SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment
No. ______)
Filed by
the Registrant
¢
Filed by
a Party other than the Registrant
£
Check the
appropriate box:
£
Preliminary
Proxy Statement
£
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¢
Definitive
Proxy Statement
£
Definitive
Additional Materials
£
Soliciting
Material Pursuant to § 240.14a-12
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Meridian
Interstate Bancorp, Inc.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
¢
No
fee required.
£
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
Title of each class of securities to which transaction
applies:
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N/A
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(2)
Aggregate number of securities to which transactions
applies:
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N/A
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(3)
Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule
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0-11 (set forth the amount on which the filing fee is calculated and state
how it was determined):
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N/A
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(4)
Proposed maximum aggregate value of transaction:
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N/A
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(5)
Total fee paid:
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N/A
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£
Fee paid
previously with preliminary materials.
£
Check box if
any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the
filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and
the date of its filing.
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(1)
Amount Previously Paid:
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N/A
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(2) Form,
Schedule or Registration Statement No.:
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N/A
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(3) Filing
Party:
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N/A
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(4) Date
Filed:
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N/A
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July 7,
2008
Dear
Stockholder:
You are
cordially invited to attend the first 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 Tuesday, August 19, 2008 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 Company’s 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.
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Sincerely,
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/s/
Richard J. Gavegnano
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Richard
J. Gavegnano
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Chairman
of the Board and
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Chief
Executive Officer
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10
Meridian Street
East
Boston, Massachusetts 02128
(617)
567-1500
______________________
NOTICE
OF 2008 ANNUAL MEETING OF STOCKHOLDERS
______________________
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TIME
AND DATE
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11:00
a.m. on Tuesday, August 19, 2008
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PLACE
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Peabody
Office of East Boston Savings Bank
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67
Prospect Street
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Peabody,
Massachusetts 01960
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ITEMS
OF BUSINESS
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(1)
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To
elect four directors to serve for a term of three
years.
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(2)
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To
approve the Meridian Interstate Bancorp, Inc. 2008 Equity Incentive
Plan.
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(3)
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To
ratify the selection of Wolf & Company, P.C. as our independent
registered public accounting firm for fiscal year 2008.
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(4)
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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 June
30, 2008.
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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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/s/
Vincent D. Basile
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Vincent
D. Basile
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Corporate
Secretary
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July
7, 2008
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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 Tuesday, August 19, 2008 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 July 11, 2008.
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 June 30, 2008. 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 June 30,
2008, there were 23,000,000 shares of Company common stock
outstanding. Each share of common stock has one vote. The
Company’s Articles of Incorporation provide that, subject to certain exceptions,
a record owner of the Company’s common stock who beneficially owns, either
directly or indirectly, in excess of 10% of the Company’s 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 June 30, 2008, 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 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 approve the Company’s 2008 Equity Incentive Plan, you may vote in favor of
the proposal, against the proposal or abstain from voting. To be
approved, this matter must receive the affirmative vote of a majority of the
total votes outstanding and eligible to be voted at the annual meeting,
including shares held by Meridian Financial Services, Incorporated, and a
majority of votes cast at the annual meeting, excluding the shares held by
Meridian Financial Services, Incorporated. Pursuant to applicable
Massachusetts law and regulation, if the Company’s 2008 Equity Incentive Plan is
implemented prior to January 23, 2009, the 2008 Equity Incentive Plan must be
approved by at least two-thirds of the total votes eligible to be cast at the
annual meeting, including the shares held by Meridian Financial Services,
Incorporated, and a majority of the total votes eligible to be cast at the
annual meeting, excluding shares held by Meridian Financial Services,
Incorporated. Accordingly, in the event the 2008 Equity Incentive
Plan is not approved by stockholders as required under Massachusetts law and
regulation but is approved by a majority of the votes eligible to be cast
including shares held by Meridian Financial Services, Incorporated and a
majority of votes cast, excluding shares held by Meridian Financial Services,
Incorporated, the Board intends to establish and implement the Equity Incentive
Plan after January 23, 2009. For purposes of implementation of the
Company’s 2008 Equity Incentive Plan prior to January 23, 2009, broker non-votes
and abstentions will have the same effect as votes cast against this
proposal. For purposes of implementation of the Company’s 2008 Equity
Incentive Plan after January 23, 2009, broker non-votes and abstentions will not
be counted as votes cast and will have no effect on this proposal.
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.
Voting
by Proxy
The Company’s 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 Company’s Board of
Directors. The Board of Directors recommends that you
vote:
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•
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for
each of the
nominees for director;
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•
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for
approval of the
Company’s 2008 Equity Incentive Plan;
and
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•
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for
ratification of the
appointment of Wolf & Company, P.C. as the Company’s independent
registered public accounting firm.
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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 our proxy solicitor, Georgeson, Inc. at (212)
440-9800.
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 Company’s 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 Company’s directors, executive officers and
employees. The Code of Ethics and Business Conduct requires that the
Company’s 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
Company’s 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 Us—Investor
Relations—Corporate Governance”
section of the Company’s 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 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 2007, the Board of Directors held 17
meetings. No director attended fewer than 75% of the total meetings
of the Company’s and the Bank’s 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
standing committees and their members. Except as described below with
respect to the Audit Committee, all members of each committee are independent in
accordance with the listing standards of the Nasdaq Stock Market,
Inc. The charters of all three committees are available the
“About Us—Investor
Relations—Corporate Governance”
section of the Company’s website,
www.ebsb.com
.
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Director
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Audit
Committee |
Compensation
Committee |
Nominating/
Corporate Governance 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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James
P. Del Rossi
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X
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X*
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Anna
R. DiMaria
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X
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X
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Richard
F. Fernandez
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X
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Philip
F. Freehan
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Domenic
A. Gambardella
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X*
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X
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Richard
J. Gavegnano
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Edward
L. Lynch
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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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James
G. Sartori
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||||||
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Paul
T. Sullivan
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||||||
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Number
of Committee Meetings in 2007
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9
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5
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1
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__________________________
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*
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Denotes
Chairperson.
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Audit
Committee.
The Audit Committee assists the Board of Directors
in its oversight of the Company’s accounting and reporting practices, the
quality and integrity of the Company’s financial reports and the Company’s
compliance with applicable laws and regulations. The Audit Committee
is also responsible for engaging the Company’s 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.”
The Audit Committee consists of
Directors Basile, Censullo, DiMaria, Fernandez, Lynch and
Natalucci. Securities and Exchange Commission rules and the listing
standards of the Nasdaq Stock Market, Inc. generally require that all members of
this committee must be independent directors, as
defined
in both the Securities and Exchange Commission rules and the listing standards
of the Nasdaq Stock Market, Inc. However, the Securities and Exchange
Commission rules and the listing standards of the Nasdaq Stock Market, Inc.
provide an exemption for companies that have recently completed their initial
public offering, like the Company. These rules and listing standards
require that, for one year following the effectiveness of a new public company’s
registration statement, a majority of the members of the audit committee must be
independent directors. In reliance on this exemption, Director
DiMaria (who is an independent director under the listing standards of the
Nasdaq Stock Market, Inc.) and Director Lynch are currently serving as members
of the Company’s Audit Committee to assist the Audit Committee in its transition
to that of a public company. Directors DiMaria and Lynch may only
serve on the Audit Committee until November 13, 2008, and are expected to resign
from the Audit Committee before such date. The Company believes that
their service on the Audit Committee would not materially adversely affect the
ability of the Audit Committee to act independently and to satisfy the other
requirements of Rule 10A-3 of the Exchange Act, governing listing standards
relating to audit committees.
Compensation Committee.
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 will not participate in
discussions related to his compensation or the Committee’s review of any
documents related to the determination of his compensation,
however. The Compensation Committee reviews all compensation
components for the Company’s 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 executive’s 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.
The Company’s 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 Company’s corporate
governance guidelines. The Nominating/Corporate Governance Committee
also considers and recommends the nominees for director to stand for election at
the Company’s 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. The 2008 Annual
Meeting is our first annual meeting as a public company.
Stock
Ownership
The following table provides
information as of June 30, 2008, with respect to persons known by the Company to
be the beneficial owners of more than 5% of the Company’s 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 23,000,000 shares of
Company common stock issued and outstanding as of June 30, 2008.
|
Name
and Address
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Number
of
Shares
Owned
|
Percent
of
Common Stock
Outstanding
|
||||||
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Meridian
Financial Services, Incorporated
10
Meridian Street
East
Boston, Massachusetts 02128
|
12,650,000 | 55.0 | % | |||||
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Bay
Pond Partners, L.P.
C/O
Wellington Management Company, LLP
75
State Street
Boston,
MA 02109
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1,275,100 | 5.5 | % | |||||
The
following table provides information as of June 30, 2008 about the shares of
Meridian Interstate Bancorp common stock that may be considered to be
beneficially owned by each director, named executive officer listed in the
Summary Compensation Table 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. Unless otherwise indicated, none of the shares
listed are pledged as security, 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 23,000,000 shares of Company common
stock issued and outstanding as of June 30, 2008.
