broker how to vote.
As of the close of business on March 31, 2011, there were
22,462,801 shares of Company common stock outstanding. Each
share of common stock has one vote. The Companys Articles
of Incorporation provide that, subject to certain exceptions, a
record owner of the Companys common stock who beneficially
owns, either directly or indirectly, in excess of 10% of the
Companys outstanding shares, is not entitled to any vote
in respect of the shares held in excess of the 10% limit. This
restriction does not apply to our mutual holding company,
Meridian Financial Services, Incorporated.
Attending
the Meeting
If you were a stockholder as of the close of business on
March 31, 2011, you may attend the meeting. However, if
your shares of Company common stock are held by a broker, bank
or other nominee (i.e., in street name), you
will need proof of ownership to be admitted to the meeting. A
recent brokerage statement or a letter from a bank or broker are
examples of proof of ownership. If you want to vote your shares
of Company common stock held in street name in person at the
meeting, you will have to get a written proxy in your name from
the broker, bank or other nominee who holds your shares.
Vote
Required
A majority of the outstanding shares of common stock entitled to
vote is required to be represented at the meeting to constitute
a quorum for the transaction of business. If you return valid
proxy instructions or attend the meeting in person, your shares
will be counted for purposes of determining whether there is a
quorum, even if you abstain from voting. Broker non-votes also
will be counted for purposes of determining the existence of a
quorum. A broker non-vote occurs when a broker, bank or other
nominee holding shares for a beneficial owner does not vote on a
particular
1
proposal because the nominee does not have discretionary voting
power with respect to that item and has not received voting
instructions from the beneficial owner.
In voting on the election of directors, you may vote in favor of
all nominees, withhold votes as to all nominees or withhold
votes as to specific nominees. There is no cumulative voting for
the election of directors. Directors are elected by a plurality
of the votes cast at the annual meeting. This means that the
nominees receiving the greatest number of votes will be elected.
Votes that are withheld and broker non-votes will have no effect
on the outcome of the election.
In voting to ratify the appointment of Wolf &
Company, P.C., as our independent registered public
accounting firm, you may vote in favor of the proposal, against
the proposal or abstain from voting. To be approved, this matter
requires the affirmative vote of a majority of the votes cast at
the annual meeting. Broker non-votes and abstentions will not be
counted as votes cast and will have no effect on this proposal.
In voting on the non-binding proposal to approve our executive
compensation, you may vote in favor of the proposal, vote
against the proposal or abstain from voting. To approve the
proposal, the affirmative vote of a majority of the votes cast
at the annual meeting is required. While this vote is required
by law, it will neither be binding on us or the Board of
Directors, nor will it create or imply any change in the
fiduciary duties of, or impose any additional fiduciary duty on
us or the Board of Directors.
In voting on the non-binding proposal with respect to the
frequency that stockholders will vote on our executive
compensation, a stockholder may select that stockholders:
(i) consider the proposal every 1 YEAR;
(ii) consider the proposal every 2 YEARS;
(iii) consider the proposal every 3 YEARS; or
(iv) ABSTAIN from voting on the proposal.
Generally, approval of any matter presented to stockholders
requires the affirmative vote of a majority of the votes cast.
However, because this vote is advisory and non-binding, if none
of the frequency options receive a majority of the votes cast,
the option receiving the greatest number of votes will be
considered the frequency recommended by our stockholders. Even
though this vote will neither be binding on us or the Board of
Directors, nor will it create or imply any change in the
fiduciary duties of, or impose any additional fiduciary duty on
us or the Board of Directors, the Board of Directors will take
into account the outcome of this vote in making a determination
on the frequency that advisory votes on executive compensation
will be included in our proxy statements.
Voting by
Proxy
The Companys Board of Directors is sending you this proxy
statement to request that you allow your shares of Company
common stock to be represented at the annual meeting by the
persons named in the enclosed proxy card. All shares of Company
common stock represented at the meeting by properly executed and
dated proxies will be voted according to the instructions
indicated on the proxy card. If you sign, date and return a
proxy card without giving voting instructions, your shares will
be voted as recommended by the Companys Board of
Directors. The Board of Directors recommends that you:
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vote for each of the nominees for director;
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vote for ratification of the appointment of
Wolf & Company, P.C. as the Companys
independent registered public accounting firm;
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vote for the approval of our executive
compensation as described in this proxy statement; and
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mark the 1 YEAR box with respect to
the advisory proposal on the frequency of the stockholders
vote on executive compensation.
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If any matters not described in this proxy statement are
properly presented at the annual meeting, the persons named in
the proxy card will use their judgment to determine how to vote
your shares. This includes a motion to adjourn or postpone the
meeting to solicit additional proxies. The Company does not
currently know of any other matters to be presented at the
meeting.
You may revoke your proxy at any time before the vote is taken
at the meeting. To revoke your proxy, you must either advise the
Corporate Secretary of the Company in writing before your common
stock has been voted at the annual meeting, deliver a later
dated proxy or attend the meeting and vote your shares in person
by ballot. Attendance at the annual meeting will not in itself
constitute revocation of your proxy.
If your Company common stock is held in street name, you will
receive instructions from your broker, bank or other nominee
that you must follow to have your shares voted. Your broker,
bank or other nominee may allow you to deliver your voting
instructions via the telephone or the Internet. Please review
the proxy card or instruction form provided by your broker, bank
or other nominee that accompanies this proxy statement.
If you have any questions about voting, please contact
Richard Gavegnano at
(978) 977-2211.
Corporate
Governance
General
The Company periodically reviews its corporate governance
policies and procedures to ensure that the Company meets the
highest standards of ethical conduct, reports results with
accuracy and transparency and maintains full compliance with the
laws, rules and regulations that govern the Companys
operations. As part of this periodic corporate governance
review, the Board of Directors reviews and adopts best corporate
governance policies and practices for the Company.
Code of
Ethics and Business Conduct
The Company has adopted a Code of Ethics and Business Conduct
that is designed to promote the highest standards of ethical
conduct by the Companys directors, executive officers and
employees. The Code of Ethics and Business Conduct requires that
the Companys directors, executive officers and employees
avoid conflicts of interest, comply with all laws and other
legal requirements, conduct business in an honest and ethical
manner and otherwise act with integrity and in the
Companys best interest. Under the terms of the Code of
Ethics and Business Conduct, directors, executive officers and
employees are required to report any conduct that they believe
in good faith to be an actual or apparent violation of the Code
of Ethics and Business Conduct. A copy of the Code of Ethics and
Business Conduct can be found in the About
UsInvestor RelationsCorporate Governance
section of the Companys website, www.ebsb.com.
As a mechanism to encourage compliance with the Code of Ethics
and Business Conduct, the Company has established procedures to
receive, retain and treat complaints regarding accounting,
internal accounting controls and auditing matters. These
procedures ensure that individuals may submit concerns regarding
questionable accounting or auditing matters in a confidential
and anonymous manner. The Code of Ethics and Business Conduct
also prohibits the
3
Company from retaliating against any director, executive officer
or employee who reports actual or apparent violations of the
Code of Ethics and Business Conduct.
Meetings
of the Board of Directors
The Company conducts business through meetings of its Board of
Directors and through activities of its committees. During 2010,
the Board of Directors held 19 meetings (not including committee
meetings), and two additional meetings of our non-employee
independent directors. No director attended fewer than 75% of
the total meetings of the Companys and the Banks
respective Board of Directors and the committees on which such
director served (held during the period for which the director
has served as a director or committee member, as appropriate).
Committees
of the Board of Directors
The following table identifies our Audit, Compensation and
Nominating/Corporate Governance committees and their members.
All members of each committee are independent in accordance with
the listing standards of the Nasdaq Stock Market, Inc. The
Company also maintains an Executive Committee as a standing
committee. The charters of the Audit Committee, Compensation
Committee and Nominating/Corporate Governance Committee are
available in the About UsInvestor
RelationsCorporate Governance section of the
Companys website, www.ebsb.com.
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Nominating/
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Corporate
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Compensation
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Governance
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Director
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Audit Committee
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Committee
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Committee
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Vincent D. Basile
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X
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Marilyn A. Censullo
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X
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X
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Robert D. DeBlosi
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X
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Anna R. DiMaria
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X
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Richard F. Fernandez
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X
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Domenic A. Gambardella
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X
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X
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Carl A. LaGreca
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X
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Gregory F. Natalucci
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X
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X
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Number of Committee Meetings in 2010
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13
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6
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3
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Audit Committee. Pursuant to Meridian
Interstate Bancorps Audit Committee Charter, the Audit
Committee assists the Board of Directors in its oversight of the
Companys accounting and reporting practices, the quality
and integrity of the Companys financial reports and the
Companys compliance with applicable laws and regulations.
The Audit Committee, which is comprised solely of non-employee
directors, all of whom the Board has determined are independent
in accordance with the listing standards of the Nasdaq Stock
Market, Inc., is also responsible for engaging the
Companys independent registered public accounting firm and
monitoring its conduct and independence. The Board of Directors
has designated Marilyn A. Censullo as an audit committee
financial expert under the rules of the Securities and Exchange
Commission. The report of the Audit Committee required by the
rules of the Securities and Exchange Commission is included in
this proxy statement. See Audit Committee
Report.
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Compensation Committee. Pursuant to Meridian
Interstate Bancorps Compensation Committee Charter, the
Compensation Committee approves the compensation objectives for
the Company and the Bank and establishes the compensation for
the Chief Executive Officer and other executives. Our Chief
Executive Officer makes recommendations as to the appropriate
mix and level of compensation for other executive officers to
the Compensation Committee and determines the compensation for
subordinates of executive officers. In making his
recommendations, the Chief Executive Officer considers the
objectives of our compensation philosophy and the range of
compensation programs authorized by the Compensation Committee.
Our Chief Executive Officer does not participate in discussions
related to his compensation or the Committees review of
any documents related to the determination of his compensation.
The Compensation Committee, which is comprised solely of
non-employee directors, all of whom the Board of Directors has
determined are independent in accordance with the listing
standards of the Nasdaq Stock Market, Inc., reviews all
compensation components for the Companys Chief Executive
Officer and other highly compensated executive officers
compensation including base salary, annual incentive, long-term
incentives and other perquisites. In addition to reviewing
competitive market values, the committee also examines the total
compensation mix,
pay-for-performance
relationship, and how all elements, in the aggregate, comprise
the executives total compensation package. Decisions by
the Compensation Committee with respect to the compensation of
executive officers are approved by the full Board of Directors.
The report of the Compensation Committee required by the rules
of the Securities and Exchange Commission is included in this
proxy statement. See Compensation Committee
Report.
Nominating/Corporate Governance
Committee. Pursuant to the Meridian Interstate
Bancorp Nominating/Corporate Governance Committee charter, the
Companys Nominating/Corporate Governance Committee assists
the Board of Directors in identifying qualified individuals to
serve as Board members, in determining the composition of the
Board of Directors and its committees, in monitoring a process
to assess Board effectiveness and in developing and implementing
the Companys corporate governance guidelines. The
Nominating/Corporate Governance Committee also considers and
recommends the nominees for director to stand for election at
the Companys annual meeting of stockholders. The
procedures of the Nominating/Corporate Governance Committee
required to be disclosed by the rules of the Securities and
Exchange Commission are included in this proxy statement. See
Nominating/Corporate Governance Committee
Procedures.
Attendance
at the Annual Meeting
The Board of Directors encourages each director to attend annual
meetings of stockholders. All of our then-existing directors
attended the 2010 Annual Meeting of Stockholders.
Board
Leadership Structure
The Board of Directors currently combines the position of
Chairman of the Board with the position of Chief Executive
Officer, coupled with a lead independent director to further
strengthen the governance structure. The Board of Directors
believes this provides an efficient and effective leadership
model for the Company. Combining the Chairman of the Board and
Chief Executive Officer positions fosters clear accountability,
effective decision-making, a clear and direct channel of
communication from senior management to the full Board of
Directors and alignment on corporate strategy. To further
strengthen the leadership of the Board of Directors, the Board
selects a lead independent director on an annual basis,
currently Vincent D. Basile. The responsibilities of the lead
independent director include leading all Board meetings of
non-management Directors, including the annual
performance evaluation of the Chairman of the Board and Chief
Executive Officer. The Board of Directors believes its
administration of its risk oversight function is not affected by
the Board of Directors leadership structure. To assure
effective independent oversight, the Board has adopted a number
of governance practices, including holding executive sessions of
the independent
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directors at least twice a year or more often as needed. In
addition, the Compensation Committee, which consists only of
independent directors, evaluates the performance of our Chairman
of the Board and Chief Executive Officer and presents its
findings to our independent directors.
Risk
Oversight
The Board of Directors has an active role, as a whole and also
at the committee level, in overseeing management of the
Companys risks. The Board of Directors regularly reviews
information regarding the Companys credit, liquidity and
operations, as well as the risks associated with such areas. The
Companys Compensation Committee is responsible for
overseeing the management of risks relating to the
Companys executive compensation plans and arrangements.
The Audit Committee oversees management of financial risks. The
Nominating/Corporate Governance Committee manages risks
associated with the independence of the Board of Directors and
potential conflicts of interest. While each committee is
responsible for evaluating certain risks and overseeing the
management of such risks, the entire Board of Directors is
regularly informed about such risks. The Board of Directors
annually reviews our conflict of interest policy to ensure all
directors are in compliance with the policy.
Stock
Ownership
The following table provides information as of March 31,
2011, with respect to persons known by the Company to be the
beneficial owners of more than 5% of the Companys
outstanding common stock. A person may be considered to own any
shares of common stock over which he or she has, directly or
indirectly, sole or shared voting or investing power.
Percentages are based on 22,462,801 shares of Company
common stock issued and outstanding as of March 31, 2011.
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Percent
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Number of
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of Common Stock
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Name and Address
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Shares Owned
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Outstanding
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Meridian Financial Services, Incorporated
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13,164,109
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58.60
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10 Meridian Street
East Boston, Massachusetts 02128
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Bay Pond Partners, L.P.
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1,183,400
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5.27
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%
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C/O Wellington Management Company, LLP (1)
280 Congress Street
Boston, Massachusetts
02210-1039
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Wellington Management Company LLP (2)
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2,166,400
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9.64
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%
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280 Congress Street
Boston, Massachusetts
02210-1039
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(1)
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Based exclusively on a
Schedule 13G filed by Bay Pond Partners, L.P. with the
Securities and Exchange Commission on February 14, 2011.
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(2)
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Based exclusively on a
Schedule 13G filed by Wellington Management Company, LLP
with the Securities and Exchange Commission on February 14,
2011.
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The following table provides information as of March 31,
2011 about the shares of Meridian Interstate Bancorp common
stock that may be considered to be beneficially owned by each
director, named executive officer as of March 31, 2011 and
all directors and executive officers of the Company as a group.
A person may be considered to beneficially own any shares of
common stock over which he or she has, directly or indirectly,
sole or shared voting or investment power, or which he or she
has the right to acquire beneficial ownership at any time within
sixty days after March 31, 2011. Unless otherwise
indicated, none of the shares listed are pledged as collateral
for a loan, and each of the named individuals has sole voting
power and sole investment power with respect to the number of
shares shown. Percentages are based on 22,462,801 shares of
Company common stock issued and outstanding as of March 31,
2011.
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Number of
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Percent of Common
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Name
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Shares Owned
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Stock Outstanding
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Directors
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Vincent D. Basile
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17,000
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(1)
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Marilyn A. Censullo
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15,500
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(2)
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Robert D. DeBlosi
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6,400
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(3)
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Anna R. DiMaria
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18,500
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(4)
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*
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Richard F. Fernandez
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28,000
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(5)
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Domenic A. Gambardella
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24,500
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(6)
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*
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Richard J. Gavegnano
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225,000
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(7)
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1.0
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%
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Thomas J. Gunning
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4,100
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(8)
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*
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Carl A. LaGreca
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6,000
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(9)
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*
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Edward L. Lynch
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23,500
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(10)
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*
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Edward J. Merritt
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3,500
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(11)
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*
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Gregory F. Natalucci
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13,900
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(12)
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*
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James G. Sartori
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27,394
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(13)
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*
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Paul T. Sullivan
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22,000
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(14)
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*
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Named Executive Officers Who Are Not Also Directors
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Deborah J. Jackson
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42,000
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(15)
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*
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Mark L. Abbate
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9,500
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(16)
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*
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John Migliozzi
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16,850
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(17)
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*
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|
|
|
|
|
|
|
|
All directors and executives as a group (17 persons)
|
|
|
503,644
|
|
|
|
2.2
|
%
|
|
|
|
*
|
|
Less than 1%.
|
(1)
|
|
Includes 4,900 restricted shares
and 6,000 shares that may be acquired at the exercise price
of $9.50 per share and 2,000 that may be acquired at an exercise
price of $8.99 per share under options that are presently
exercisable or will become exercisable within 60 days.
|
(2)
|
|
Includes 1,000 shares held in
an IRA, 4,900 restricted shares and 6,000 shares that may
be acquired at the exercise price of $9.50 per share and 1,000
that may be acquired at an exercise price of $8.99 per share
under options that are presently exercisable or will become
exercisable within 60 days.
|
(3)
|
|
Includes 4,900 restricted shares
and 3,000 shares that may be acquired at the exercise price
of $9.50 per share and 400 that may be acquired at an exercise
price of $8.99 per share under options that are presently
exercisable or will become exercisable within 60 days.
|
(4)
|
|
Includes 4,900 restricted shares
and 6,000 shares that may be acquired at the exercise price
of $9.50 per share and 1,000 that may be acquired at an exercise
price of $8.99 per share under options that are presently
exercisable or will become exercisable within 60 days.
|
(5)
|
|
Includes 2,000 shares held in
an IRA, 2,000 shares held in spouses IRA, 4,900
restricted shares and 6,000 shares that may be acquired at
the exercise price of $9.50 per share and 1,000 that may be
acquired at an exercise price of $8.99 per share under options
that are presently exercisable or will become exercisable within
60 days.
|
7
|
|
|
(6)
|
|
Includes 5,000 shares held
jointly with spouse, 5,500 restricted shares and
10,000 shares that may be acquired at the exercise price of
$9.50 per share and 2,000 that may be acquired at an exercise
price of $8.99 per share under options that are presently
exercisable or will become exercisable within 60 days.
|
(7)
|
|
Includes 67,000 restricted shares,
13,000 shares pledged as collateral and 70,000 shares
that may be acquired at the exercise price of $9.50 per share
and 15,000 that may be acquired at an exercise price of $8.99
per share under options that are presently exercisable or will
become exercisable within 60 days.
|
(8)
|
|
Includes 800 restricted shares and
400 shares that may be acquired at the exercise price of
$9.29 per share under options that are presently exercisable or
will become exercisable within 60 days.
|
(9)
|
|
Includes 4,000 restricted shares
and 1,000 shares that may be acquired at the exercise price
of $8.99 per share under options that are presently exercisable
or will become exercisable within 60 days.
|
(10)
|
|
Includes 4,900 restricted shares
and 6,000 shares that may be acquired at the exercise price
of $9.50 per share and 1,000 that may be acquired at an exercise
price of $8.99 per share under options that are presently
exercisable or will become exercisable within 60 days.
|
(11)
|
|
Includes 2,000 restricted shares
and 1,000 shares that may be acquired at the exercise price
of $9.29 per share under options that are presently exercisable
or will become exercisable within 60 days.
|
(12)
|
|
Includes 400 shares held in
an IRA, 4,900 restricted shares and 6,000 shares that may
be acquired at the exercise price of $9.50 per share and 1,000
that may be acquired at an exercise price of $8.99 per share
under options that are presently exercisable or will become
exercisable within 60 days.
|
(13)
|
|
Includes 2,500 shares held
jointly with spouse, 1,800 held in an IRA, 1,000 held by spouse,
1,094 shares held in spouses IRA, 5,500 restricted
shares and 10,000 shares that may be acquired at the
exercise price of $9.50 per share and 2,000 that may be acquired
at an exercise price of $8.99 per share under options that are
presently exercisable or will become exercisable within
60 days.
|
(14)
|
|
Includes 5,500 restricted shares
and 10,000 shares that may be acquired at the exercise
price of $9.50 per share and 2,000 that may be acquired at an
exercise price of $8.99 per share under options that are
presently exercisable or will become exercisable within
60 days.
|
(15)
|
|
Includes 10,000 restricted shares
and 20,000 shares that may be acquired at the exercise
price of $8.57 per share and 5,000 that may be acquired at an
exercise price of $8.99 per share under options that are
presently exercisable or will become exercisable within
60 days.
|
(16)
|
|
Includes 4,800 restricted shares
and 3,500 shares that may be acquired at the exercise price
of $9.29 per share under options that are presently exercisable
or will become exercisable within 60 days.
|
(17)
|
|
Includes 4,850 shares held in
an IRA, 4,800 restricted shares and 4,000 shares that may
be acquired at the exercise price of $9.50 per share and 1,000
that may be acquired at an exercise price of $8.99 per share
under options that are presently exercisable or will become
exercisable within 60 days.
|
8
Proposal 1
Election of Directors
The Board of Directors of Meridian Interstate Bancorp is
presently composed of 14 members. The Board is divided into
three classes, each with three-year staggered terms, with
approximately one-third of the directors elected each year. The
nominees for election this year are Vincent D. Basile, Edward J.
Merritt, James G. Sartori, Paul T. Sullivan and Carl A. LaGreca,
all of whom are current directors of the Company.
All of our directors except for Messrs. Gavegnano, Merritt
and Lynch are independent under the current listing standards of
the Nasdaq Stock Market, Inc. Messrs. Gavegnano and Merritt
are not independent because they are employees of Meridian
Interstate Bancorp and East Boston Savings Bank. Mr. Lynch
is not independent because of the legal fees paid to him or
received by him, directly or indirectly, from East Boston
Savings Bank. In determining the independence of our other
directors, the Board of Directors considered loans to directors
and members of their immediate families, and legal fees paid to,
or received by, directly or indirectly, Directors DiMaria and
Sullivan, which were not required to be disclosed individually
under Transactions with Related Persons.
It is intended that the proxies solicited by the Board of
Directors will be voted for the election of the nominees named
below. If any nominee is unable to serve, the persons named in
the proxy card will vote your shares to approve the election of
any substitute proposed by the Board of Directors.
Alternatively, the Board of Directors may adopt a resolution to
reduce the size of the Board. At this time, the Board of
Directors knows of no reason why any nominee might be unable to
serve.
The Board of Directors recommends a vote FOR the
election of all nominees.
Information regarding the nominees and the directors continuing
in office is provided below. Unless otherwise stated, each
individual has held his or her current occupation for the last
five years. The age indicated in each biography is as of
December 31, 2010.
All of the nominees and directors continuing in office are long
time residents of the communities served by the Company and its
subsidiaries and many of such individuals have operated, or
currently operate, businesses located in such communities. As a
result, each nominee and director continuing in office has
significant knowledge of the businesses that operate in the
Companys market area, an understanding of the general real
estate market, values and trends in such communities and an
understanding of the overall demographics of such communities.
Additionally, as residents of such communities, each nominee and
continuing director has direct knowledge of the trends and
developments occurring in such communities. As a community
banking institution, the Company believes that the local
knowledge and experience of its directors assists the Company in
assessing the credit and banking needs of its customers,
developing products and services to better serve its customers
and in assessing the risks inherent in its lending operations.
As local residents, our nominees and directors are also exposed
to the advertising, product offerings and community development
efforts of competing institutions which, in turn, assists the
Company in structuring its marketing efforts and community
outreach programs.
Nominees
for Election of Directors
The nominees standing for election are:
Vincent D. Basile is a self-employed management
consultant who has published articles on management leadership
in national journals and has served as Clerk of Meridian
Financial Services and East Boston Savings Bank since 2007 and
has served as the Corporate Secretary of the Company since its
formation. Mr. Basiles knowledge of best management
practices, corporate
9
governance matters and his contacts with local community
leaders, politicians and municipalities gives him insights into
the Companys challenges and opportunities in its lending
area and in assessing and securing the location of branches and
offices. Previously, Mr. Basile was a Regional
Administrator in the Massachusetts Office of the Commissioner of
Probation, and served as the Chairman of the Board of Omega
Marketing, formerly an East Boston-based manufacturer of high
performance life jackets. Mr. Basile is also a retired Lt.
Colonel in the U.S. Army Reserve. He has been a Corporator
of Meridian Financial Services since 1977. Age 71. Director
since 2002.
Edward J. Merritt serves as President of the Mt.
Washington Division of East Boston Savings Bank and became a
Board member as a result of the Companys acquisition of
Mt. Washington Cooperative Bank. Previously,
Mr. Merritt served as the President and Chief Executive
Officer and a director of Mt. Washington Cooperative Bank for
over 11 years. Mr. Merritts direct experience in
managing the operations and employees of Mt. Washington provides
the Board of Directors with insight into the operations of Mt.
Washington and assists the Board with the integration of Mt.
Washington into the Companys operations.
Mr. Merritts
long-term
experience with managing the
day-to-day
operations of a community banking institution operating in a
community in which the Company previously had limited market
penetration also provides the Board with additional perspective
with respect to such market area and assists the Board in
recognizing and assessing growth opportunities in the market
area in which Mt. Washington Cooperative Bank operated.
Age 51. Director since 2010.
James G. Sartori retired as Treasurer of Bandwagon, Inc.,
an importer and distributor company, on April 1, 2011.
Mr. Sartoris experience as Treasurer for over
37 years provides the Board with the perspective of someone
experienced in financial and accounting issues. Age 67.
Director since 2001.
Paul T. Sullivan is a partner with the law firm Paul T.
Sullivan, Esquire, P.C. Mr. Sullivans expertise
in the area of family and estate law and his general background
as a lawyer provides the Board of Directors with a unique
perspective in addressing the legal requirements of the Company
and its subsidiaries and in assessing legal issues, including
litigation matters. Age 64. Director since 2001.
Carl A. LaGreca is a Certified Public
Accountant. He is the President of Forman, Itzkowitz,
Berenson & LaGreca, PC, an accounting firm in Waltham,
Massachusetts, where he has been employed for 25 years.
Mr. LaGreca has significant expertise and background with
regard to accounting matters, the application of generally
accepted accounting principles and matters of business finance
and business transactions. Mr LeGrecas professional and
business experience provides the Board with valuable insight
into the accounting and public reporting issues faced by the
Company and in assessing strategic transactions involving the
Company. Age 65. Director since January 2009.
Directors
Continuing in Office
The
following directors have terms ending in 2012:
Marilyn A. Censullo, a Certified Public Accountant, has
been a partner in the accounting firm of Naffah &
Company, P.C. since 2000, and has over 30 years of
experience as an accountant. Ms. Censullo has significant
experience with the application of generally accepted accounting
principles and matters of business finance and business
transactions. Ms. Censullos professional and business
experience provides the Board with valuable insight into the
accounting and public reporting issues faced by the Company and
in assessing strategic transactions involving the Company.
Age 53. Director since 2007.