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Name
|
Number
of
Shares Owned |
|
Percent
of
Common Stock Outstanding |
||||||
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Directors
|
|||||||||
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Vincent
D. Basile
|
2,500 | * | |||||||
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Marilyn
A. Censullo
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1,000 | * | |||||||
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James
P. Del Rossi
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10,000 | * | |||||||
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Anna
R. DiMaria
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5,000 | * | |||||||
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Philip
F. Freehan
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15,000 | (1) | * | ||||||
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Richard
F. Fernandez
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- | - | |||||||
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Domenic
A. Gambardella
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5,000 | (2) | * | ||||||
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Richard
J. Gavegnano
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40,000 | * | |||||||
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Edward
L. Lynch
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10,000 | * | |||||||
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Gregory
F. Natalucci
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400 | (3) | * | ||||||
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James
G. Sartori
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2,500 | (4) | * | ||||||
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Paul
T. Sullivan
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2,500 | * | |||||||
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Named
Executive Officer Who Is Not Also A Director
|
|||||||||
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Leonard
V. Siuda
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15,000 | (5) | * | ||||||
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All
directors and executive officers
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|||||||||
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as
a group (13 persons)
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108,900 | * | |||||||
_________________
* Less than 1%.
* Less than 1%.
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(1)
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Includes
15,000 shares held in an IRA.
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(2)
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Includes
5,000 shares held jointly with
spouse.
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(3)
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Includes
400 shares held in an IRA.
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(4)
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Includes
2,500 shares held jointly with
spouse.
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(5)
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Includes
15,000 shares held in an IRA.
|
Proposal
1 — Election of Directors
The Board of Directors of Meridian
Interstate Bancorp is presently composed of 12 members. The Board is
divided into three classes, each with three-year staggered terms, with one-third
of the directors elected each year. The nominees for election this
year are Vincent D. Basile, James P. Del Rossi, James G. Sartori and Paul T.
Sullivan, all of whom are current directors of the Company and the
Bank.
All of
our directors are independent under the current listing standards of the Nasdaq
Stock Market, except for Mr. Richard J. Gavegnano, our Chairman of the Board and
Chief Executive Officer, Mr. Philip F. Freehan, our Executive Vice President and
Director Edward L. Lynch. In determining the independence of our
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, 2007.
Nominees
for Election of Directors
The nominees standing for election
are:
Vincent D. Basile
is a
self-employed management consultant and also serves as Clerk of Meridian
Financial Services and East Boston Savings Bank and Corporate Secretary of
Meridian Interstate Bancorp. Previously, Mr. Basile was a Regional
Administrator in the Massachusetts Office of the Commissioner of
Probation. 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 67. Director since 2002.
James P. Del Rossi
is a
private consultant to firms that service the banking and financial services
industry. Mr. Del Rossi is also a consultant with the firm Keefe,
Bruyette & Woods, Inc. He was Senior Vice President of the
Depositors’ Insurance Fund and a former Director of Bank Examinations of the
Massachusetts Division of Banks, which includes 35 years of regulatory
experience and 44 years of community banking experience. Mr. Del
Rossi has served as a director of Hampshire First Bank since
2006. Mr. Del Rossi also serves as a director of Financial Concepts,
Inc., a consulting firm to financial institutions. Age
71. Director since 2002.
James G. Sartori
is Treasurer
of Bandwagon, Inc., an importer and distributor company. Age
64. Director since 1990.
Paul T. Sullivan
is a partner
with the law firm Bagley & Bagley, P.C. Age
61. Director since 1999.
Directors
Continuing in Office
The
following directors have terms ending in 2009:
Marilyn A. Censullo
, a
Certified Public Accountant, has been a partner in the accounting firm of Naffah
& Company, P.C. since 2000. Ms. Censullo has over 28 years of
experience as an accountant. Age 50. Director since
2007.
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 33 years serving as corporator, trustee and
director. Mr. Gavegnano has served as Chairman of the Board of East
Boston Savings Bank, Meridian Interstate Bancorp and Meridian Financial Services
since 2003, 2006 and 2003, respectively. In 2007, Mr. Gavegnano was
appointed Chief Executive Officer of Meridian Interstate Bancorp and Meridian
Financial Services and Investor Relations Officer of Meridian Interstate
Bancorp. 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. Age 60.
Director since 1995.
Edward L. Lynch
has been an
Attorney at Law, Sole Practitioner, for the past 34 years. Mr. Lynch
has served as a director of Hampshire First Bank since 2006. Age 66.
Director since 1997.
Gregory F. Natalucci
is an
auditor with CNA Financial Corporation, a commercial and property and casualty
insurer. Age 61. Director since 2000.
The
following directors have terms ending in 2010
:
Anna R. DiMaria
has been an
Attorney at Law with the Law Offices of Michael A. D’Avolio for the past 17
years. Age 61. Director since 2004.
Richard F. Fernandez
has been
a merger and acquisition/banking consultant for Jay Cashman, Inc., an industrial
construction company, since 2006. 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. Age 65. Director since 2008.
Philip F. Freehan
has served
as Executive Vice President of East Boston Savings Bank, Meridian Interstate
Bancorp and Meridian Financial Services since 1984, 2006 and 1991,
respectively. Mr. Freehan has also served as Senior Loan Officer of
East Boston Savings Bank since 1984. Age 57. Director since
1986.
Domenic A. Gambardella
is
President of Meridian Insurance Agency Inc., an insurance agency. Age
61. Director since 1994.
Proposal
2 — Approval of the Company’s 2008 Equity Incentive Plan
The Board of Directors has approved for
submission to stockholders for approval the Meridian Interstate Bancorp, Inc.
2008 Equity Incentive Plan (the “Equity Incentive Plan”). The Equity
Incentive Plan is designed to provide officers, employees, directors and
trustees of Meridian Interstate Bancorp, the Bank and Meridian Financial
Services, Inc. with additional incentives to promote the growth and performance
of Meridian Interstate Bancorp. The Equity Incentive Plan is subject
to stockholder approval and will become effective upon its implementation by the
Board of Directors subsequent to satisfaction of applicable stockholder approval
requirements. Most of the companies that we compete with for
directors and management-level employees are public companies that offer equity
compensation as part of their overall director and officer compensation
programs. The Equity Incentive Plan will give us the flexibility we
need to continue to attract and retain highly qualified individuals by offering
a competitive compensation program that is linked to the performance of our
common stock.
The Equity Incentive Plan complies with
the regulations of the Massachusetts Commissioner of Banks and Division of
Banks. However, the Massachusetts Commissioner of Banks and Division of Banks do
not endorse or approve the Equity Incentive Plan in any manner.
The following is a summary of the
material features of the Equity Incentive Plan, which is qualified in its
entirety by reference to the provisions of the Equity Incentive Plan, attached
hereto as Appendix A.
General
Subject
to permitted adjustments for certain corporate transactions, the Equity
Incentive Plan authorizes the issuance or delivery to participants of up to
1,449,000 shares of Company 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.
The
Equity Incentive Plan will be administered by the members of Meridian Interstate
Bancorp’s Compensation Committee who are “Disinterested Board Members,” as
defined in the Equity Incentive Plan (the “Committee”). The Committee
has full and exclusive power within the limitations set forth in the Equity
Incentive Plan to make all decisions and determinations regarding the selection
of participants and the granting of awards; establishing the terms and
conditions relating to each award; adopting rules, regulations and guidelines
for carrying out the Equity Incentive Plan’s purposes; and interpreting and
otherwise construing the Equity Incentive Plan. The Equity Incentive
Plan also permits the Board of Directors or the Committee to delegate to one or
more officers of Meridian Interstate Bancorp the power to: (i) designate
officers and employees who will receive awards; and (ii) determine the number of
awards to be received by them, provided that such delegation is not prohibited
by applicable law or the rules of the stock exchange on which our common stock
is traded. Awards intended to be “performance-based” under Section
162(m) of the Internal Revenue Code must be granted by the Committee in order to
be exempt from the $1.0 million limit on deductible compensation for tax
purposes.
The
Committee may grant an award under the Equity Incentive Plan as an alternative
to or replacement of an existing award under the Equity Incentive Plan or any
other plan of Meridian Interstate Bancorp or its subsidiaries, or as the form of
payment for grants or rights earned or due under any other plan or arrangement
of Meridian Interstate Bancorp or its subsidiaries, including the plan of any
entity acquired by Meridian Interstate Bancorp or its
subsidiaries.
The
Equity Incentive Plan may be funded with authorized but unissued shares or with
shares repurchased in open market transactions. Depending on market
and financial conditions at the time of the establishment and implementation of
the Equity Incentive Plan, we expect to fund awards under the Equity Incentive
Plan with shares repurchased in open market transactions.