10
Richard J. Gavegnano was in the investment business for
37 years with national New York Stock Exchange member
firms, and retired in 2006 ending his career as a Vice President
with A.G. Edwards & Sons, Inc. He has been associated
with East Boston Savings Bank for 37 years serving as
corporator, trustee and director. Mr. Gavegnano has served
as Chairman of the Board of East Boston Savings Bank, Meridian
Interstate Bancorp, Inc. and Meridian Financial Services since
2003, 2006 and 2003, respectively. In 2007, Mr. Gavegnano
was appointed Chief Executive Officer of Meridian Interstate
Bancorp, Inc. and Meridian Financial Services and Investor
Relations Officer of Meridian Interstate Bancorp, Inc.
Mr. Gavegnano has served as Chairman of the Board of
Hampshire First Bank since 2006. Mr. Gavegnano has
experience in business development, commercial real estate and
investments. Mr. Gavegnanos positions as Chairman of
the Board and Chief Executive Officer foster clear
accountability, effective decision-making, a clear and direct
channel of communication from senior management to the full
Board, and alignment on corporate strategy. Age 63.
Director since 1995.
Edward L. Lynch has been an Attorney at Law, Sole
Practitioner, for the past 35 years specializing in real
estate closings. Since 2006, Mr. Lynch has also served as a
director of Hampshire First Bank. Mr. Lynchs
experience as a director of Hampshire First provides the Board
with insight on the operations of Hampshire First and the market
area served by Hampshire First. His experience as a lawyer
assists the Board in analyzing and addressing the legal
requirements of the Company and its subsidiaries, including any
litigation matters. Age 69. Director since 2001.
Gregory F. Natalucci is an auditor with CNA Financial
Corporation, a commercial and property-casualty insurer.
Mr. Natalucci has practiced in this field for over
33 years. In connection with his position with CNA
Financial he has gained extensive knowledge of audit practices
and of the insurance industry. Mr. Nataluccis
experience provides the Board with experience when assessing the
Companys accounting and internal audit practices and with
respect to its insurance needs in general. Age 65. Director
since 2002.
The following directors have terms ending in 2013:
Anna R. DiMaria has been an Attorney at Law with the Law
Offices of Michael A. DAvolio for the past 18 years.
Ms. DiMarias background as an attorney provides the
Board of Directors with a unique perspective in addressing the
legal requirements of the Company and its subsidiaries. Her
professional experience also provides the Company with expertise
in the area of real estate and estate law. Age 65. Director
since 2006.
Richard F. Fernandez has been Chief Financial Officer at
Stoughton Recycling Technologies, LLC since 2010 and has been a
merger and acquisition/banking consultant since 2006. He is also
a director of Hampshire First Bank. Mr. Fernandez was a
Commercial Lending Regional Manager for Sovereign Bank from 2000
to 2006. Mr. Fernandez has 40 years commercial lending
experience at several institutions, including Sovereign Bank, US
Trust Company, and Shawmut Bank. Mr. Fernandezs
extensive knowledge in mergers and acquisitions is valuable in
assisting the Board of Directors with evaluating strategic
planning initiatives and growth opportunities, which from to
time are important strategies for the Company. Age 68.
Director since 2008.
Domenic A. Gambardella was the former owner and President
of Meridian Insurance Agency Inc., an insurance agency, and was
the owner of a financial services firm focused on small
businesses. Mr. Gambardellas experience as President
of an insurance agency gives him unique insights into the
Companys challenges, opportunities and operations in the
insurance products field and generally in the area of wealth
management and non-depository products that are offered by the
Company and its subsidiaries. Age 64. Director since 1995.
11
Thomas J. Gunning is Executive Director of Building
Trades Employers Association, a multi-trade organization that
represents over 250 contractors affiliated with 11 different
building trade unions. Mr. Gunnings experience in
legislative matters, labor relations and contract negotiations
brings the Board of Directors the perspective of someone who is
familiar with all facets of labor matters. Mr. Gunning
served a director of Mt. Washington Cooperative Bank since 2008
and became a director of the Company as result of the
Companys acquisition of Mt. Washington Bank in January
2010. Mr. Gunnings service with and knowledge of the
operations, customers and employees of Mt. Washington provide
the Board with greater institutional knowledge of
Mt. Washington and assist the Board with the integration of
Mt. Washington and maximizing the opportunities resulting from
the merger. Age 57. Director since 2010.
Proposal 2
Ratification of Independent Registered
Public Accounting Firm
The Audit Committee of the Board of Directors has appointed
Wolf & Company, P.C. to be the Companys
independent registered public accounting firm for the 2011
fiscal year, subject to ratification by stockholders. A
representative of Wolf & Company, P.C. is
expected to be present at the annual meeting to respond to
appropriate questions from stockholders and will have the
opportunity to make a statement should he or she desire to do so.
If the ratification of the appointment of the firm is not
approved by a majority of the votes cast by stockholders at the
annual meeting, other independent registered public accounting
firms may be considered by the Audit Committee of the Board of
Directors.
The Board of Directors recommends that stockholders vote
FOR the ratification of the appointment of
Wolf & Company, P.C. as the Companys
independent registered public accounting firm.
Audit
Fees
The following table sets forth the fees paid by the Company for
the fiscal years ended December 31, 2010 and 2009 to
Wolf & Company, P.C.
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Audit fees
|
|
$
|
339,000
|
|
|
$
|
323,000
|
|
Audit-related fees
|
|
$
|
15,700
|
|
|
$
|
15,000
|
|
Tax fees
|
|
$
|
28,500
|
|
|
$
|
27,000
|
|
All other fees
|
|
$
|
30,500
|
|
|
$
|
39,500
|
|
Audit fees relate to the audit of the Companys annual
consolidated financial statements, quarterly review fees, and
the audit of internal controls over financial reporting.
Audit-related fees pertain to the audit of the Companys
defined contribution plan. Tax fees consist of tax return
preparation and other tax matters. All other fees for 2010
pertain to services related to review of a comment letter from
the Securities and Exchange Commission and information
technology, and for 2009, pertain to services related to
information technology, the merger with Mt. Washington
Cooperative Bank and the filing of a registration statement on
Form S-8.
Pre-Approval
of Services by the Independent Registered Public Accounting
Firm
The Audit Committee is responsible for appointing, setting
compensation and overseeing the work of the independent
registered public accounting firm. In accordance with its
charter, the Audit
12
Committee approves, in advance, all audit and permissible
non-audit services to be performed by the independent registered
public accounting firm. Such approval process ensures that the
independent registered public accounting firm does not provide
any non-audit services to the Company that are prohibited by law
or regulation.
In addition, the Audit Committee has established a policy
regarding pre-approval of all audit and permissible non-audit
services provided by the independent registered public
accounting firm. Requests for services by the independent
registered public accounting firm for compliance with the audit
or services policy must be specific as to the particular
services to be provided. The request may be made with respect to
either specific services or a type of service for predictable or
recurring services. During the years ended December 31,
2010 and 2009, 100% of audit and other services provided by
Wolf & Company, P.C. were approved, in advance,
by the Audit Committee.
Proposal 3
Advisory (Non-Binding) Vote on
Executive Compensation
In accordance with recently adopted changes to Section 14A
of the Securities Exchange Act of 1934, as amended, stockholders
are being given the opportunity to vote on an advisory
(non-binding) resolution at the Annual Meeting to approve the
compensation of our Named Executive Officers, as
described in this proxy statement under Compensation
Discussion and Analysis and the compensation tables and
narrative disclosure. This proposal, commonly known as a
say-on-pay
proposal, gives stockholders the opportunity to endorse or not
endorse the Companys executive pay program.
The purpose of our compensation policies and procedures is to
attract and retain experienced, highly qualified executives
critical to the Companys long-term success and enhancement
of stockholder value. The Board of Directors believes the
Companys compensation policies and procedures achieve this
objective, and therefore recommend stockholders vote
For the proposal. Specifically, stockholders
are being asked to approve the following:
RESOLVED, that the compensation paid to the
Companys Named Executive Officers, as disclosed in this
proxy statement pursuant to Item 402 of Securities and
Exchange Commission
Regulation S-K,
including the Compensation Discussion and Analysis, compensation
tables and narrative discussion is hereby APPROVED.
Although non-binding, the Board of Directors and the
Compensation Committee value constructive dialogue on executive
compensation and other important governance topics with our
stockholders and encourage all stockholders to vote their shares
on this matter. The Board of Directors and the Compensation
Committee will review the voting results and take them into
consideration when making future decisions regarding our
executive compensation programs.
Unless otherwise instructed, validly executed proxies will be
voted FOR this resolution.
The Board of Directors recommends that you vote
FOR the resolution set forth in Proposal 3.
13
Proposal 4
Advisory (Non-Binding) Vote on the Frequency of
Voting on Executive Compensation
In accordance with recently adopted changes to Section 14A
of the Securities Exchange Act of 1934, as amended, stockholders
are being given the opportunity to vote on an advisory
(non-binding) resolution at the Annual Meeting to approve the
compensation of executive officers (the
say-on-pay
advisory vote in Proposal 3 above) this year and will do so
at least once every three years thereafter. Pursuant to recently
adopted changes to Section 14A of the Securities Exchange
Act of 1934, as amended, at the 2011 Annual Meeting, we are also
asking stockholders to vote on whether future
say-on-pay
advisory votes on executive compensation should occur every
year, every two years or every three years.
After careful consideration, the Board of Directors recommends
that future stockholder
say-on-pay
advisory votes on executive compensation be conducted every
year. The determination was based upon the premise that named
executive officer compensation is evaluated, adjusted and
approved on an annual basis by the Board of Directors upon a
recommendation from the Compensation Committee and the belief
that investor sentiment should be a factor taken into
consideration by the Compensation Committee in making its annual
recommendation.
Although the Board of Directors recommends a
say-on-pay
vote every year, stockholders will be able to specify one of
four choices for this proposal on the proxy card: every year,
every two years, every three years or abstain. Stockholders are
not voting to approve or disapprove of the Board of
Directors recommendation.
Unless otherwise instructed, validly executed proxies will be
voted FOR the 1 Year frequency option.
The Board of Directors recommends that you vote
FOR the 1 Year option.
Audit
Committee Report
The Companys management is responsible for the
Companys internal controls and financial reporting
process. The Companys independent registered public
accounting firm is responsible for performing an independent
audit of the Companys consolidated financial statements,
issuing an opinion on the conformity of those financial
statements with generally accepted accounting principles, and
issuing a report on internal control over financial reporting.
The Audit Committee oversees the Companys internal
controls and financial reporting process on behalf of the Board
of Directors.
In this context, the Audit Committee has met and held
discussions with management and the independent registered
public accounting firm. Management represented to the Audit
Committee that the Companys consolidated financial
statements were prepared in accordance with generally accepted
accounting principles and the Audit Committee has reviewed and
discussed the consolidated financial statements with management
and the independent registered public accounting firm. The Audit
Committee discussed with the independent registered public
accounting firm matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication With Audit
Committees), including the quality, not just the acceptability,
of the accounting principles, the reasonableness of significant
judgments and the clarity of the disclosures in the financial
statements.
In addition, the Audit Committee has received the written
disclosures and the letter from the independent registered
public accounting firm required by the Independence Standards
Board Standard No. 1 (Independence Discussions With Audit
Committees) and has discussed with the
14
independent registered public accounting firm the firms
independence from the Company and its management. In concluding
that the registered public accounting firm is independent, the
Audit Committee considered, among other factors, whether the
non-audit services provided by the firm were compatible with its
independence.
The Audit Committee discussed with the Companys
independent registered public accounting firm the overall scope
and plans for their audit. The Audit Committee meets with the
independent registered public accounting firm, with and without
management present, to discuss the results of their audit, their
evaluation of the Companys internal controls, and the
overall quality of the Companys financial reporting.
In performing all of these functions, the Audit Committee acts
only in an oversight capacity. In its oversight role, the Audit
Committee relies on the work and assurances of the
Companys management, which has the primary responsibility
for financial statements and reports, and of the independent
registered public accounting firm who, in their report, express
an opinion on the conformity of the Companys financial
statements to generally accepted accounting principles. The
Audit Committees oversight does not provide it with an
independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or
policies, or appropriate internal controls and procedures
designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit
Committees considerations and discussions with management
and the independent registered public accounting firm do not
assure that the Companys financial statements are
presented in accordance with generally accepted accounting
principles, that the audit of the Companys financial
statements has been carried out in accordance with generally
accepted auditing standards or that the Companys
independent registered public accounting firm is in fact
independent.
In reliance on the reviews and discussions referred to above,
the Audit Committee recommended to the Board of Directors, and
the Board has approved, that the audited consolidated financial
statements be included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2010, for filing with the
Securities and Exchange Commission. The Audit Committee also has
approved, subject to stockholder ratification, the selection of
Wolf & Company, P.C. as the Companys
independent registered public accounting firm, for the fiscal
year ending December 31, 2011.
Audit
Committee of the Board of Directors of
Meridian Interstate Bancorp, Inc.
Marilyn
A. Censullo, Chair
Robert D. DeBlosi
Carl A. LaGreca
Gregory F. Natalucci
Information
about Executive Officers
The following provides information regarding our executive
officers as of March 31, 2011, that are not directors of
the Company.
Deborah J. Jackson, President and Chief Operating Officer
of Meridian Interstate Bancorp, Inc. and East Boston Savings
Bank, joined us in March 2009. Previously, Ms. Jackson was
Chief Financial Officer for Hingham Institution for Savings for
14 years. Age 53.
Mark L. Abbate, Senior Vice President, Treasurer and
Chief Financial Officer of Meridian Interstate Bancorp, Inc. and
East Boston Savings Bank, joined us in January 2010. From
December
15
2007 through July 2009, Mr. Abbate was Executive Vice
President and Chief Financial Officer of Service Bancorp, Inc.
and Strata Bank of Franklin, Massachusetts. From March 2006
through December 2007, Mr. Abbate was a consultant based in
Boston providing project consulting leadership to financial
institutions in need of finance, accounting and risk management
support. Age 55.
John Migliozzi, Executive Vice President of East Boston
Savings Bank, joined us in 1998. Mr. Migliozzi began his
career with us as a Commercial Lender. Age 53.
Executive
Compensation
Compensation
Discussion and Analysis
Our Compensation Philosophy. Our compensation
philosophy starts from the premise that the success of Meridian
Interstate Bancorp and East Boston Savings Bank depends, in
large part, on the dedication and commitment of the people we
place in key operating positions to drive our business strategy.
We strive to provide our management team with incentives tied to
the successful implementation of our corporate objectives. We
also recognize that we operate in a competitive environment for
talent. Therefore, our approach to compensation considers the
full range of compensation techniques that enable us to compare
favorably with our peers as we seek to attract and retain key
personnel.
We base our compensation decisions on four basic principles:
|
|
|
|
|
Meeting the Demands of the MarketOur goal is to compensate
our employees at competitive levels in relation to surveyed
averages to position us as the preferred employer among our
peers who provide similar financial services in the regional
market. Base pay and incentive pay for all employees, and
stock-based benefit plans for eligible employees will be
positioned relative to our peers offerings to either meet
or exceed, or in some cases lag, depending on the employment
environment. Base pay at equitable levels is most important in
meeting the market. It is the component of compensation that
most directly affects current and near-term standard of living
and it is the most easily compared between competing job offers.
Our Incentive Compensation Plan is almost equally important as
it focuses rewards based on current year individual and bank
performance.
|
|
|
|
Aligning with StockholdersWe use equity compensation as a
key component of our compensation mix to develop a culture of
ownership among our key personnel and to align their individual
financial interests with the interests of our stockholders.
Long-term incentives such as the 2008 Equity Incentive Plan (the
EIP) and the Employee Stock Ownership Plan (the
ESOP) are important in aligning interests with
stockholders. The ESOP and the EIP place stock in the hands of
employees and executives over the course of time and have become
an increasingly important part of total compensation.
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Driving PerformanceWe will structure compensation around
the attainment of company-wide, business unit and individual
targets that return positive results to our bottom line. Base
pay rates are subject to annual merit increases that result from
performance evaluations. These performance-based increases are
directly tied to individual contributions to bank performance
and, over time, become a material portion of pay resulting from
accomplishments. Our short-term incentive bonus plan is tied
directly to individuals performance and loan production,
deposit generation, net earnings, cost of funds and efficiency
of enterprise-wide performance. In this
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16
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plan, individuals performance is rewarded, but only if
East Boston Savings Bank performance reaches certain targets
established by the Compensation Committee. The plan itself sets
a target bonus payout if bank performance meets budget
projections. There are also significantly lesser payouts at two
lower tiers of performance and two higher tiers set as stretch
targets. The difference between tiers is determined in order to
draw a clear relationship between bank performance and rewards.
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Reflecting our Business PhilosophyOur approach to
compensation reflects our values and the way we do business in
the communities we serve: compensation rates that are priced to
be valued by the market and prudent for the organizations
strategic well-being. Base pay and the incentive compensation
plan are meant to place a recognizable fair value on employment
at East Boston Savings Bank. Long-term incentives, such as the
EIP, represent longer-term value in the employment relationship.
|
Adjustments to base pay in the form of merit increases are
limited by a cap on increases. The cap is recommended by the
Senior Vice President of Human Resources to the Compensation
Committee of the Board of Directors. It is based on surveyed
projected caps of peers, the current competitive position being
assumed by East Boston Savings Bank for recruitment purposes and
informed by the current Consumer Price IndexAll Urban
Consumers (the CPI-U) as a proxy for inflation and
the unemployment rate. The inflation rate is used as an
additional benchmark when possible to ensure that merit
increases will have meaning to employees in terms of purchasing
power. At times of high inflation it is not necessarily possible
to use this benchmark due to prohibitive cost.
Base pay merit increases are computed using a numerical
performance evaluation score for each individual on a scale from
one to five, calculating that score as a percentage of a
theoretical 5% cap; then applying that percentage to the actual
cap. Caps in recent years have been 3.00% and 3.25%.
The short-term incentive compensation plan, commonly known as
the bonus, is structured for all eligible employees on the basis
of five tiers of overall bank performance. The middle tier
reflects bank performance that meets our budgets for loan
production, deposit generation, net earnings, cost of funds and
efficiency. Each of these five performance elements is assigned
a numerical value for middle tier performance and for two lower
performance tiers and two higher performance tiers. Depending on
how we score regarding these five elements an overall score will
place the level of bonus payout at one of these five levels, or
below the scale entirely, in which case the Board has the
discretion to pay a bonus using other criteria. To date the
Board has not been put in this position and so has not exercised
that discretion. This plan has been benchmarked to peers
similar plans using data from the Pearl Meyer &
Partners survey, as explained below.
An individuals performance determines the level of bonus
they can receive within our performance level. An employee who
is rated as satisfactory on his or her performance evaluation
would receive a certain percentage of gross pay in the form of a
bonus. An employee who is rated as less than satisfactory
forfeits the bonus entirely and employees who are rated above
satisfactory receive a higher percentage of pay as bonus.
Base Compensation. The salaries of our
executive and other officers are reviewed at least annually to
assess our competitive position and make any necessary
adjustments. Our goal is to maintain salary levels for our
officers at a level consistent with base pay received by those
in comparable positions with our peers. To further that goal, we
obtain peer group information from a variety of independent
sources. Our primary source is a comprehensive annual
Banking
17
Compensation Survey Report issued by Pearl
Meyer & Partners in conjunction with the Massachusetts
Bankers Association. Its 2010 report contained data from 120
institutions and included a peer group that we use as a
reference: a $1 billion and above asset size peer group
(consisting of 29 institutions).
The $1 billion and above asset size peer group consisted of
the following institutions:
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Bangor Savings Bank (ME)
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Florence Savings Bank
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Bank Rhode Island (RI)
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Greylock Federal Credit Union
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BankNewport (RI)
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HarborOne Credit Union
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Berkshire Bank
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Institution for Savings in Newburyport
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Bristol County Savings Bank
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Middlesex Savings Bank
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Brookline Bank
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Pawtucket Credit Union
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Cambridge Savings Bank
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PeoplesBank
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Cambridge Trust Company
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Rockland Trust Company
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Century Bancorp Inc.
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Salem Five
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Country Bank
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The Cape Cod Five Cents Savings Bank
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Danversbank
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The Washington Trust Company (RI)
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Dedham Institution for Savings
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Wainwright Bank
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Digital Federal Credit Union
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Watertown Savings Bank
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East Boston Savings Bank
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Webster Bank (CT)
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Eastern Bank
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The surveys data on projected pay raise budgets and
adjustments to pay grades are used in our decision-making
process, as well as data on short-term incentives. Some
executive compensation practices are surveyed for this report as
well, while others have been surveyed in the past for a separate
report on executive and board compensation, to which we have
subscribed. This additional survey report, specific to executive
and board compensation, was produced by Clark Consulting. The
latest such report surveyed 107 institutions and included one
peer group that we use as a reference, a $750 million and
above asset size peer group (consisting of 19 institutions). The
peer group was comprised of the following institutions:
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Bank Rhode Island (RI)
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Danvers Savings Bank
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BankNewport (RI)
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Dedham Institution for Savings
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Berkshire Bank
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East Boston Savings Bank
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Bristol County Savings Bank
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Eastern Bank
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Brookline Bancorp
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Middlesex Savings Bank
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Cape Cod Five Cents Savings Bank
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Peoples Bank
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Century Bank
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Plymouth Savings Bank
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Compass Bank for Savings
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Watertown Savings Bank
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Country Bank for Savings
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The Washington Trust Company (RI)
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Credit Union Central Falls (RI)
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The midpoints of our pay grades are compared to those averaged
in the survey, then adjusted for the age of the data and the
surveys forecast of future grade changes.
Individuals compensation was reviewed with the comparable
surveyed position in terms of competitive pay grade and current
rate of pay in relation to the average surveyed
25th,
50th and
75th
percentiles. Ultimately, any individuals rate of pay was
determined with these criteria in mind, but mainly through
performance evaluations and those particulars of the recruitment
process that determined the rate of pay at hire. Rates that may
diverge materially from time to time from survey averages are
typically driven by our particular needs and employment market
trends that may have developed unnoted by the survey.
18
We also evaluate salary levels at the time of promotion or other
change in responsibilities or as a result of commitments we made
when a particular officer was hired. Individual performance and
retention risk are also considered as part of our annual
compensation assessment. Officers are rated on competencies,
such as knowledge and business development but are also rated on
the attainment of mutually agreed upon pre-determined goals and
objectives for each individual officer which are specific to
each calendar-year rating period based on our strategic plan,
and market, performance and regulatory initiatives. Executive
officers are evaluated on the attainment of goals only. These
evaluations are performed at the end of each year and are used
to determine both merit increases to base salary and the
individual performance component of the incentive compensation
plan.
The Compensation Committee used an analysis of sample jobs
salary grade midpoints from the Pearl Meyer & Partners
2010 Banking Compensation Survey to measure the validity of the
banks salary grade structure. That analysis plotted the
average salary grade midpoints of approximately 25 jobs against
the actual salary grade midpoints of those comparable bank jobs
(representing about 30% of the banks jobs). Average
differences were calculated and the Committee found that the
trend line of the differences was immaterial and did not in
itself warrant adjustment of the Banks salary grades. The
committee also took into consideration the Banks
competitive position in recruitment and the change in cost of
living over the previous year as measured by CPI and concluded
not to change the salary grade structure for 2010.
Cash Bonuses under our Incentive Compensation
Plan. The objective of our Incentive Compensation
Plan is to motivate and reward our employees for achieving
specific Company and individual goals that support the strategic
plan. All bonus payments under this plan are determined at the
discretion of the Compensation Committee and no officer or
employee has a right to a bonus under this plan unless the
Compensation Committee has specifically authorized the bonus.
Rewards under this plan represent compensation that must be
earned each year based on performance relative to Company and
individual performance.
All of our named executive officers are eligible to receive an
annual cash bonus under our Incentive Compensation Plan upon the
successful performance of East Boston Savings Bank and the
attainment of individual performance goals. The entire amount of
the bonus is discretionary and is determined by the Compensation
Committee and ratified by the Executive Committee of the Board
of Directors. For 2010, the Compensation Committee determined
the bonus amounts by reviewing East Boston Savings Banks
loan growth, deposit growth, cost of funds, net operating income
and efficiency ratio, as well as the contributions of our named
executive officers to our success. The amounts of the bonuses
paid in 2011 for the year 2010 under this plan are included in
the Summary Compensation Table in the column labeled
Bonus. For 2010, the amount of the incentive cash
bonus payable to a named executive officer could range from 0%
to 50% of a named executive officers salary.
The total bonus pool which may be distributed under the
Incentive Compensation Plan equals 10% of the net operating
income of the Company, unless the Compensation Committee
authorizes a different amount.
19
To determine the amount of the cash bonus payable to our named
executive officers in 2011 for the year 2010, Company goals,
which are defined each year, are first measured by comparing
five Company performance measures with actual results. For 2010,
the Companys performance measures were as follows:
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Weight
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Actual
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Weighted
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Performance Measure
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(%)
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Threshold
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Target
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Maximum
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Results
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Points
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Points
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(Dollars in thousands)
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Net Loan Growth
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25.0
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7.30
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%
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15.57
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%
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22.66
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%
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4.97
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%
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0
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0
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Deposit Growth
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12.5
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4.65
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%
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9.82
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%
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13.48
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%
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11.69
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%
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4
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2
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Cost of Funds
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12.5
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1.73
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%
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1.58
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%
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|
1.49
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%
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1.49
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%
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4
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2
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Net Operating Income
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25.0
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$
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12,739
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$
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17,276
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$
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19,998
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$
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20,755
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5
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5
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|
Efficiency Ratio
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25.0
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74.50
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%
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69.24
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%
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63.98
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%
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65.00
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%
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4
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4
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The Incentive Compensation Plan weights the relative importance
of each of the performance measures and assigns a number of
points (from 1 to 5) to the level of
achievement of each such performance measure. For example, an
executive may achieve five points if the maximum goal is
achieved under a performance measure and no points if the
threshold goal is not achieved. Achievement between threshold
and maximum will result in attainment of one to four points for
the relevant performance measure. For 2010, based on actual
results, five points were achieved under one performance measure
(e.g., net operating income), four points were achieved under
three performance measures (e.g., deposit growth, cost of funds
and efficiency ratio) and no points were achieved for net loan
growth because we did not achieve the threshold level of
performance. The points achieved were then adjusted based on the
relative weight given to the performance measure and the
weighted points were multiplied by 5 in order to
determine the percentage achievement of the performance goals.
Based on the above, the Company achieved 65% of the targeted
performance measures. After determining the Company performance,
the Compensation Committee uses a matrix to determine the amount
of the bonus payable to a named executive officer, which is as
follows:
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Amount of Bonus for
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Amount of Bonus for All Other
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Performance Scale
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Richard J. Gavegnano
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Named Executive
Officers
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20
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10%
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6%
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40
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14% 18%
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8% 12%
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60
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|
17% 25%
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11% 15%
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80
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|
25% 35%
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|
14% 20%
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100
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35% 50%
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|
20% 27%
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In 2010, since the Company achieved 65% of the bonus target,
Mr. Gavegnano was eligible to receive a bonus in 2011 equal
to 17% to 25% of his base salary and the other named executive
officers were eligible to receive a bonus equal to 11% to 15% of
their base salary. As described above, all bonuses are subject
to the discretion of the Compensation Committee and the
Compensation Committee may decide to award a bonus that is
higher or lower than suggested in the above tables. The
Compensation Committee considers the executives individual
performance in determining the amount of his or her award.