Eligibility
Employees,
directors and trustees of Meridian Interstate Bancorp, Meridian Financial
Services, Inc. and the Bank are eligible to receive awards under the Equity
Incentive Plan, except that non-employees may not be granted incentive stock
options.
Types
of Awards
The
Committee may determine the type and terms and conditions of awards under the
Equity Incentive Plan, which shall be set forth in an award agreement delivered
to each participant. Each award shall be subject to conditions
established by the Committee that are set forth in the recipient’s award
agreement, and shall be subject to vesting conditions and restrictions as
determined by the Committee; provided, however, that in the event the Equity
Incentive Plan is implemented prior to the one year anniversary date of our
initial stock issuance (January 23, 2009), certain regulatory limitations on
vesting and award amounts will be imposed on awards. Awards may be
granted in a combination of incentive and non-qualified stock options, stock
appreciation rights or restricted stock, as follows:
Stock
Options
.
A stock option
is the right to purchase shares of common stock at a specified price for a
specified period of time. The exercise price may not be less than the
fair market value of a share of our common stock on the date the stock option is
granted. Fair market value for purposes of the Equity Incentive Plan
means the final sales price of Meridian Interstate Bancorp’s common stock as
reported on the Nasdaq Global Select Market on the date in question, or if
Meridian Interstate Bancorp’s common stock was not traded on such date, then on
the day prior to such date or on the next preceding day on which Meridian
Interstate Bancorp’s common stock was traded, and without regard to after-hours
trading activity. The Committee will determine the fair market value
of the common stock, in accordance with Section 422 of the Internal Revenue
Code, if it cannot be determined in the manner described
above. Further, the Committee may not grant a stock option with a
term that is longer than 10 years.
Stock
options are either “incentive” stock options or “non-qualified” stock
options. Incentive stock options have certain tax advantages that are
not available to non-qualified stock options, and must comply with the
requirements of Section 422 of the Internal Revenue Code. Only
employees are eligible to receive incentive stock options. Outside
directors may only receive non-qualified stock options under the Equity
Incentive Plan. Shares of common stock purchased upon the exercise of
a stock option must be paid for at the time of exercise either (i) by personal,
certified or cashiers check, (ii) by tendering stock of Meridian Interstate
Bancorp owned by the participant in satisfaction of the exercise price, or (iii)
by a “cashless exercise” through a third party. The total number of
shares that may be acquired upon the exercise of a stock option will be rounded
down to the nearest whole share.
Restricted
Stock
.
A restricted
stock award is a grant of common stock, subject to vesting requirements, to a
participant for no consideration or such minimum consideration as may be
required by applicable law or regulation. Restricted stock awards may
be granted only in whole shares of common stock and are subject to vesting
conditions and other restrictions established by the Committee as set forth in
the Equity Incentive Plan or the award agreement. Prior to vesting of
the restricted stock award, unless otherwise determined by the Committee, the
recipient of a restricted stock award may exercise any voting
rights
with respect to common stock subject to an award and receive any dividends and
distributions with respect to the common stock.
Stock
Appreciation Rights.
A
stock appreciation right
is the right to receive a payment of Company common stock in an amount equal to
the excess of the fair market value of a share of Company common stock on the
date of exercise of the stock appreciation right over the fair market value of
the common stock on the date of grant of the stock appreciation
right. The total number of shares that may be acquired upon the
exercise of a stock appreciation right will be rounded down to the nearest whole
share. Stock appreciation rights may be granted in tandem with the
grant of stock options, and are exercisable on the same conditions as the
related stock option that is granted simultaneously. The exercise of
a tandem stock appreciation right cancels the related stock option and the
exercise of the related stock option cancels the tandem stock appreciation
right.
Prohibition
Against Repricing of Options or Stock Appreciation Rights
.
The Equity
Incentive Plan provides that neither the Committee nor the Board is authorized
to make any adjustment or amendment that reduces or would have the effect of
reducing the exercise price of a stock option or a stock appreciation right
previously granted.
Limitation
on Awards Under the Equity Incentive Plan
The
following limit applies to awards under the Equity Incentive Plan:
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the
maximum number of shares of stock, in the aggregate, that may be issued or
delivered to any one employee participant pursuant to the exercise of
stock options or stock appreciation rights is 258,750 shares (or 25% of
the shares available for stock option awards), all of which may be issued
during any calendar year;
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The
following limits apply to awards under the Equity Incentive Plan in the event it
is established and implemented by the Board prior to January 23,
2009:
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the
maximum number of shares of stock, in the aggregate, that may be issued or
delivered to any one employee participant pursuant to restricted stock
awards is 103,500 shares (or 25% of the shares available for restricted
stock awards), all of which may be issued during any calendar
year;
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the
maximum number of shares of stock that may be issued or delivered to any
one individual non-employee director or trustee pursuant to the exercise
of stock options and stock appreciation rights, in the aggregate, shall be
51,750 shares or (5% of the shares available for stock option awards), and
the maximum number of shares that may be issued or delivered to any one
individual non-employee director or trustee pursuant to restricted stock
awards, in the aggregate, shall be 20,700 shares (or 5% of the shares
available for restricted stock awards);
and
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the
maximum number of shares of stock that may be issued or delivered to all
non-employee directors, in the aggregate, pursuant to the exercise of
stock options and stock appreciation rights shall be 310,500 shares (or
30% of the shares available for stock option awards), and the maximum
number of shares that may be issued or delivered to all non-employee
directors in the aggregate pursuant to restricted stock awards shall be
124,200 (or 30% of the shares available for restricted stock
awards.
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To the
extent any shares of stock covered by an award (including restricted stock
awards) under the Equity Incentive Plan are not delivered to a participant or
beneficiary for any reason, including because the award is forfeited or canceled
or because a stock option or stock appreciation right is not exercised, then
such shares shall not be deemed to have been delivered for purposes of
determining the maximum number of shares of stock available for delivery under
the Plan. To the extent (i) a stock option is exercised by using an
actual or constructive exchange of shares to pay the exercise price, (ii) shares
of stock covered by an award are withheld to satisfy withholding taxes upon
exercise or vesting of the award, or (iii) stock appreciation rights are settled
in shares of stock upon exercise, the number of shares of stock available shall
be reduced by the gross number of stock options and stock appreciation rights
exercised rather than the net number of shares of stock issued.
In the
event of a corporate transaction involving the stock of Meridian Interstate
Bancorp (including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares), the
foregoing share limitations and all outstanding awards will automatically be
adjusted proportionally and uniformly to reflect such event to the extent that
the adjustment will not affect the award’s status as “performance-based
compensation” under Section 162(m) of the Internal Revenue Code, if
applicable; provided, however, that the Committee may adjust awards to preserve
the benefits or potential benefits of the awards, including the prevention of
automatic adjustments if appropriate.
Performance
Features
General.
A
federal income tax deduction for Meridian Interstate Bancorp will generally be
unavailable for annual compensation in excess of $1.0 million paid to its chief
executive officer or three other most highly compensated officers (other than
its chief financial officer). However, amounts that constitute
“performance-based compensation” (under Section 162(m) of the Internal Revenue
Code) are not counted toward the $1.0 million limit. The Equity
Incentive Plan is designed so that stock options and stock appreciation rights
will be considered performance-based compensation. The Committee may
designate whether any restricted stock awards granted to any participant are
intended to be performance-based compensation. Any restricted stock awards
designated as performance-based compensation will be conditioned on the
achievement of one or more performance measures, to the extent required by
Section 162(m) of the Internal Revenue Code.
Performance
Measures.
The performance measures that may be used for such awards will
be based on any one or more of the following performance measures, as selected
by the Committee: basic earnings per share; basic cash earnings per share;
diluted earnings per share; diluted cash earnings per share; net income; cash
earnings; net interest income; non-interest income; general and administrative
expense to average assets ratio; cash general and administrative expense to
average assets ratio; efficiency ratio; cash efficiency ratio; return on average
assets; cash return on average assets; return on average stockholders’ equity;
cash return on average stockholders’ equity; return on average tangible
stockholders’ equity; cash return on average tangible stockholders’ equity; core
earnings; operating income; operating efficiency ratio; net interest rate
spread; growth in assets, loans, or deposits; loan production volume;
non-performing loans; cash flow; strategic business objectives, consisting of
one or more objectives based upon meeting specified cost targets, business
expansion goals, and goals relating to acquisitions or divestitures, or goals
relating to capital raising and capital management; or any combination of the
foregoing. Performance measures may be based on the performance of Meridian
Interstate Bancorp as a whole or of any one or more subsidiaries or business
units of Meridian Interstate Bancorp or a subsidiary and may be measured
relative to a peer group, an index or a business plan. The Committee may adjust
performance measures after they have been set, but only to the extent the
Committee exercises negative discretion as permitted under applicable law
for
purposes
of an exception to Section 162(m) of the Internal Revenue Code. In
establishing the performance measures, the Committee may provide for the
inclusion or exclusion of certain items. Additionally, the grant of an award
intended to be performance-based compensation and the establishment of any
performance-based measures shall be made during the period required by Section
162(m) of the Internal Revenue Code.
Vesting
of Awards
The
Committee may specify vesting requirements on any award. If the
vesting of an award under the Equity Incentive Plan is conditioned on the
completion of a specified period of service with Meridian Interstate Bancorp or
its subsidiaries, without the achievement of performance measures or objectives,
then the required period of service for full vesting shall be determined by the
Committee and evidenced in an award agreement. In the event the
Equity Incentive Plan is established and implemented prior to January 23, 2009,
no awards may vest at a rate exceeding 20% per year commencing one year after
the date of grant; subject to acceleration of vesting in the event of death and
substantial disability. To the extent permitted by applicable law or
regulation, or pursuant to an applicable regulatory waiver, the Committee may
determine that all stock options and stock appreciation rights then held by a
participant shall become fully exerciseable (subject to expiration provisions
otherwise applicable to such award) and all restricted stock awards shall be
fully earned and vested immediately. Unless the Committee specifies
that an unvested award will be forfeited on retirement (as defined in the Equity
Incentive Plan), any unvested award will continue to vest following retirement
in accordance with the vesting schedule set forth in the award
agreement.
Change
in Control
Unless
otherwise stated in an award agreement as determined by the Committee, upon the
occurrence of a change in control of Meridian Interstate Bancorp, all stock
awards then held by a participant will continue to vest in accordance with the
vesting schedule established at the time of grant. For the purposes of the
Equity Incentive Plan, a change in control occurs when: (a) any person is
or becomes the beneficial owner, directly or indirectly, of securities of
Meridian Interstate Bancorp representing 25% or more of the combined voting
power of Meridian Interstate Bancorp’s then outstanding voting securities;
(b) the Incumbent Directors (as defined in the Equity Incentive Plan)
cease, for any reason, to constitute a majority of the Whole Board (as defined
in the Equity Incentive Plan); or (c) a plan of reorganization, merger,
consolidation or similar transaction involving Meridian Interstate Bancorp and
one or more other corporations or entities is consummated, other than a plan of
reorganization, merger, consolidation or similar transaction that is defined in
the Equity Incentive Plan as an Excluded Transaction, or the stockholders of
Meridian Interstate Bancorp approve a plan of complete liquidation of Meridian
Interstate Bancorp, or a sale, liquidation or other disposition of all or
substantially all of the assets of Meridian Interstate Bancorp or the Bank is
consummated; or (d) a tender offer is made for 25% or more of the
outstanding voting securities of Meridian Interstate Bancorp and the
stockholders owning beneficially or of record 25% or more of the outstanding
voting securities of Meridian Interstate Bancorp have tendered or offered to
sell their shares pursuant to such tender offer and such tendered shares have
been accepted by the tender offeror; or (e) a Potential Change in Control
(as defined in the Equity Incentive Plan) occurs, and the Board of Directors
determines, pursuant to the vote of a majority of the Whole Board, with at least
two-thirds of the Incumbent Directors then in office voting in favor of such
determination, to deem the Potential Change in Control to be a change in control
for purposes of the Equity Incentive Plan.
Forfeiture
The
Committee may specify that rights and benefits with respect to any award may be
subject to reduction, cancellation, forfeiture or recoupment upon the occurrence
of certain events in addition to any otherwise applicable vesting or performance
conditions. Such events include termination for cause; termination of
service material violations of policies; breach of noncompetition,
confidentiality or other restrictive covenants; or any other conduct that is
detrimental to Meridian Interstate Bancorp’s business or reputation, its
affiliates and/or its subsidiaries.
If
Meridian Interstate Bancorp is required to prepare an accounting restatement due
to the material noncompliance of Meridian Interstate Bancorp, as a result of
misconduct, with any financial reporting requirement under the securities laws,
any participant who is subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 shall reimburse Meridian Interstate Bancorp the
amount of any payment in settlement of an award earned or accrued during the
twelve- month period following the first public issuance or filing with the U.S.
Securities and Exchange Commission of the financial document embodying such
financial reporting requirement. In addition, in the event of an accounting
restatement, the Committee, in its sole and exclusive discretion, may require
that any participant reimburse Meridian Interstate Bancorp for all or any part
of the amount of any payment in settlement of any award granted
hereunder.
Amendment
and Termination
The Board
of Directors may, at any time, amend or terminate the Equity Incentive Plan or
any award granted under the Equity Incentive Plan, provided that, except as
provided in the Equity Incentive Plan, no amendment or termination may adversely
impair the rights of an outstanding award without the participant’s (or affected
beneficiary’s) written consent. The Board of Directors may not amend the
provision of the Equity Incentive Plan related to repricing, materially increase
the original number of securities that may be issued under the Equity Incentive
Plan (other than as provided in the Equity Incentive Plan), materially increase
the benefits accruing to a participant, or materially modify the requirements
for participation in the Equity Incentive Plan, without approval of
stockholders. Notwithstanding the foregoing, the Board may, without stockholder
approval, amend the Equity Incentive Plan at any time, retroactively or
otherwise, to ensure that the Equity Incentive Plan complies with current or
future law and the Board of Directors may unilaterally amend the Equity
Incentive Plan and any outstanding award, without participant consent, in order
to maintain an exemption from, or to comply with, Section 409A of the
Internal Revenue Code, and its applicable regulations and guidance.
Effective
Date and Duration of Plan
The
Equity Incentive Plan will become effective when established and implemented by
the Board of Directors subsequent to the satisfaction of the applicable
stockholder approval requirements at this annual meeting. The Equity
Incentive Plan will remain in effect as long as any awards under it are
outstanding; however, no awards may be granted under the Equity Incentive Plan
on or after the 10-year anniversary of the effective date of the Equity
Incentive Plan. At any time, the Board of Directors may terminate the
Equity Incentive Plan. However, any termination of the Equity Incentive Plan
will not affect outstanding awards.
Federal
Income Tax Considerations
The
following is a summary of the federal income tax consequences that may arise in
conjunction with participation in the Equity Incentive Plan.
Non-Qualified
Stock Options.
The grant of a non-qualified option will not result in
taxable income to the participant. Except as described below, the participant
will realize ordinary income at the time of exercise in an amount equal to the
excess of the fair market value of the shares acquired over the exercise price
for those shares, and Meridian Interstate Bancorp will be entitled to a
corresponding deduction for tax purposes. Gains or losses realized by the
participant upon disposition of such shares will be treated as capital gains and
losses, with the basis in such shares equal to the fair market value of the
shares at the time of exercise.
Incentive Stock
Options.
The grant of an incentive stock option will not result in
taxable income to the participant. The exercise of an incentive stock option
will not result in taxable income to the participant provided the participant
was, without a break in service, an employee of Meridian Interstate Bancorp or a
subsidiary during the period beginning on the date of the grant of the option
and ending on the date three months prior to the date of exercise (one year
prior to the date of exercise if the participant is disabled, as that term is
defined in the Internal Revenue Code).
The
excess of the fair market value of the shares at the time of the exercise of an
incentive stock option over the exercise price is an adjustment that is included
in the calculation of the participant’s alternative minimum taxable income for
the tax year in which the incentive stock option is exercised. For purposes of
determining the participant’s alternative minimum tax liability for the year of
disposition of the shares acquired pursuant to the incentive stock option
exercise, the participant will have a basis in those shares equal to the fair
market value of the shares at the time of exercise.
If the
participant does not sell or otherwise dispose of the shares within two years
from the date of the grant of the incentive stock option or within one year
after the exercise of such stock option, then, upon disposition of such shares,
any amount realized in excess of the exercise price will be taxed as a capital
gain. A capital loss will be recognized to the extent that the amount realized
is less than the exercise price.
If the
foregoing holding period requirements are not met, the participant will
generally realize ordinary income at the time of the disposition of the shares,
in an amount equal to the lesser of (i) the excess of the fair market value
of the shares on the date of exercise over the exercise price, or (ii) the
excess, if any, of the amount realized upon disposition of the shares over the
exercise price, and Meridian Interstate Bancorp will be entitled to a
corresponding deduction. If the amount realized exceeds the value of the shares
on the date of exercise, any additional amount will be a capital gain. If the
amount realized is less than the exercise price, the participant will recognize
no income, and a capital loss will be recognized equal to the excess of the
exercise price over the amount realized upon the disposition of the
shares.
Stock
Appreciation Rights.
The grant of a stock appreciation right will not
result in taxable income to the participant. Upon exercise of a stock
appreciation right, the fair market value of shares received will be taxable to
the participant as ordinary income and Meridian Interstate Bancorp will be
entitled to a corresponding deduction. Gains and losses realized by the
participant upon disposition of any such shares will be treated as capital gains
and losses, with the basis in such shares equal to the fair market value of the
shares at the time of exercise.
Restricted Stock.
A participant who has been granted a restricted stock award will not
realize taxable income at the time of grant, provided that that the stock
subject to the award is not delivered at the
time of
grant, or if the stock is delivered, it is subject to restrictions that
constitute a “substantial risk of forfeiture” for federal income tax purposes.