In 2011, the Compensation Committee awarded bonuses to
Mr. Gavegnano, Ms Jackson, Mr. Merritt,
Mr. Abbate and Mr. Migliozzi in the amounts of
$127,107, $52,293, $50,542, $38,889 and $33,971 respectively.
Long-Term Compensation. We established a
long-term incentive compensation program to deliver competitive
awards to our management team. We use the EIP to reward
outstanding
20
performance with incentives that focus our management team on
the task of creating long-term stockholder value. By increasing
the equity holdings of our management team, we provide them with
a continuing stake in our success. The nature and size of awards
made under the EIP were based on a number of factors, including
regulatory requirements, awards made to individuals holding
comparable positions among our peer group of financial
institutions, internal equity, revenue generation and the tax or
accounting treatment of specific equity compensation techniques.
Role of the Compensation Committee. We have
established a Compensation Committee of Meridian Interstate
Bancorp to develop our executive compensation program and to
monitor the success of the program in achieving the objectives
of our compensation philosophy. The Committee, which consists of
Ms. DiMaria, Ms. Censullo and Mr. Gambardella,
all independent directors, are responsible for the
administration of our compensation programs and policies,
including the administration of our cash- and stock-based
incentive programs. The Committee evaluates the performance of
our Chief Executive Officer and other executive officers and
approves all compensation decisions relating to our executive
officers. Decisions by the Committee with respect to our Chief
Executive Officer and other executive officers are approved by
the full Board of Directors, and our Chief Executive Officer
does not participate in discussions related to his compensation
or the Committees review of any documents specifically
related to his compensation. The Committee operates under the
mandate of a formal charter that establishes a framework for the
fulfillment of its responsibilities.
Role of Management. Our Chief Executive
Officer makes recommendations as to the appropriate mix and
level of compensation for other executive officers to the
Compensation Committee and determines the compensation for
subordinates of executive officers. In making his
recommendations, the Chief Executive Officer considers the
objectives of our compensation philosophy and the range of
compensation programs authorized by the Compensation Committee.
Our Chief Executive Officer will not participate in discussions
related to his compensation or the Committees review of
any documents related to the determination of his compensation,
however.
Peer Group Analysis. In its review of overall
compensation, the Compensation Committee has referred to
information published by Massachusetts Banking Association/Pearl
Meyer and Partners with respect to compensation paid by a peer
group of 119 financial institutions of similar assets size and
geographic location. As a public company, a critical element of
our compensation philosophy and a key determinant of specific
compensation decisions for our management team will be a
comparative analysis of our compensation mix and levels relative
to a peer group of publicly-traded banks and thrifts. We firmly
believe that the cornerstone of our compensation program is the
maintenance of a competitive compensation program relative to
the companies with whom we compete for talent. The peer group
will reflect consideration of several factors, including
geographic location, size, operating characteristics, and
financial performance.
Allocation Among Compensation
Components. Under our present structure, base
salary has represented the largest component of compensation for
our executive officers. As a public company, we expect that the
mix of base salary, bonus and long-term cash and equity
compensation will vary, depending upon the role of the
individual officer in the organization. In allocating
compensation among these elements, we believe that the
compensation of our most senior levels of management should
become predominately performance-based, while lower levels of
management should receive a greater portion of their
compensation in base salary.
Severance and Change in Control Benefits. We
have entered into employment agreements with Mr. Gavegnano,
Ms. Jackson, Mr. Merritt and a change in control
agreement with Mr. Abbate on terms consistent with the
compensation packages for the senior management among our peers
and a severance plan for certain other employees. The severance
payments under these agreements, which are contingent on the
occurrence of certain termination events, are intended to
provide the
21
executive with a sense of security in making the commitment to
dedicate his or her professional career to the success of our
company.
Tax and Accounting Considerations. In
consultation with our advisors, we evaluate the tax and
accounting treatment of each of our compensation programs at the
time of adoption and on an annual basis to ensure that we
understand the financial impact of the program. Our analysis
includes a detailed review of recently adopted and pending
changes in tax and accounting requirements. As part of our
review, we consider modifications
and/or
alternatives to existing programs to take advantage of favorable
changes in the tax or accounting environment or to avoid adverse
consequences. To preserve maximum flexibility in the design and
implementation of our compensation program, we have not adopted
a formal policy that requires all compensation to be tax
deductible. However, to the greatest extent possible, it is our
intent to structure our compensation programs in a tax efficient
manner.
Retirement Benefits; Employee Welfare
Benefits. Currently, our primary retirement savings
vehicle is our defined contribution 401(k) plan, which enables
our employees to supplement their retirement savings with
elective deferral contributions that we match at specified
levels. In connection with our stock offering, East Boston
Savings Bank adopted an employee stock ownership plan for
eligible employees of the Bank. (See Employee Stock
Ownership Plan.) In addition to retirement programs,
we provide our employees with coverage under medical, life
insurance and disability plans on terms consistent with industry
practice. We also entered into supplemental executive retirement
agreements with certain officers to provide them with
supplemental benefits. (See Pension Benefits.)
Director Compensation. Our outside directors
are compensated with meeting fees. We do not pay any annual or
other retainer fees. Directors who are also employees of East
Boston Savings Bank do not receive additional compensation for
service on the board. The level and mix of director compensation
is revised by the Compensation Committee on a periodic basis to
ensure consistency with the objectives of our overall
compensation philosophy. We also entered into supplemental
executive retirement agreements with certain directors to
provide them with supplemental benefits (See Directors
Compensation.) We expect that, in the future, our
review of director compensation will also consider the increased
responsibility and liability of directors at publicly traded
companies due to changes in the regulatory environment and the
heightened scrutiny of corporate governance practices.
Stock Compensation Grant and Award
Practices. As a public company, we expect that our
Compensation Committees grant-making process will be
independent of any consideration of the timing of the release of
material nonpublic information, including with respect to the
determination of grant dates or stock option exercise prices.
Similarly, we expect that the release of material nonpublic
information will never be timed with the purpose or intent to
affect the value of executive compensation.
Stock Ownership Requirements. As a mutual
holding company without public stockholders, we had not adopted
formal stock ownership requirements for our senior officers and
board members. We expect that the Compensation Committee will
review prevailing practices among peer companies with respect to
stock ownership guidelines and determine whether such guidelines
are appropriate.
The Compensation Commitee believes that any risks arising from
our compensation policies and practices for our employees are
not reasonably likely to have a material adverse effect on
Meridian Interstate Bancorp, Inc. and East Bost Savings Bank. In
addition, the Compensation Committee believes that the mix and
design of the elements of our executive compensation does not
encourage management to assume excessive risks. In its review,
the Compensation Committee concluded that significant weighting
towards long-term incentive compensation discourges short-
22
term risk taking and that the significant number of shares of
stock of Meridian Interstate Bancorp, Inc. owned by the named
executive officers discourages excessive risk taking.
Compensation
for the Named Executive Officers in 2010.
Chief Executive Officer Compensation. In
determining compensation for Mr. Gavegnano, our Chief
Executive Officer, the Compensation Committee reviewed salaries
and pay grades of similar executives at peer institutions as
compiled by an industry standard survey. Using this data the
Committee determined an equitable base salary for
Mr. Gavegnano of $425,000 annually.
Compensation for our Other Named Executive
Officers. In determining base salary for
Ms. Jackson and Messrs. Merritt, Abbate and Migliozzi,
the Compensation Committee reviewed salaries and pay grades of
similar executives at peer institutions as compiled by the
survey mentioned above. Using this data, the Committee
determined equitable pay scales within which annual merit
increases would be made. The Committee then determined the merit
increases based on written analyses of the accomplishments and
attainment of goals for each executive during the preceding
year. These increases took effect on January 1, 2010, and
resulted in annual base salaries of $291,413 for Ms Jackson and
$177,313 for Mr. Migliozzi. Mr. Abbate was hired at
the beginning of 2010 at a market rate of $200,000 and
Mr. Merritts base salary is $281,655.
Three factors affect the salaries of our named executives:
salary negotiated at hire or appointment, annual merit increases
and market adjustments. Mr. Gavegnanos salary was
adjusted to a market competitive rate based on the Pearl
Meyer & Partners survey. The $425,000 salary equated
to the 20th percentile of the average base salary of the Chief
Executive Officers within our peer group according to the 2009
Pearl Meyer & Partners survey. Ms. Jacksons
salary was adjusted for merit for 2010 and is within the
3rd quartile of average base salaries for Chief Operating
Officers in our peer group in the Pearl Meyer &
Partners 2009 survey. Mr. Migliozzi was promoted to Senior
Vice President and Senior Loan Officer in 2009. With that
promotion his salary was increased to fall within the surveyed
second quartile for his position and was then adjusted for merit
for 2010.
Incentive Compensation/Bonus. Bonus amounts
were paid to the named executives according to the terms of the
Incentive Compensation Plan. The plan places greater emphasis on
overall bank performance than on individual performance and
resulted in payments in 2010 for the year 2009 that were 67% of
surveyed average for Mr. Gavegnano, 57% of average for Ms
Jackson, and 66% of average for Mr. Migliozzi.
Messrs. Abbate and Merritt did not receive a bonus in 2010
for the year 2009 since they were not yet eligible due to their
date of hire. Surveyed averages are not yet available for
comparison to the bonus amounts paid in 2011 for 2010. The
particulars of this plan are discussed in greater detail
elsewhere in this document.
23
Summary
Compensation Table
The following information is furnished for all individuals
serving as the principal executive officer and principal
financial officer of Meridian Interstate Bancorp or its
subsidiaries during the year ended December 31, 2010 and
the three other most highly compensated executive officers of
Meridian Interstate Bancorp or its subsidiaries whose total
compensation for 2010 exceeded $100,000.
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Change in
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Pension Value
|
|
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|
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|
|
|
|
|
|
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and Non-
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Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
Name and Principal
|
|
|
|
|
|
|
|
Awards ($)
|
|
Awards ($)
|
|
Compensation
|
|
Compensation
|
|
|
Position
|
|
Year
|
|
Salary ($)
|
|
Bonus ($)
|
|
(1)
|
|
(1)
|
|
($)(2)
|
|
($)(3)
|
|
Total ($)
|
Richard J. Gavegnano,
|
|
|
2010
|
|
|
$
|
425,000
|
|
|
$
|
127,107
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
675,450
|
|
|
$
|
43,669
|
|
|
$
|
1,271,226
|
|
Chairman of the Board and
|
|
|
2009
|
|
|
$
|
350,000
|
|
|
$
|
87,500
|
|
|
$
|
314,650
|
|
|
$
|
265,500
|
|
|
$
|
260,604
|
|
|
$
|
34,052
|
|
|
$
|
1,312,306
|
|
Chief Executive Officer (4)
|
|
|
2008
|
|
|
$
|
311,400
|
|
|
$
|
48,539
|
|
|
$
|
584,350
|
|
|
$
|
619,500
|
|
|
$
|
227,515
|
|
|
$
|
117,621
|
|
|
$
|
1,908,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deborah J. Jackson,
|
|
|
2010
|
|
|
$
|
291,413
|
|
|
$
|
52,293
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
148,470
|
|
|
$
|
492,176
|
|
President and Chief
|
|
|
2009
|
|
|
$
|
233,481
|
|
|
$
|
36,171
|
|
|
$
|
130,650
|
|
|
$
|
223,500
|
|
|
$
|
|
|
|
$
|
117,858
|
|
|
$
|
741,660
|
|
Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward J. Merritt,
|
|
|
2010
|
|
|
$
|
281,655
|
|
|
$
|
50,542
|
|
|
$
|
23,225
|
|
|
$
|
21,900
|
|
|
$
|
|
|
|
$
|
69,904
|
|
|
$
|
447,226
|
|
President, Mt. Washington Bank, a Division of East Boston
Savings Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark L. Abbate,
|
|
|
2010
|
|
|
$
|
200,000
|
|
|
$
|
35,889
|
|
|
$
|
55,740
|
|
|
$
|
76,650
|
|
|
$
|
|
|
|
$
|
10,528
|
|
|
$
|
378,807
|
|
Senior Vice President, Treasurer and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Migliozzi
|
|
|
2010
|
|
|
$
|
177,313
|
|
|
$
|
33,971
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
28,840
|
|
|
$
|
240,124
|
|
Executive Vice
|
|
|
2009
|
|
|
$
|
172,500
|
|
|
$
|
25,875
|
|
|
$
|
26,970
|
|
|
$
|
17,700
|
|
|
$
|
|
|
|
$
|
28,828
|
|
|
$
|
271,873
|
|
President
|
|
|
2008
|
|
|
$
|
151,364
|
|
|
$
|
14,746
|
|
|
$
|
35,960
|
|
|
$
|
35,400
|
|
|
$
|
|
|
|
$
|
78,458
|
|
|
$
|
315,928
|
|
|
|
|
(1)
|
|
The amounts shown reflect the
grant date fair value of restricted stock awards or stock
options, as applicable, computed in accordance with FASB ASC
Topic 718. Refer to the Companys
Form 10-K
filed on March 16, 2011 with the Securities and Exchange
Commission for the assumptions relating to these awards.
|
(2)
|
|
For each year, represents the
actuarial change in pension value in the executives
account from December 31 of the prior year to December 31 of the
reported year under a Supplemental Executive Retirement
Agreement.
|
(3)
|
|
For 2010, employer contributions
under the company match and safe harbor provision of the 401(k)
Plan were $12,427, $14,700, $0, $11,878, and $12,126 for
Messrs. Gavegnano, Merritt, Abbate, Migliozzi and
Ms. Jackson, respectively. The amount of premiums paid for
long term care insurance was $1,441 for Mr. Gavegnano. For
2010, employer contributions under the ESOP were $16,919, $0,
$0, $16,273, and $16,212 for Messrs. Gavegnano, Merritt,
Abbate, Migliozzi and Ms Jackson, respectively. For 2010,
imputed income from life insurance provided by the bank was
$12,882, $2,211, $1,528, $689, and $2,274 for
Messrs. Gavegnano, Merritt, Abbate, Migliozzi and Ms
Jackson, respectively. For Ms. Jackson, for 2010 the
Company contributed $117,858 under her Supplemental Executive
Retirement Agreement and for Mr. Merritt the Company
contributed $50,000 under his Supplemental Executive Retirement
Agreement. Mr. Abbate was paid $9,000 in temporary housing
reimbursement. Mr. Merritt received $2,993 in imputed
income for the personal use of a car leased by the bank.
|
(4)
|
|
In 2008, Mr. Gavegnano was
appointed Chief Executive Officer and after such appointment was
not paid any fees relating to his service as Chairman of the
Board, and as a member on the board of directors of East Boston
Savings Bank, board of trustees of Meridian Financial Services,
committees of each board and as a Corporator of Meridian
Financial Services.
|
24
Employment
Agreements
East Boston Savings Bank has entered into substantially similar
employment agreements with Richard J. Gavegnano, its Chairman of
the Board of Directors and Chief Executive Officer, and Deborah
J. Jackson, its President and Chief Operating Officer, and
Edward J. Merritt, President of the Mt. Washington Division
of East Boston Savings Bank.