Upon the later of delivery or vesting of shares subject to an award, the holder
will realize ordinary income in an amount equal to the then fair market value of
those shares and Meridian Interstate Bancorp will be entitled to a corresponding
deduction for tax purposes. Gains or losses realized by the
participant upon disposition of such shares will be treated as capital gains and
losses, with the basis in such shares equal to the fair market value of the
shares at the time of delivery or vesting. Dividends paid to the holder during
the restriction period, if so provided, will also be compensation income to the
participant and Meridian Interstate Bancorp will be entitled to a corresponding
deduction for tax purposes. A participant who makes an election under
Section 83(b) of the Internal Revenue Code will include the full fair market
value of the restricted stock award in taxable income in the year of grant at
the grant date fair market value.
Withholding of
Taxes.
Meridian Interstate Bancorp may withhold amounts from participants
to satisfy withholding tax requirements. Except as otherwise provided
by the Committee, participants may have shares withheld from awards or may
tender previously owned shares to Meridian Interstate Bancorp to satisfy the
minimum tax withholding requirements.
Change in
Control.
In
the event of a change in control, outstanding unvested awards under the Equity
Incentive Plan may be considered parachute payments that would cause an “excess
parachute payment” under the Internal Revenue Code. An excess
parachute payment may subject the participant to a 20% excise tax and preclude
deduction by Meridian Interstate Bancorp.
Deduction
Limits
. Section 162(m) of the Internal Revenue Code generally
limits Meridian Interstate Bancorp’s ability to deduct for tax purposes
compensation in excess of $1.0 million per year for its chief executive officer
and the three other most highly compensated executives (excluding the chief
financial officer) named in the summary compensation table (“covered
employees”). Restricted stock awards, other than performance-based
restricted stock awards, and other awards that are not subject to performance
goals may be subject to this deduction limit if income recognized on the awards
plus other compensation of the executive that is subject to the limit exceeds
$1.0 million. “Qualified performance-based compensation” is not
subject to this limit and is fully deductible by Meridian Interstate
Bancorp. “Qualified performance-based compensation” is compensation
that is subject to a number of requirements such as stockholder approval of
possible performance goals, and objective quantification of those goals in
advance. Stock options and stock appreciation rights available for
award under the Equity Incentive Plan will be considered “qualified
performance-based compensation” even if such awards vest solely due to the
passage of time during the performance of services. Accordingly, if
an award is not exempt from Section 162(m), income recognized on such award by a
covered employee will be subject to the $1.0 million deduction limit on
compensation.
In the
case of performance-based awards granted to a covered employee that are not
distributed until after the covered employee’s retirement or other termination
of employment, the $1.0 million deduction limit will not apply and the award
will be fully deductible. Performance awards may provide for
accelerated vesting upon death, disability, or a change in control and still be
considered exempt from the $1.0 million deduction limit. The Equity
Incentive Plan is designed so that stock options, stock appreciation rights and
performance-based restricted stock awards that are subject to performance goals
may qualify as qualified performance-based compensation that is not subject to
the $1.0 million deduction limit. Meridian Interstate Bancorp expects
that the Committee will take these deduction limits into account in setting the
size and the terms and conditions of awards. However, the Committee
may decide to grant awards that result in executive compensation that exceeds
the deduction limit.
Tax
Advice.
The preceding discussion is based on federal tax laws
and regulations presently in effect, which are subject to change, and the
discussion does not purport to be a complete description of
the
federal income tax aspects of the Equity Incentive Plan. A participant may
also be subject to state and local taxes in connection with the grant of awards
under the Equity Incentive Plan. Meridian Interstate Bancorp suggests that
participants consult with their individual tax advisors to determine the
applicability of the tax rules to the awards granted to them in their
personal circumstances.
Accounting
Treatment
Under
Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment,”
Meridian Interstate Bancorp is required to recognize compensation expense on its
income statement over the requisite service period or performance period based
on the grant date fair value of stock options and other equity-based
compensation (such as restricted stock and stock appreciation
rights).
Awards
to be Granted
The Board
of Directors adopted the Equity Incentive Plan, and the Compensation Committee
intends to meet promptly after stockholder approval to determine the specific
terms of the awards, including the allocation of awards to executive officers,
employees and non-employee directors. At the present time, no
specific determination has been made as to the grant or allocation of
awards.
Required
Vote
In order
to approve the Equity Incentive Plan, the proposal must receive the affirmative
vote of a majority of the total votes outstanding and eligible to be voted at
the annual meeting, including shares held by Meridian Financial Services,
Incorporated, and a majority of votes cast at the annual meeting, excluding the
shares held by Meridian Financial Services, Incorporated. Pursuant to
applicable Massachusetts law and regulation, if the Equity Incentive Plan is
implemented prior to January 23, 2009, the Equity Incentive Plan must be
approved by at least two-thirds of the total votes eligible to be cast at the
annual meeting, including the shares held by Meridian Financial Services,
Incorporated, and a majority of the total votes eligible to be cast at the
annual meeting, excluding shares held by Meridian Financial Services,
Incorporated. Accordingly, in the event the Equity Incentive Plan is
not approved by stockholders as required under Massachusetts law and regulation
but is approved by a majority of the votes eligible to be cast including shares
held by Meridian Financial Services, Incorporated and a majority of votes cast,
excluding shares held by Meridian Financial Services, Incorporated, the Board
intends to establish and implement the Equity Incentive Plan after January 23,
2009.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE 2008 EQUITY
INCENTIVE PLAN.
Proposal
3 — Ratification of Independent Registered Public Accounting Firm
The Audit Committee of the Board of
Directors has appointed Wolf & Company, P.C. to be the Company’s independent
registered public accounting firm for the 2008 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 Company’s independent registered public accounting
firm.
Audit
Fees
The following table sets forth the fees
paid by the Company for the fiscal years ending December 31, 2007 and 2006 to
Wolf & Company, P.C.
|
2007
|
2006
|
|||||||
|
Audit
fees
|
$ | 186,000 | $ | 74,000 | ||||
|
Audit-related
fees
|
$ | 318,300 | $ | 12,700 | ||||
|
Tax
fees
|
$ | 22,500 | $ | 21,000 | ||||
|
All
other fees
|
$ | 31,000 | $ | 30,350 | ||||
|
(1)
|
Audit
fees relate to the audit of the Company’s annual consolidated financial
statements and quarterly review
fees.
|
|
(2)
|
Audit
related fees pertain to the audit of the Company’s defined contribution
plan in both 2006 and 2007, as well as services rendered for the Company’s
stock offering in 2007.
|
|
(3)
|
Tax
fees consist of tax return preparation and other tax
matters.
|
|
(4)
|
All
other fees pertain software licensing fees paid for use of an online based
risk management program and compliance
activities.
|
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 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, 2007 and 2006, 95% and
81%, of audit services were approved, in advance, by the Audit Committee. The
services that were not pre-approved related to services rendered prior to our
becoming a public company.
Audit
Committee Report
The Company’s management is responsible
for the Company’s internal controls and financial reporting
process. The Company’s independent registered public accounting firm
is responsible for performing an independent audit of the Company’s consolidated
financial statements and issuing an opinion on the conformity of those financial
statements with generally accepted accounting principles. The Audit
Committee oversees the Company’s 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 Company’s 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
independent registered public accounting firm the firm’s 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
Company’s 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 examination, their evaluation of the Company’s
internal controls, and the overall quality of the Company’s 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
Company’s 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 Company’s
financial statements to generally accepted accounting principles. The
Audit Committee’s 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 Committee’s
considerations and discussions with management and the independent registered
public accounting firm do not assure that the Company’s financial statements are
presented in accordance with generally accepted accounting principles, that the
audit of the Company’s financial statements has been carried out in accordance
with generally accepted auditing standards or that the Company’s 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 Company’s Annual Report on Form 10-K for the year
ended December 31, 2007, for
filing
with the Securities and Exchange Commission. The Audit Committee also
has approved, subject to stockholder ratification, the selection of the
Company’s independent registered public accounting firm, for the fiscal year
ending December 31, 2008.
Audit
Committee of the Board of Directors of
Meridian
Interstate Bancorp, Inc.
Edward L.
Lynch, Chair
Vincent
D. Basile
Marilyn
A. Censullo
Anna R.
DiMaria
Gregory
F. Natalucci
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 Market – Our 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. Long-term incentives such as the Equity
Appreciation Plan and the stock-based benefit plan we have proposed for
stockholder approval are important in aligning interests with
stockholders.
|
|
|
·
|
Aligning
with Stockholders – We intend to 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. The employee stock ownership
plan and the equity incentive plan will place stock in the hands of
employees and executives over the course of time and will become an
increasingly important part of total
compensation.
|
|
|
·
|
Driving
Performance – We 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 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.
|
|
|
·
|
Reflecting
our Business Philosophy – Our 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
organization’s 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 incentive
such as the Equity Appreciation Pan and planned stock-based plans,
represent longer-term value in the employment
relationship.
|
Prior to
our initial public offering, our compensation program relied on two primary
elements: (i) base compensation or salary priced in relation to a market survey
and adjusted annually on the basis of a capped merit system; and (ii)
discretionary cash-based, short-term incentive compensation that provides for
payments based on individual performance and job level and company performance
measures.