Each employment agreement provides for a two-year term. The term
of each employment agreement extends on a daily basis (except
Mr. Merritts agreement extends on an annual basis),
unless written notice of non-renewal is given by the Board of
Directors of East Boston Savings Bank or by the executive. The
employment agreements provide for a base salary for
Mr. Gavegnano of $350,000, $285,000 for Ms. Jackson,
and $225,000 for Mr. Merritt. In addition to a base salary,
each employment agreement provides for, among other things,
participation in our annual incentive plan and certain employee
benefits plans. Each employment agreement provides for
termination by East Boston Savings Bank for cause, as defined in
the agreement, at any time. If East Boston Savings Bank
terminates the executives employment for reasons other
than for cause, or if the executive resigns from East Boston
Savings Bank for good reason (as defined in the employment
agreement), then the executive would receive a lump sum
severance payment equal to the sum of (i) two times current
annual base salary (Mr. Merritt is also entitled to two
times the average cash bonuses earned in the three years
preceding the year of termination), and (ii) the value of
24 months of health insurance premiums. In that case,
Mr. Gavegnano would receive a severance benefit equal to
$710,090 Ms. Jackson would receive a severance benefit
equal to $597,110, and Mr. Merritt would receive a
severance benefit equal to $573,287. Upon termination of the
executive for reasons other than a change in control (see
below), the executive must adhere to a two year non-competition
restriction.
Under each employment agreement, if voluntary or involuntary
termination follows a change in control of the Bank or Meridian
Interstate Bancorp, the executive would receive a severance
payment equal to 2.99 times the executives base
amount, less any other parachute payments, as
those terms are defined under Section 280G of the Internal
Revenue Code. In the event the executive terminates employment
in connection with a change in control, the maximum severance
payment Mr. Gavegnano, Ms. Jackson, and
Mr. Merritt would receive (based on taxable compensation
earned) equals $1,060,703 $861,737, and $832,179 respectively.
Generally, an executives base amount equals
the average of the taxable compensation paid during the
preceding five taxable years. In the event severance payments to
the executive include an excess parachute payment as
defined in Section 280G of the Internal Revenue Code, such
payment will be cutback by the minimum dollar amount necessary
to avoid this result.
Change in
Control Agreement
East Boston Savings Bank has entered into a change in control
agreement with Mark Abbate, its Senior Vice President, Treasurer
and Chief Financial Officer. The change in control agreement
provides that upon an involuntary termination, other than for
cause, or voluntary termination for good reason (as defined in
the agreement) following a change in control of Meridian
Interstate Bancorp or East Boston Savings Bank, the executive
would be entitled to a cash severance payment equal to two times
his base salary and the highest level of cash bonus earned in
any one of the three calendar years preceding the year of
termination. In addition, the executive would be entitled to
receive non-taxable medical and dental coverage substantially
identical to the coverage maintained for the executive prior to
his termination of employment for 24 months following his
termination of employment. In the event severance payments to
the executive include an excess parachute payment as
defined in Section 280G of the Internal Revenue Code, such
payment will be cutback by the minimum dollar amount necessary
to avoid this result. In the event the executive terminates
employment in connection with a change in control, the maximum
severance payment Mr. Abbate would receive (based on
taxable compensation earned) equals $409,977.
25
Benefit
Plans
Employee Stock Ownership Plan. In connection
with Meridian Interstate Bancorps stock offering, East
Boston Savings Bank adopted an employee stock ownership plan for
eligible employees of East Boston Savings Bank. Eligible
employees who had attained age 18 and were employed by East
Boston Savings Bank or Meridian Interstate Bancorp at the
closing date of the offering (January 22, 2008), and had
completed three months of service, began participating in the
plan as of January 1, 2008 (the effective date of the
plan). Thereafter, new employees of East Boston Savings Bank and
Meridian Interstate Bancorp who have attained age 18 and
completed three months of service during a continuous
12-month
period will be eligible to participate in the employee stock
ownership plan as of the first entry date following completion
of the plans eligibility requirements.
East Boston Savings Bank engaged an independent third party
trustee to purchase, on behalf of the employee stock ownership
plan, 828,000 shares of common stock, representing 8.0% of
the total number of shares of Meridian Interstate Bancorp sold
in the stock offering and contributed to the charitable
foundation. The purchase was funded by a subsidiary capitalized
by Meridian Interstate Bancorp. The loan equaled 100% of the
aggregate purchase price of the common stock. The loan to the
employee stock ownership plan will be repaid principally from
East Boston Savings Banks contributions to the employee
stock ownership plan and dividends payable on common stock held
by the employee stock ownership plan over the
20-year term
of the loan. The interest rate for the employee stock ownership
plan loan is 6.5%.
Shares purchased by the employee stock ownership plan with the
proceeds of the employee stock ownership plan loan will be held
in a suspense account and released on a pro rata basis as the
loan is repaid. Discretionary contributions to the employee
stock ownership plan and shares released from the suspense
account will be allocated among participants on the basis of
each participants proportional share of compensation.
Participants vest 100% in the benefits allocated under the
employee stock ownership plan upon completing three years of
service with East Boston Savings Bank or its affiliates. A
participant will become fully vested at retirement, upon death
or disability, upon a change in control or upon termination of
the employee stock ownership plan. Benefits are generally
distributable upon a participants separation from service.
Any unvested shares that are forfeited upon a participants
termination of employment will be reallocated among the
remaining plan participants.
Plan participants will be entitled to direct the plan trustee on
how to vote common stock credited to their accounts. The trustee
will vote allocated shares held in the employee stock ownership
plan as instructed by the plan participants and unallocated
shares and allocated shares for which no instructions are
received will be voted in the same ratio on any matter as those
shares for which instructions are given, subject to the
fiduciary responsibilities of the trustee.
Under applicable accounting requirements, compensation expenses
for a leveraged employee stock ownership plan is recorded at the
fair market value of the employee stock ownership plan shares
when committed to be released to participants accounts.
The employee stock ownership plan must meet certain requirements
of the Internal Revenue Code and the Employment Retirement
Income Security Act of 1974, as amended. East Boston Savings
Bank has requested a favorable determination letter from the
Internal Revenue Service regarding the tax-qualified status of
the employee stock ownership plan.
26
Grants of
Plan-Based
Awards.
Below are the details of awards granted to the Named Executive
Officers during 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Option
|
|
|
|
|
|
|
|
|
|
|
Awards: Number
|
|
|
|
|
|
|
|
|
All Other Stock
|
|
of Securities
|
|
|
|
Grant Date Fair
|
|
|
|
|
Awards: Number
|
|
Underlying
|
|
|
|
Value of Stock and
|
|
|
|
|
of Shares of Stock
|
|
Options
|
|
Exercise Price of
|
|
Option Awards
|
Name
|
|
Grant Date
|
|
(#)
|
|
(#)
|
|
Option Awards
|
|
(2)
|
|
Edward J. Merritt
|
|
1/26/2010
|
|
2,500 (1)
|
|
5,000 (1)
|
|
$9.29
|
|
$45,125
|
Mark L. Abbate
|
|
1/26/2010
|
|
6,000 (1)
|
|
17,500 (1)
|
|
$9.29
|
|
$132,390
|
|
|
|
(1)
|
|
The awards vest at a rate of 20%
per year, commencing on January 26, 2011.
|
(2)
|
|
The amounts reflect the full grant
date fair value of the awards calculated in accordance with FASB
ASC No. 718. All awards were granted pursuant to the 2008
Equity Incentive Plan.
|
Outstanding
Equity Awards at Fiscal Year-End
The following table provides information concerning unexercised
options and stock awards that have not vested as of
December 31, 2010 for each Named Executive Officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Number of Shares
|
|
Market Value of
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
or Units of Stock
|
|
Shares or Units of
|
|
|
Options
|
|
Options
|
|
Exercise
|
|
Option
|
|
That Have Not
|
|
Stock That Have
|
|
|
Exercisable
|
|
Unexercisable
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Not Vested
|
Name
|
|
(#)
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)
|
|
($)(5)
|
|
Richard J. Gavegnano
|
|
|
70,000
|
|
|
|
105,000 (1
|
)
|
|
$
|
9.50
|
|
|
|
10/13/2018
|
|
|
|
39,000 (1
|
)
|
|
$
|
459,810
|
|
|
|
|
15,000
|
|
|
|
60,000 (2
|
)
|
|
$
|
8.99
|
|
|
|
10/27/2019
|
|
|
|
28,000 (2
|
)
|
|
$
|
330,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deborah J. Jackson
|
|
|
10,000
|
|
|
|
40,000 (3
|
)
|
|
$
|
8.57
|
|
|
|
03/27/2019
|
|
|
|
8,000 (3
|
)
|
|
$
|
94,320
|
|
|
|
|
5,000
|
|
|
|
20,000 (2
|
)
|
|
$
|
8.99
|
|
|
|
10/27/2019
|
|
|
|
4,000 (2
|
)
|
|
$
|
47,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward J. Merritt
|
|
|
|
|
|
|
5,000 (4
|
)
|
|
$
|
9.29
|
|
|
|
01/26/2020
|
|
|
|
2,500 (4
|
)
|
|
$
|
29,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark L. Abbate
|
|
|
|
|
|
|
17,500 (4
|
)
|
|
$
|
9.29
|
|
|
|
01/26/2020
|
|
|
|
6,000 (4
|
)
|
|
$
|
70,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Migliozzi
|
|
|
4,000
|
|
|
|
6,000 (1
|
)
|
|
$
|
9.50
|
|
|
|
10/13/2018
|
|
|
|
2,400 (1
|
)
|
|
$
|
28,296
|
|
|
|
|
1,000
|
|
|
|
4,000 (2
|
)
|
|
$
|
8.99
|
|
|
|
10/27/2019
|
|
|
|
2,400 (2
|
)
|
|
$
|
28,296
|
|
|
|
|
(1)
|
|
Awards vest at a rate of 20% per
year on October 13, 2010, 2011, 2012 and 2013.
|
(2)
|
|
Awards vest at a rate of 20% per
year on October 27, 2010, 2011, 2012, 2013 and 2014.
|
(3)
|
|
Awards vest at a rate of 20% per
year on March 27, 2010, 2011, 2012, 2013 and 2014.
|
(4)
|
|
Awards vest at a rate of 20% per
year on January 26, 2011, 2012, 2013, 2014 and 2015.
|
(5)
|
|
Based on the $11.79 per share
trading price of our common stock on December 31, 2010.
|
27
Option
Exercises and Stock Vested
The following table sets forth information regarding the value
realized by our Named Executive Officers on option award
exercise and stock awards vested during the year ended
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
Acquired on
|
|
Value Realized on
|
|
Number of Shares
|
|
Value Realized on
|
Name
|
|
Exercise
|
|
Exercise
|
|
Acquired on Vesting
|
|
Vesting
|
|
Richard J. Gavegnano
|
|
|
|
|
|
$
|
|
|
|
|
20,000
|
|
|
$
|
214,170
|
|
Deborah J. Jackson
|
|
|
|
|
|
$
|
|
|
|
|
3,000
|
|
|
$
|
31,670
|
|
Edward J. Merritt
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Mark L. Abbate
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
John Migliozzi
|
|
|
|
|
|
$
|
|
|
|
|
1,400
|
|
|
$
|
14,982
|
|
Equity
Award Plan
The 2008 Equity Incentive Plan authorizes the issuance or
delivery to participants of up to 1,449,000 shares of our
common stock pursuant to grants of restricted stock awards,
incentive stock options, non-qualified stock options and stock
appreciation rights; provided, however, that no more than
1,035,000 shares may be issued or delivered in the
aggregate pursuant to the exercise of stock options or stock
appreciation rights, and no more than 414,000 shares may be
issued or delivered pursuant to restricted stock awards. Upon a
participants termination of service for reasons of death
or disability, or in the event of a change in control, the
participant would become fully vested in all equity awards under
the plan. As of December 31, 2010, upon death or
disability, Messrs. Gavegnano, Merritt, Abbate, Migliozzi
and Ms. Jackson would be entitled to the acceleration of
their unvested restricted stock awards in the amount of
$789,930, $29,475, $70,740, $56,592 and $141,480, respectively.
Pension
Benefits
The following table provides information with respect to
supplemental executive retirement plans that are not defined
contribution plans and that provide for payments or benefits in
connection with the retirement of a Named Executive Officer as
of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Present
|
|
|
|
|
|
|
Years
|
|
Value of
|
|
|
|
|
|
|
Credited
|
|
Accumulated
|
|
Payments during
|
Name
|
|
Plan Name
|
|
Service
|
|
Benefit (1)
|
|
Last Fiscal Year
|
|
Richard J. Gavegnano
|
|
Supplemental Executive Retirement Agreement
|
|
|
4.5
|
|
|
$
|
1,082,161
|
|
|
|
|
|
|
|
|
(1)
|
|
Refer to Footnote 13 of the
audited financial statements filed as part of the Companys
Form 10-K
filed on March 16, 2011 with the Securities and Exchange
Commission for material assumptions relating to the Plan.
|
Supplemental Executive Retirement
Agreement. East Boston Savings Bank has entered
into a supplemental executive retirement agreement with
Mr. Gavegnano.
Under Mr. Gavegnanos agreement, if the executive
terminates employment for any reason other than for cause, he
will receive an annual benefit (paid monthly) equal to 70% of
his final average compensation. For purposes of the agreement,
final average compensation equals the three
28
years base salary that results in the highest average. The
annual benefit is generally payable in the form of an unreduced
life annuity with a 50% spousal survivor annuity. However, the
executive is permitted to elect an actuarial equivalent optional
form of benefit that is offered under the SBERA Plan, including
a single lump sum distribution, provided that the election is in
compliance with Internal Revenue Code Section 409A.
Mr. Gavegnano will become 100% vested in the annual benefit
upon the completion of eight years of service (12.5% per year),
which will occur when he attains the age of 68. The executive
will become fully vested in his annual benefit immediately upon
his death prior to his termination, a change in control of
Meridian Interstate Bancorp or East Boston Savings Bank, or upon
any involuntary termination other than for cause by Meridian
Interstate Bancorp or East Boston Savings Bank.
Upon death, the executives beneficiary is entitled to the
executives annual benefit, which will be calculated as if
the executive had retired the day before his death. In the event
the executive becomes disabled, he will be entitled to his
annual benefit, which will be calculated as if the executive had
terminated his employment on the date of his disability with
eight years of service.
As of December 31, 2010, Mr. Gavegnanos lump sum
benefit under his agreement is $3,212,704 upon his voluntary or
involuntary termination, disability, death, or in the event of a
change in control of Meridian Interstate Bancorp or East Boston
Savings Bank followed by his termination of employment.
Non-qualified
Deferred Compensation
The following table provides information for each nonqualified
deferred compensation plan in which the named executive officers
participated in 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
|
|
|
Contributions in Last
|
|
Earnings in
|
|
Balance at Last
|
Name
|
|
Plan Name
|
|
Fiscal Year ($)(1)
|
|
2010 ($)
|
|
Fiscal Year
End ($)
|
|
Deborah J. Jackson
|
|
Supplemental Executive Retirement Agreement
|
|
$117,858
|
|
|
|
$235,716
|
Edward J. Merritt
|
|
Supplemental Executive Retirement Agreement
|
|
$50,000
|
|
|
|
$766,921
|
|
|
|
(1)
|
|
Contributions included in the
Registrant Contributions in Last Fiscal Year column
are included as compensation for the individuals in the Summary
Compensation Table.
|
(2)
|
|
Amounts included in the
Aggregate Balance at Last Fiscal Year End have been
reported as compensation for the individuals for years in which
their summary compensation has been reported.
|
East Boston Savings Bank has entered into substantially similar
supplemental executive retirement agreements with Deborah J.
Jackson and Edward J. Merritt. Under the terms of each
agreement, East Boston Savings Bank shall credit an accumulation
account on behalf of Ms. Jackson and Mr. Merritt with
$117,858 and $50,000, respectively, as of each
December 31st, provided that all amounts credited to the
account shall not exceed $1,650,000 for Ms. Jackson and
$750,000 for Mr. Merritt. Upon a termination of employment,
death or disability, the accumulation account shall be paid in a
single lump sum payment to Ms. Jackson or her beneficiary,
as applicable, and in installments to Mr. Merritt or his
beneficiary, as applicable. As of December 31, 2010,
Ms. Jackson would have received a lump sum payment in the
amount of $235,716, and Mr. Merritt would have received
installment payments worth a total of $766,921, if the
executives employment had terminated due to death,
disability or if the executive voluntarily resigned. In the
event the executives employment is terminated by East
Boston Savings Bank without cause or by the
29
executive for good reason within two years (one year for
Mr. Merritt) of a change in control (as defined in the
agreement), an amount equal to $1,650,000 shall be paid to
Ms. Jackson and $1,466,921 shall be paid to
Mr. Merritt, in a single lump sum.
Director
Compensation
The following table provides the compensation received by
individuals who served as
non-employee
directors of Meridian Interstate Bancorp during the 2010 fiscal
year.
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|
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|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
Option
|
|
|
Nonqualified
|
|
|
All Other
|
|
|
|
|
|
|
or Paid in
|
|
|
Stock Awards
|
|
|
Awards
|
|
|
Deferred
|
|
|
Compensation
|
|
|
|
|
Name
|
|
Cash ($)
|
|
|
($)(1)
|
|
|
($)(1)
|
|
|
($)(7)
|
|
|
($)(6)
|
|
|
Total ($)(8)
|
|
|
Vincent D. Basile (2)
|
|
$
|
58,650
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
53,500
|
|
|
$
|
5,718
|
|
|
$
|
117,868
|
|
Marilyn A. Censullo (2)
|
|
|
37,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,300
|
|
Robert D. DeBlosi (3)
|
|
|
19,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
901
|
|
|
|
20,201
|
|
Anna R. DiMaria (2)
|
|
|
21,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,500
|
|
Richard F. Fernandez (2)
|
|
|
41,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,900
|
|
Domenic A. Gambardella (4)
|
|
|
53,800
|
|
|
|
|
|
|
|
|
|
|
|
13,800
|
|
|
|
3,394
|
|
|
|
70,994
|
|
Thomas J. Gunning (5)
|
|
|
10,900
|
|
|
|
9,290
|
|
|
|
8,760
|
|
|
|
|
|
|
|
|
|
|
|
28,950
|
|
Carl A. LaGreca (6)
|
|
|
31,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,400
|
|
Edward L. Lynch (2)
|
|
|
14,200
|
|
|
|
|
|
|
|
|
|
|
|
23,300
|
|
|
|
2,764
|
|
|
|
40,264
|
|
Gregory F. Natalucci (2)
|
|
|
33,400
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
3,125
|
|
|
|
49,525
|
|
James G. Sartori (4)
|
|
|
53,800
|
|
|
|
|
|
|
|
|
|
|
|
36,600
|
|
|
|
3,590
|
|
|
|
93,990
|
|
Paul T. Sullivan (4)
|
|
|
42,200
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
|
3,451
|
|
|
|
59,651
|
|
|
|
|
(1)
|
|
The amounts include the full grant
date fair value of the awards calculated in accordance with FASB
ASC No. 718. Refer to the Companys
Form 10-K
filed with the SEC for the assumptions relating to the awards.
In addition, the number of shares of restricted stock and stock
options granted during the 2010 fiscal year are as follows:
1,000 shares of restricted stock and 2,000 options awarded
to Mr. Gunning on January 26, 2010. All awards vest at
a rate of 20% per year, commencing on January 26, 2011.
|
(2)
|
|
At December 31, 2010, each of
Mr. Basile, Ms. Censullo, Ms. DiMaria,
Mr. Fernandez, Mr. Lynch and Mr. Natalucci had
4,900 unvested shares of restricted stock and held 15,000 stock
options with an exercise price of $9.50 per share and 5,000
stock options with an exercise price of $8.99 per share, except
Mr. Basile had 10,000 stock options with an exercise price
of $8.99 per share.
|
(3)
|
|
At December 31, 2010,
Mr. DeBlosi had 2,600 unvested shares of restricted stock
and held 25,000 stock options with an exercise price of $9.50
per share and 10,000 stock options with an exercise price of
$8.99 per share.
|
(4)
|
|
At December 31, 2010, each of
Messrs. Gambardella, Sartori and Sullivan had 5,500
unvested shares of restricted stock and held 7,500 stock options
with an exercise price of $9.50 per share and 2,000 stock
options with an exercise price of $8.99 per share.
|
(5)
|
|
At December 31, 2010,
Mr. Gunning had 1,000 unvested shares of restricted stock
and held 2,000 stock options with an exercise price of $9.29 per
share.
|
(6)
|
|
At December 31, 2010,
Mr. LaGreca had 4,000 unvested shares of restricted stock
and held 5,000 stock options with an exercise price of $8.99 per
share.
|
(7)
|
|
Represents the actuarial change in
pension value in the directors accounts from
January 1, 2010 to December 31, 2010 under each
directors Supplemental Retirement Agreement.
|
(8)
|
|
Represents premiums paid for
long-term care insurance and life insurance, respectively, as
follows: $5,185 and $533 for Mr. Basile; $0 and $901 for
Mr. DeBlosi; $3,118 and $276 for Mr. Gambardella;
$2,286 and $478 for Mr. Lynch; $2,850 and $276 for
Mr. Natalucci; $3,206 and $384 for Mr. Sartori; $3,265
and $276 for Mr. Sullivan.
|
30
Supplemental Retirement Agreements. East
Boston Savings Bank has entered into supplemental retirement
agreements with each of Messrs. Basile, Gambardella, Lynch,
Natalucci, Sartori and Sullivan. Under the agreements, if the
director terminates service for any reason, the director will
receive an annual benefit equal to 50% of his final average
compensation. For purposes of the agreements, a directors
final average compensation equals the average of the
directors annual fees from East Boston Savings Bank and
Meridian Financial Services, Inc. for the three years during
which the directors annual fees were the highest. The
annual benefit is generally payable in the form of an unreduced
life annuity with a 50% spousal survivor annuity, which will
commence on the first day of the first month following the
directors termination of service. However, the director is
permitted to elect an actuarial equivalent optional form of
benefit, which may be a lump sum distribution or a life annuity
with 120 monthly payments guaranteed, provided that the
election is in compliance with Internal Revenue Code
Section 409A.
Notwithstanding the foregoing, the directors annual
benefit will be reduced by 2.5% for each year that he terminates
service prior to reaching age 72. Upon death, the director
is entitled to the annual benefit, which will be calculated as
if the director had retired the day before his death. In the
event the director becomes disabled, the director will be
entitled to the annual benefit, calculated as if the director
had retired age 72 with 120 months of service.
Meeting Fees for Non-Employee Directors. The
following table sets forth the applicable fees that will be paid
to our non-employee directors for their service on the boards of
directors, trustees or corporators of Meridian Financial
Services, Incorporated, Meridian Interstate Bancorp and East
Boston Savings Bank during 2010. The meeting fee for the East
Boston Savings Bank is paid only to the two independent
directors of the Bank who are not directors of the Company or
Meridian Financial Services, Incorporated, who serve as required
under Massachusetts state law.
|
|
|
|
|
Meridian Interstate
Bancorp
|
|
|
|
|
Board meeting fee
|
|
$
|
700
|
|
Meeting fee for Audit Committee member
|
|
$
|
1,500
|
|
Meeting fee for Audit Committee Chairman
|
|
$
|
2,000
|
|
Meeting fee for Audit Committee Clerk
|
|
$
|
1,800
|
|
Meeting fee for Strategic Planning Committee member
|
|
$
|
700
|
|
Meeting fees for all members
|
|
$
|
700
|
|
|
|
|
|
|
East Boston Savings Bank
|
|
|
|
|
Monthly fee for Executive Committee members
|
|
$
|
3,000
|
|
Meeting fee for independent non-holding company members
|
|
$
|
700
|
|
Meeting fee for one CRA member
|
|
$
|
600
|
|
Monthly fee for one visiting trustee
|
|
$
|
600
|
|
|
|
|
|
|
Meridian Financial Services
|
|
|
|
|
Trustee meeting fee
|
|
$
|
600
|
|
Annual Corporator fee $250
|
|
$
|
250
|
|
31
Compensation
Committee Report
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis that is required by the
rules established by the Securities and Exchange Commission.
Based on such review and discussions, the Compensation Committee
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this proxy statement. See
Compensation Discussion and Analysis.
Compensation
Committee of the Board of Directors of
Meridian Interstate Bancorp, Inc.
Domenic
A. Gambardella, Chair
Marilyn A. Censullo
Anna R. DiMaria
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Companys executive officers and directors,
and persons who own more than 10% of any registered class of the
Companys equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange
Commission. Executive officers, directors and greater than 10%
stockholders are required by regulation to furnish the Company
with copies of all Section 16(a) reports they file.
Based solely on the Companys review of copies of the
reports it has received and written representations provided to
it from the individuals required to file the reports, with the
exception of Director Gunning, who filed a Form 5 to report
the purchase of shares of common stock, the Company believes
that each of its executive officers and directors has complied
with applicable reporting requirements for transactions in
Meridian Interstate Bancorp common stock during the year ended
December 31, 2010.
Transactions
with Related Persons
The aggregate amount of loans by East Boston Savings Bank to
executive officers, directors and trustees of East Boston
Savings Bank, the Company and Meridian Financial Services, Inc.,
and members of their immediate families, was $7.1 million
at December 31, 2010. The outstanding loans made to the
Companys and East Boston Savings Banks directors and
executive officers, and members of their immediate families,
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 East Boston Savings Bank, and did
not involve more than the normal risk of collectibility or
present other unfavorable features.