Adjustments
to base pay in the form of merit increases are limited by a cap on
increases. The cap is recommended by the 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 CPI-U as a proxy for inflation. The inflation rate
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 then computed using a numerical performance evaluation score
for each individual on a one-to-five scale, 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 4% and 4.5%.
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 is benchmarked to peers’ similar plans using
data from the Clark Consulting survey, as explained below.
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.
The
Equity Appreciation Plan was a long-term incentive plan in the form of a
so-called phantom stock plan used to retain and motivate directors, officers and
other managerial employees. Assistant vice presidents and higher were
awarded shares, historically annually, at the discretion of the Board, which
represented a benchmark share value. The shares when granted had no
value and only gained value as our equity subsequently grew. This
plan was terminated at our annual meeting in April of
2007. Stock-based long-term incentive plans are expected to fulfill
similar goals of connecting job performance and bank performance through
long-term mutual benefit.
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 at 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 Compensation Survey Report” issued by Clark
Consulting in conjunction with the Massachusetts Bankers
Association. Its 2007 report contained data from 123 institutions and
included two peer groups that we use as a reference, a $600 million to $1
billion asset size peer group (consisting of 19 institutions) and a $1 billion
and above asset size peer group (consisting of 21 institutions). The
$600 million to $1 billion asset size peer group consisted of the following
institutions:
|
The
Bank of Western Massachusetts
|
Hudson
Savings Bank
|
|
|
BankFive
|
Hyde
Park Savings Bank
|
|
|
Benjamin
Franklin Bank
|
Jeanne
D’Arc Credit Union
|
|
|
Cambridge
Trust Company
|
The
Lowell Five Cent Savings Bank
|
|
|
Dedham
Institution for Savings
|
Metro
Credit Union
|
|
|
East
Boston Savings Bank
|
Slades
Bank
|
|
|
East
Cambridge Savings Bank
|
South
Shore Savings Bank
|
|
|
Easthampton
Savings Bank
|
Unibank
|
|
|
Enterprise
Bank & Trust Company
|
Wainwright
Bank
|
|
|
Greylock
Federal Credit Union
|
The $1 billion and above asset size
peer group consisted of the following institutions:
|
Bangor
Savings Bank (ME)
|
Eastern
Bank
|
|
|
Bank
Rhode Island (RI)
|
HarborOne
Credit Union
|
|
|
BankNewport
(RI)
|
Middlesex
Savings Bank
|
|
|
Berkshire
Bank
|
PeoplesBank
|
|
|
Brookline
Bank
|
Rockland
Trust Company
|
|
|
Cambridge
Savings Bank
|
Salem
Five
|
|
|
Cape
Cod Five Cents Savings Bank
|
United
Bank
|
|
|
Century
Bank
|
The
Washington Trust Company (RI)
|
|
|
Country
Bank for Savings
|
Watertown
Savings Bank
|
|
|
Danversbank
|
Webster
Bank (CT)
|
|
|
Digital
Federal Credit Union
|
The survey’s 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 are
surveyed for a separate report on executive and board compensation, to which we
also subscribe. This additional survey report, specific to executive
and board compensation, is also 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:
|
Bank
Rhode Island (RI)
|
Danvers
Savings Bank
|
|
|
BankNewport
(RI)
|
Dedham
Institution for Savings
|
|
|
Berkshire
Bank
|
East
Boston Savings Bank
|
|
|
Bristol
County Savings Bank
|
Eastern
Bank
|
|
|
Brookline
Bancorp
|
Middlesex
Savings Bank
|
|
|
Cape
Cod Five Cents Savings Bank
|
Peoples
Bank
|
|
|
Century
Bank
|
Plymouth
Savings Bank
|
|
|
Compass
Bank for Savings
|
Watertown
Savings Bank
|
|
|
Country
Bank for Savings
|
The
Washington Trust Company (RI)
|
|
|
Credit
Union Central Falls (RI)
|
The
midpoints of our pay grades are compared to those averaged in the survey, then
adjusted for the age of the data and the survey’s 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 25
th
,
50
th
and 75
th
percentiles. Ultimately, any individual’s rate of pay was determined
with these criteria in mind, but also 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.
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 specific 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 job 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.
Cash-Based
Incentive Compensation.
Our current cash-based
incentive program is intended to reward employees based upon the successful
performance of East Boston Savings Bank and the attainment of individual
performance goals. The Compensation Committee determines the bonus
for the Chief Executive Officer, and for all employees, based upon five
criteria: loan growth; deposit growth; cost of funds; net operating income and
efficiency ratio. All recommendations are presented to the Executive
Committee of the board of directors for final ratification. See
“—Compensation for the Named
Executive Officers in 2007—Chief Executive Officer Compensation,”
below.
Long-Term
Compensation.
We intend to establish a long-term incentive
compensation program to deliver competitive awards to our management
team. We expect to use the 2008 Equity Incentive Plan to reward
outstanding 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 will provide them with a continuing
stake in our success. The nature and size of awards to be made
under
the 2008
Equity Incentive Plan will be based on a number of factors, including regulatory
requirements, awards made to individuals holding comparable positions among our
peer group of financial institutions and the tax or accounting treatment of
specific equity compensation techniques.
Role of the
Compensation Committee.
Prior to our initial
public offering, the Compensation Committee of East Boston Savings Bank
developed and administered the executive compensation program. As a
public company, 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 and Messrs.
Del Rossi and 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
reviews and approves all compensation decisions relating to our executive
officers. 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 Committee’s 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/Clark Consulting Group with respect to compensation paid by
a peer group of 123 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 be
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 amended and
restated employment agreements with our senior officers on terms consistent with
the compensation packages for the highest 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 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 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 sponsor a supplemental executive retirement plan to
provide certain officers with supplemental benefits. (See
“Nonqualified Deferred
Compensation.”
) In connection with our stock offering, the
Bank adopted an employee stock ownership plan for eligible employees of the
Bank. (See
“Employee Stock Ownership
Plan.”
)
Director
Compensation.
Our outside directors are compensated through a combination
of retainers and meeting 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 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 mutual holding
company without public stockholders, we were not able to make equity-based
awards to our officers and employees. As a public company, we expect
that, following our implementation of an equity compensation program, our
Compensation Committee’s 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.
Compensation
for the Named Executive Officers in 2007.
Chief Executive Officer
Compensation.
Mr. Gavegnano was
appointed our Chief Executive Officer in July 2007. Prior to this
appointment, Mr. Gavegnano served as our independent Chairman of the Board and
received a fee of $54,600 in 2006. In determining compensation for
Mr. Gavegnano as our Chief Executive Officer, the Compensation Committee
reviewed salaries and pay grades of similar executives at peer institutions as
compiled by industry standard surveys. Using this data the Committee
determined an equitable pay scale for Mr. Gavegnano.
Compensation for our Other Named
Executive Officers
. In determining compensation for Messrs.
Verdonck, Freehan and Siuda, the Compensation Committee reviewed salaries and
pay grades of similar executives at peer institutions as compiled by industry
standard surveys. 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, 2007.
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 for the 2007 fiscal year and the most highly compensated
executive officers of Meridian Interstate Bancorp or its subsidiaries whose
total compensation for the 2007 fiscal year exceeded $100,000.
|
|
|
Salary
|
Bonus
|
Change
in
Pension Value and Nonqualified Deferred Compensation Earnings |
All
Other
Compensation |
Total
|
|||||||||||||||
|
Name
and Principal Position
|
Year
|
($)(1)
|
($)
|
($)(2)
|
($)(3)
|
($)
|
|||||||||||||||
|
Richard
J. Gavegnano
|
|||||||||||||||||||||
|
Chairman
of the Board and
|
2007
|
$ | 178,216 | $ | - | $ | 203,488 | $ | 1,671 | $ | 383,375 | ||||||||||
|
Chief
Executive Officer
|
2006
|
$ | 153,585 | $ | - | $ | 20,383 | $ | 1,635 | $ | 175,603 | ||||||||||
|
Robert
F. Verdonck (4)
|
2007
|
$ | 360,992 | $ | 52,381 | $ | 173,494 | $ | 66,745 | $ | 653,612 | ||||||||||
|
President
|
2006
|
$ | 349,207 | $ | 47,067 | $ | 103,768 | $ | 30,506 | $ | 530,548 | ||||||||||
|
Philip
F. Freehan
|
2007
|
$ | 232,323 | $ | 33,550 | $ | 68,663 | $ | 42,341 | $ | 376,877 | ||||||||||
|
Executive
Vice President
|
2006
|
$ | 223,667 | $ | 21,581 | $ | 56,984 | $ | 22,370 | $ | 324,602 | ||||||||||
|
Leonard
V. Siuda
|
|||||||||||||||||||||
|
Treasurer
and Chief
|
2007
|
$ | 173,071 | $ | 24,986 | $ | 126,690 | $ | 41,590 | $ | 366,337 | ||||||||||
|
Financial
Officer
|
2006
|
$ | 166,574 | $ | 19,219 | $ | 92,923 | $ | 21,426 | $ | 300,142 | ||||||||||
|
(1)
|
For
Mr. Gavegnano, represents fees relating to Mr. Gavegnano’s 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.
|
|
(2)
|
For
each year, represents the actuarial change in pension value in the
executives’ accounts from December 31 of the prior year to
December 31 of the reported year under each executive’s Supplemental
Executive Retirement Agreement.
|
|
(3)
|
For
2007, consists of three components. Employer contributions
under the company match and safe harbor provision of the 401(k) Plan were
$22,651, $15,952 and $11,880 for Messrs. Verdonck, Freehan and Siuda,
respectively. Transportation compensation paid to executives in
conjunction with termination of bank-provided automobiles for executives
was $41,370, $23,882 and $26,725 for Messrs. Verdonck, Freehan and Siuda,
respectively. The amount of premiums paid for long term health
care insurance was $1,671, $2,724, $2,507 and $2,985 for Messrs.
Gavegnano, Verdonck, Freehan and Siuda,
respectively.
|
|
(4)
|
Mr.
Verdonck resigned and retired from all positions at the Company, Bank and
all affiliated entities, including our mutual holding company, Meridian
Financial Services, Incorporated, effective June 6, 2008. In
exchange for a release of any claims against the Company, the Bank and
affiliated entities by Mr. Verdonck and consistent with the terms of Mr.
Verdonck’s employment agreement, the Bank entered into a Separation
Agreement with Mr. Verdonck (the “Separation Agreement”). The Separation
Agreement provides for the payment of any accrued compensation, 24 months
salary continuation payments at his current rate of salary of $30,961 per
month, the lump sum payment of benefits under his supplemental executive
retirement plan totaling $2,351,591 to be paid on December 7, 2008, the
continuation of an existing split dollar life insurance policy and a bank
owned life insurance policy, both of which had been fully paid, and the
maintenance of existing long term care insurance policies for Mr. Verdonck
and his spouse at a current annual premium of $2,723. An after-tax expense
of $1.0 million associated with the foregoing was recognized by the
Company in the second quarter of
2008.
|
Employment
Agreements
The Bank
plans to enter into amended and restated employment agreements with each of
Philip F. Freehan, its Executive Vice President and Senior Loan Officer, and
Leonard V. Siuda, its Treasurer and Chief Financial Officer. In
addition, Meridian Interstate Bancorp plans to enter into an employment
agreement with Richard J. Gavegnano, its Chairman of the Board and Chief
Executive Officer. The amendments and agreements are currently being
reviewed and assessed by the Compensation Committee. Each of the
amended employment agreements with the Bank and the agreement with Meridian
Interstate Bancorp are substantially identical and are collectively referred to
as the “employment agreements.” The employment agreements are
intended to ensure that the Bank and Meridian Interstate Bancorp will maintain a
stable and competent management base. The continued success of the
Bank and Meridian Interstate Bancorp depends to a significant degree on the
skills and competence of its officers.
The
employment agreements provide for a two-year term. The term of the
employment agreements extends on a daily basis, unless written notice of
non-renewal is given by the board of directors of Meridian Interstate Bancorp or
the Bank or by the executive. The employment agreements will provide
for a base salary for Messrs. Gavegnano, Freehan and Siuda of $300,000, $232,323
and $173,071 respectively. In addition to a base salary, the
employment agreements provide for, among other things, participation in our
annual incentive plan and certain employee benefits plans. The
employment agreements provide for termination by the Bank or Meridian Interstate
Bancorp for cause, as defined in the agreements, at any time. If the
Bank or Meridian Interstate Bancorp terminates an executive’s employment for
reasons other than for cause, or if an executive resigns from the Bank or
Meridian Interstate Bancorp after a: (1) material diminution of
duties and authority; (2) demotion from his current position; (3) removal from
his seat on the board of directors (as applicable); (4) reduction in base salary
(unless the reduction affects all or substantially all officers); (5) relocation
of the executive’s principal place of employment by more than 50 miles (10 miles
in the event of a change in control); or (6) failure of the Bank or Meridian
Interstate Bancorp to comply with the material terms of the agreement, then the
executive would receive a lump sum severance payment equal to the sum of (i) two
times his current annual base salary and (ii) the value of 24 months of health
insurance premiums. In that case Messrs. Gavegnano, Freehan and Siuda
would receive a severance benefit equal to $610,512, $493,032 and $374,428,
respectively. 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 the
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 his “base amount,” less any
other “parachute payments” as those terms are defined under Section 280G of the
Internal Revenue Code. In the event the executives terminate
employment in connection with a change in control, the maximum severance payment
for Messrs. Gavegnano, Freehan and Siuda would receive (based on taxable
compensation earned from 2003 to 2007) equals $343,254, $725,583, and $546,759,
respectively. Generally, an executive’s “base amount” equals the
average of the taxable compensation paid to him for the preceding five taxable
years.
Employee
Severance Compensation Plan
In
connection with Meridian Interstate Bancorp’s stock offering, the Compensation
Committee approved the East Boston Savings Bank Employee Severance Compensation
Plan to provide severance benefits to eligible employees whose employment
terminates in connection with a change in control of East Boston Savings Bank or
Meridian Interstate Bancorp. Employees become eligible for severance
benefits under the plan if they have a minimum of one year of service with East
Boston Savings Bank. Individuals who enter into employment or change
in control-related severance agreements with East Boston Savings Bank or
Meridian Interstate Bancorp will not participate in the severance
plan. Under the
severance
plan, if, within 12 months of a change in control, East Boston Savings Bank or
Meridian Interstate Bancorp or their successors terminate an employee’s
employment or if the individual voluntarily terminates employment upon the
occurrence of events specified in the severance plan, then that individual will
receive a severance payment equal to two week’s compensation for each year of
service with East Boston Savings Bank, up to a maximum payment equal to six
months of the employee’s base compensation or, if otherwise designated by the
board of directors, certain management level employees would receive a severance
payment equal to one year’s compensation regardless of their years of
service. East Boston Savings Bank has designated all Assistant Vice
Presidents and above not covered by an employment agreement as eligible for a
minimum one-year severance benefit. Based solely on compensation and
service levels as of December 31, 2007, the total payments due under the terms
of the severance plan would be approximately $4.8 million, if all eligible
employees are terminated, which is an unlikely event.
Benefit
Plans
Employee Stock
Ownership Plan.
In connection with the 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 plan’s 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 Bank’s
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 participant’s proportional share of
compensation.
Participants will 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 participant’s separation from
service. Any unvested shares that are forfeited upon a participant’s 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 release 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. East
Boston Savings Bank expects to receive a favorable determination letter, but
cannot guarantee that it will.
Nonqualified
Deferred Compensation
Supplemental
Executive Retirement Agreements.
East Boston Savings Bank has
entered into supplemental executive retirement agreements with each of Messrs.
Freehan and Siuda, and was previously a party to a supplemental executive
retirement agreement with Mr. Verdonck. Meridian Interstate Bancorp
has entered into a substantially similar agreement with Mr. Gavegnano in lieu of
the agreement that was in place for Mr. Gavegnano as a
director. Under the agreements, if the executive terminates
employment after 10 years of service, he will receive an annual benefit (paid
monthly) equal to 70% of his final average compensation, offset by his annual
pension benefit. For purposes of the agreements, an executive’s final
average compensation equals the three years’ base salary that results in the
highest average. Mr. Freehan becomes 50% vested in the annual benefit
upon the completion of ten years of service and continues to vest an additional
5% for the next ten years of service, so that he is fully vested following 20
years of service. The benefit is reduced by 2.5% for each year the
executive receives the benefit prior to reaching age
65. Notwithstanding the foregoing, the accrued benefit shall not be
reduced by the 2.5% increments after the executive has completed 25 years of
service with the Bank, or following a Change in Control (as defined in the
supplemental executive retirement agreements). Mr. Siuda’s agreement provides
that he will vest ratably in the stated benefit over a period of 18 years so
that he becomes fully vested upon attainment of age 65. Mr. Gavegnano’s
agreement provides that he will vest ratably in the stated benefit over a period
of eight years (12.5% per year) so that he becomes fully vested upon attainment
of age 68. Mr. Gavegnano’s benefit is not offset by any pension benefit since
Mr. Gavegnano did not participate in the former pension plan. The benefit is
paid in a lump sum. If the executive dies while employed, his beneficiary will
receive a benefit for their life, assuming the executive had retired on his date
of death.