Pursuant to Meridian Interstate Bancorps Audit Committee
Charter, the Audit Committee periodically reviews, no less
frequently than quarterly, a summary of Meridian Interstate
Bancorps transactions with directors and executive
officers of Meridian Interstate Bancorp and with firms that
employ directors, as well as any other related person
transactions, for the purpose of recommending to the
disinterested members of the Board of Directors that the
transactions are fair, reasonable and within Company policy and
should be ratified and approved. Also, in accordance with
banking regulations, the Board of Directors reviews all loans
made to a director or executive officer in an amount that, when
aggregated with the amount of all other loans to such person and
his or her related interests, exceed the greater of $25,000 or
5% of Meridian Interstate Bancorps capital and surplus (up
to a maximum of $500,000) and such loan must be approved in
advance by a majority
32
of the disinterested members of the Board of Directors.
Additionally, pursuant to the Companys Code of Ethics and
Business Conduct, all executive officers and directors of
Meridian Interstate Bancorp must disclose any existing or
emerging conflicts of interest to the Chairman of the Board and
Chief Executive Officer of Meridian Interstate Bancorp. Such
potential conflicts of interest include, but are not limited to,
the following: (i) Meridian Interstate Bancorp conducting
business with or competing against an organization in which a
family member of an executive officer or director has an
ownership or employment interest and (ii) the ownership of
more than 1% of the outstanding securities or 5% of total assets
of any business entity that does business with or is in
competition with Meridian Interstate Bancorp.
Nominating/Corporate
Governance Committee Procedures
General
It is the policy of the Nominating/Corporate Governance
Committee of the Board of Directors of the Company to consider
director candidates recommended by stockholders who appear to be
qualified to serve on the Companys Board of Directors. The
Nominating/Corporate Governance Committee, which is comprised
solely of non-employee directors, all of whom the Board has
determined are independent in accordance with the listing
standards of the Nasdaq Stock Market, Inc., may choose not to
consider an unsolicited recommendation if no vacancy exists on
the Board of Directors and the Nominating/Corporate Governance
Committee does not perceive a need to increase the size of the
Board of Directors. To avoid the unnecessary use of the
Nominating/Corporate Governance Committees resources, the
Nominating/Corporate Governance Committee will consider only
those director candidates recommended in accordance with the
procedures set forth below.
Diversity
Considerations
In identifying candidates for Director, the Nominating/Corporate
Governance Committee and the Board of Directors takes into
account (1) the comments and recommendations of Board
members regarding the qualifications and effectiveness of the
existing Board of Directors or additional qualifications that
may be required when selecting new Board members, (2) the
requisite expertise and sufficiently diverse backgrounds of the
Board of Directors overall membership composition,
(3) the independence of outside Directors and other
possible conflicts of interest of existing and potential members
of the Board of Directors and (4) all other factors it
considers appropriate. The Company does not have a written
policy for executing this responsibility because it believes
that the most appropriate process will depend on the
circumstances surrounding each such decision.
Procedures
to be Followed by Stockholders
To submit a recommendation of a director candidate to the
Nominating/Corporate Governance Committee, a stockholder should
submit the following information in writing to the main office
of the Company, addressed to the Chairman of the
Nominating/Corporate Governance Committee, care of the Corporate
Secretary, 10 Meridian Street, East Boston, Massachusetts 02128:
|
|
|
|
1.
|
The name of the person recommended as a director candidate;
|
|
|
2.
|
All information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange
Act of 1934;
|
|
|
3.
|
The written consent of the person being recommended as a
director candidate to being named in the proxy statement as a
nominee and to serving as a director if elected;
|
33
|
|
|
|
4.
|
As to the stockholder making the recommendation, the name and
address of such stockholder as they appear on the Companys
books; provided, however, that if the stockholder is not a
registered holder of the Companys common stock, the
stockholder should submit his or her name and address along with
a current written statement from the record holder of the shares
that reflects ownership of the Companys common
stock; and
|
|
|
5.
|
A statement disclosing whether such stockholder is acting with
or on behalf of any other person and, if applicable, the
identity of such person.
|
In order for a director candidate to be considered for
nomination at the Companys annual meeting of stockholders,
the recommendation must be received by the Nominating/Corporate
Governance Committee by January 1 of the year in which the
election is proposed.
Process
for Identifying and Evaluating Nominees
The process that the Nominating/Corporate Governance Committee
follows to identify and evaluate individuals to be nominated for
election to the Board of Directors is as follows:
Identification. For purposes of identifying
nominees for the Board of Directors, the Nominating/Corporate
Governance Committee relies on personal contacts of the
committee members and other members of the Board of Directors,
as well as its knowledge of members of the communities served by
East Boston Savings Bank. The Nominating/Corporate Governance
Committee will also consider director candidates recommended by
stockholders in accordance with the policy and procedures set
forth above. The Nominating/Corporate Governance Committee has
not previously used an independent search firm to identify
nominees.
Evaluation. In evaluating potential nominees,
the Nominating/Corporate Governance Committee determines whether
the candidate is eligible and qualified for service on the Board
of Directors by evaluating the candidate under certain criteria,
which are described below. If such individual fulfills these
criteria, the Nominating/Corporate Governance Committee will
conduct a check of the individuals background and
interview the candidate to further assess the qualities of the
prospective nominee and the contributions he or she would make
to the Board of Directors.
Qualifications
The Nominating/Corporate Governance Committee has adopted a set
of criteria that it considers when it selects individuals to be
nominated for election to the Board of Directors. A candidate
must meet the eligibility requirements set forth in the
Companys bylaws, which include an age restriction and a
restriction on service with a financial institution or its
holding company in which Meridian Financial Services owns less
than 25% of the outstanding voting stock. A candidate also must
meet any qualification requirements set forth in any Board or
committee governing documents.
If the candidate is deemed eligible for election to the Board of
Directors, the Nominating/Corporate Governance Committee will
then evaluate the following criteria in selecting nominees:
|
|
|
|
|
financial, regulatory and business experience;
|
|
|
|
familiarity with and participation in the local community;
|
|
|
|
integrity, honesty and reputation in connection with upholding a
position of trust with respect to customers;
|
34
|
|
|
|
|
dedication to the Company and its stockholders; and
|
|
|
|
independence.
|
The Committee will also consider any other factors the
Nominating/Corporate Governance Committee deems relevant,
including age, diversity, size of the Board of Directors and
regulatory disclosure obligations.
With respect to nominating an existing director for re-election
to the Board of Directors, the Nominating/Corporate Governance
Committee will consider and review an existing directors
board and committee attendance and performance; length of board
service; experience, skills and contributions that the existing
director brings to the board; and independence.
Submission
of Business Proposals and Stockholder Nominations
The Company must receive proposals that stockholders seek to
include in the proxy statement for the Companys next
annual meeting no later than December 19, 2011. If next
years annual meeting is held on a date more than 30
calendar days from May 18, 2012, a stockholder proposal
must be received by a reasonable time before the Company begins
to print and mail its proxy solicitation for such annual
meeting. Any stockholder proposals will be subject to the
requirements of the proxy rules adopted by the Securities and
Exchange Commission.
The Companys Bylaws generally provides that any
stockholder desiring to make a proposal for new business at a
meeting of stockholders or to nominate one or more candidates
for election as directors must submit written notice filed with
the Secretary of the Company not less than 120 days nor
more than 150 days in advance of the first anniversary of
the date of the Companys proxy statement for the previous
years annual meeting. For the 2012 annual meeting of
stockholders, the notice would have to be received between
November 19, 2011 and December 19, 2011. If next
years annual meeting is held on a date more than 30
calendar days from May 18, 2012, a stockholders
notice must be received not later than the close of business on
the 10th calendar day following the day on which notice of the
date of the scheduled annual meeting is publicly disclosed. The
stockholder must also provide certain information in the notice,
as set forth in the Companys Bylaws. Failure to comply
with these advance notice requirements will preclude such
nominations or new business from being considered at the meeting.
Nothing in this proxy statement or our Bylaws shall be deemed to
require us to include in our proxy statement and proxy relating
to an annual meeting any stockholder proposal that does not meet
all of the requirements for inclusion established by the
Securities and Exchange Commission in effect at the time such
proposal is received.
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Stockholder
Communications
The Company encourages stockholder communications to the Board
of Directors
and/or
individual directors. All communications from stockholders
should be addressed to Meridian Interstate Bancorp, Inc., 10
Meridian Street, East Boston, Massachusetts 02128.
Communications to the Board of Directors should be in the care
of Vincent D. Basile, Corporate Secretary. Communications to
individual directors should be sent to such director at the
Companys address. Stockholders who wish to communicate
with a Committee of the Board should send their communications
to the care of the Chair of the particular committee, with a
copy to Dominic A. Gambardella, the Chair of the
Nominating/Corporate Governance Committee. It is in the
discretion of the Nominating/Corporate Governance Committee
whether any communication sent to the full Board should be
brought before the full Board.
Miscellaneous
The Company will pay the cost of this proxy solicitation. The
Company will reimburse brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by
them in sending proxy materials to the beneficial owners of the
Company. Additionally, directors, officers and other employees
of the Company may solicit proxies personally or by telephone
without receiving additional compensation.
The Companys Annual Report to Stockholders has been
included with this proxy statement. Any stockholder who has not
received a copy of the Annual Report may obtain a copy by
writing to the Corporate Secretary of the Company. The Annual
Report is not to be treated as part of the proxy solicitation
material or as having been incorporated by reference into this
proxy statement.
If you and others who share your address own your shares in
street name, your broker or other holder of record
may be sending only one annual report and proxy statement to
your address. This practice, known as householding,
is designed to reduce our printing and postage costs. However,
if a stockholder residing at such an address wishes to receive a
separate annual report or proxy statement in the future, he or
she should contact the broker or other holder of record. If you
own your shares in street name and are receiving
multiple copies of our annual report and proxy statement, you
can request householding by contacting your broker or other
holder of record.
Whether or not you plan to attend the annual meeting, please
vote by marking, signing, dating and promptly returning the
enclosed proxy card in the enclosed envelope.
36
Important
Notice Regarding the Availability of Proxy Materials
The Companys Proxy Statement, including the Notice of the
Annual Meeting of Stockholders, and the 2010 Annual Report to
Stockholders are each available on the internet at
www.cfpproxy.com/6411.
BY ORDER OF THE BOARD OF DIRECTORS
Vincent D. Basile
Corporate Secretary
East Boston, Massachusetts
April 15, 2011
37
REVOCABLE PROXY
MERIDIAN INTERSTATE BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 18, 2011
11:00 a.m., Local Time
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the members of the official proxy committee of Meridian
Interstate Bancorp, Inc. (the Company), or any of them, with full power of substitution in each,
to act as proxy for the undersigned, and to vote all shares of common stock of the Company which
the undersigned is entitled to vote only at the Annual Meeting of Stockholders to be held on May
18, 2011 at 11:00 a.m., local time, at the Peabody, Massachusetts office of East Boston Savings
Bank, 67 Prospect Street, Peabody, Massachusetts and at any and all adjournments thereof, with all
of the powers the undersigned would possess if personally present at such meeting as follows:
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The election as directors of all nominees listed (unless the For All Except
box is marked and the instructions below are complied with). |
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Vincent D. Basile, Edward J. Merritt, James G. Sartori, Paul T. Sullivan and Carl A.
LaGreca |
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FOR ALL |
FOR |
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WITHHOLD |
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EXCEPT |
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INSTRUCTION: To withhold your vote for any individual nominee, mark FOR ALL EXCEPT and
write that nominees name on the line provided below.
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The ratification of the appointment of Wolf & Company, P.C. as independent
registered public accounting firm of Meridian Interstate Bancorp, Inc. for the fiscal
year ending December 31, 2011. |
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FOR |
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ABSTAIN |
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An advisory (non-binding) resolution to approve the Companys executive compensation
as described in the proxy statement. |
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FOR |
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AGAINST |
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ABSTAIN |
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An advisory (non-binding) proposal with respect to the frequency that stockholders
will vote on our executive compensation. |
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1 YEAR |
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2 YEARS |
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3 YEARS |
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ABSTAIN |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE LISTED PROPOSALS AND THAT STOCKHOLDERS
MARK THE EVERY YEAR BOX WITH RESPECT TO THE FREQUENCY OF VOTING ON EXECUTIVE COMPENSATION..
This proxy is revocable and will be voted as directed, but if no instructions are specified,
this proxy, properly signed and dated, will be voted FOR each of the proposals listed and for the
ONE YEAR options with respect to the frequency of voting on executive compensation. If any other
business is presented at the Annual Meeting, including whether or not to adjourn the meeting, this
proxy will be voted by the proxies in their judgment. At the present time, the Board of Directors
knows of no other business to be presented at the Annual Meeting. This proxy also confers
discretionary authority on the proxy committee of the Board of Directors to vote (1) with respect
to the election of any person as director, where the nominees are unable to serve or for good cause
will not serve and (2) matters incident to the conduct of the meeting.
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Dated: |
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SIGNATURE OF STOCKHOLDER |
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SIGNATURE OF CO-HOLDER (IF ANY) |
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Please sign exactly as your name appears on this card. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title. If shares are held jointly, each
holder may sign but only one signature is required.
Important Notice Regarding the Availability of Proxy Materials
The Companys Proxy Statement, including the Notice of the Annual Meeting of
Stockholders, and the 2010 Annual Report to Stockholders are each available on the internet at
www.cfpproxy.com/6411.
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.