The
following table provides information for the Supplemental Executive Retirement
Agreements as of December 31, 2007.
|
Name
|
Plan Name
|
Number
of
Years
Credited
Service
|
Present
Value
of
Accumulated
Benefit
|
|
Richard
J. Gavegnano
|
Supplemental
Executive
Retirement
Agreement
|
.5
|
$203,488
|
|
Robert
F. Verdonck (1)
|
Supplemental
Executive
Retirement
Agreement
|
23
|
$1,755,074
|
|
Philip
F.
Freehan
|
Supplemental
Executive
Retirement
Agreement
|
23
|
$906,999
|
|
Leonard
V.
Siuda
|
Supplemental
Executive
Retirement
Agreement
|
14
|
$697,158
|
______________
|
|
(1)
|
Mr.
Verdonck resigned and retired from all positions at the Company, Bank and
all affiliated entities, including our mutual holding company, Meridian
Financial Services, Inc., effective June 6,
2008.
|
Director
Compensation
The
following table provides the compensation received by individuals who served as
non-employee directors of Meridian Interstate Bancorp during the 2007 fiscal
year.
|
Fees
Earned or
Paid in Cash |
Change
in Pension
Value and Nonqualified Deferred Compensation Earnings |
All
Other
Compensation |
Total
|
|||||||||||||
|
Name
|
($)
|
($)(1)
|
($)(2)
|
($)
|
||||||||||||
|
Vincent
D. Basile
|
$ | 38,050 | $ | 25,761 | $ | 3,696 | $ | 67,507 | ||||||||
|
Marilyn
A. Censullo
|
4,550 | - | - | 4,550 | ||||||||||||
|
James
P. Del Rossi
|
58,100 | 66,881 | 8,641 | 133,622 | ||||||||||||
|
Anna
R. DiMaria
|
31,850 | - | - | 31,850 | ||||||||||||
|
Domenic
A. Gambardella
|
58,100 | 17,742 | 1,734 | 77,576 | ||||||||||||
|
Edward
L. Lynch
|
35,050 | 18,008 | 2,891 | 55,949 | ||||||||||||
|
Gregory
F. Natalucci
|
29,150 | 8,199 | 1,709 | 39,058 | ||||||||||||
|
James
G. Sartori
|
54,000 | 26,922 | 2,229 | 83,151 | ||||||||||||
|
Paul
T. Sullivan
|
54,000 | 19,145 | 1,841 | 74,986 | ||||||||||||
_________________
|
(1)
|
Represents
the actuarial change in pension value in the directors’ accounts from
December 31, 2006 to December 31, 2007 under each director’s Supplemental
Executive Retirement Agreement.
|
|
(2)
|
Represents
premiums paid for long term care insurance and life insurance,
respectively, as follows: $2,445 and $1,251for Mr. Basile; $6,763 and
$1,878 for Mr. Del Rossi; $1,127 and $607 for Mr. Gambardella; $1,764 and
$1,127 for Mr. Lynch, $1,128 and $581 for Mr. Natalucci; $1,363 and $866
for Mr. Sartori; $1,260 and $581 for Mr.
Sullivan.
|
Cash Retainer and
Meeting Fees for Non-Employee Directors.
The following table sets
forth the applicable retainers and 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 2008. 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
Clerk
|
$ | 300 | ||
|
Meeting
fee for Audit Committee
member
|
$ | 1,500 | ||
|
Meeting
fee for Audit Committee Chairman
|
$ | 2,000 | ||
|
Meeting
fee for Audit Committee
Clerk
|
$ | 1,800 | ||
|
Annual
fee for Strategic Planning Committee member
|
$ | 1,500 | ||
|
East
Boston Savings Bank
|
||||
|
Monthly
fee for Executive Committee members
|
$ | 3,000 | ||
|
Meeting
fee for independent non-holding company members
|
$ | 700 | ||
|
Quarterly
fee for one CRA
director
|
$ | 600 | ||
|
Monthly
fee for one visiting
trustee
|
$ | 600 | ||
|
Meridian
Financial Services
|
||||
|
Board
meeting
fee
|
$ | 600 | ||
|
Annual
Corporator
fee
|
$ | 250 | ||
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
James P.
Del Rossi
Anna R.
DiMaria
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s executive
officers and directors, and persons who own more than 10% of any registered
class of the Company’s 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 Company’s review of copies of the reports it has received and
written representations provided to it from the individuals required to file the
reports, 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,
2007.
Transactions
with Related Persons
The
aggregate amount of loans by East Boston Savings Bank to its executive officers
and directors, and members of their immediate families, was $11.9 million at
December 31, 2007. As of that date, these loans were performing
according to their original repayment terms. The outstanding loans
made to our 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 Bancorp’s Audit Committee Charter, the Audit Committee
periodically reviews, no less frequently than quarterly, a summary of Meridian
Interstate Bancorp’s 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 Bancorp’s capital and surplus (up to a maximum of $500,000) and such
loan must be approved in advance by a majority of the disinterested members of
the Board of Directors. Additionally, pursuant to the Company’s 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 Company’s Board of Directors. The
Nominating/Corporate Governance Committee 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 Committee’s resources, the
Nominating/Corporate Governance Committee will consider only those director
candidates recommended in accordance with the procedures set forth
below.
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;
|
|
|
4.
|
As
to the stockholder making the recommendation, the name and address of such
stockholder as they appear on the Company’s books; provided, however, that
if the stockholder is not a registered holder of the Company’s 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 Company’s 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 Company’s 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
individual’s 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 Company’s
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;
|
|
|
·
|
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
director’s 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 Company’s next annual meeting no later than March 9,
2009. If next year’s annual meeting is held on a date more than 30
calendar days from August 19, 2009, 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
Company’s 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 Company’s proxy statement
for the previous year’s annual meeting. For the 2009 annual meeting
of stockholders, the notice would have to be received between February 9 and
March 9, 2009. If next year’s annual meeting is held on a date more
than 30 calendar days from August 19, 2009, a stockholder’s notice must be
received not later than the close of business on the 10
th
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 Company’s
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.
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 Company’s 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 James P.
DelRossi, 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 Company will pay Georgeson, Inc. a proxy
solicitation firm, a fee of $7,500 to assist the Company in soliciting
proxies.
The Company’s 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.
|
BY
ORDER OF THE BOARD OF DIRECTORS
|
|
|
/s/
Vincent D. Basile
|
|
|
Vincent
D. Basile
|
|
|
Corporate
Secretary
|
East
Boston, Massachusetts
July 7,
2008
APPENDIX
A
MERIDIAN
INTERSTATE BANCORP, INC.
2008
EQUITY INCENTIVE PLAN
ARTICLE 1 –
GENERAL
Section
1.1
Purpose,
Effective Date and Term
. The purpose of this Meridian Interstate
Bancorp, Inc. 2008 Equity Incentive Plan (the “Plan”) is to promote the
long-term financial success of Meridian Interstate Bancorp, Inc., a
Massachusetts corporation (the “Company”), and its Subsidiaries, including East
Boston Savings Bank (the “Bank”), by providing a means to attract, retain and
reward individuals who contribute to such success and to further align their
interests with those of the Company’s stockholders. The “Effective
Date” of the Plan shall be the date the Plan is implemented by the Board
subsequent to the satisfaction of the applicable shareholder approval
requirements. The Plan shall remain in effect as long as any Awards are
outstanding;
provided,
however,
that no Awards may be granted under the Plan after the ten-year
anniversary of the Effective Date.
Section
1.2
Administration
.
The Plan shall be administered by a committee of the Company’s Board of
Directors (the “Committee”), in accordance with Section 5.1.
Section
1.3
Participation
.
Each Employee or Director of, or service provider to, the Company, MHC or any
Subsidiary of the Company who is granted an Award in accordance with the terms
of the Plan shall be a “Participant” in the Plan. Awards shall be limited
to Employees and Directors of, and service providers to, the Company, MHC or any
Subsidiary.
Section
1.4
Definitions
.
Capitalized terms used in this Plan are defined in Article 8 and elsewhere in
this Plan.
ARTICLE 2 -
AWARDS
Section
2.1
General
.
Any Award under the Plan may be granted singularly, in combination with another
Award (or Awards), or in tandem whereby the exercise or vesting of one Award
held by a Participant cancels another Award held by the Participant. Each
Award under the Plan shall be subject to the terms and conditions of the Plan
and such additional terms, conditions, limitations and restrictions as the
Committee shall provide with respect to such Award and as evidenced in the Award
Agreement. Subject to the provisions of Section 2.7, an Award may be
granted as an alternative to or replacement of an existing Award under the Plan
or any other plan of the Company or any Subsidiary or as the form of payment for
grants or rights earned or due under any other compensation plan or arrangement
of the Company or its Subsidiaries, including without limitation the plan of any
entity acquired by the Company or any Subsidiary. The types of Awards that
may be granted under the Plan include:
(a)
Stock Options
. A Stock
Option means a grant under Section 2.2 that represents the right to purchase
shares of Stock at an Exercise Price established by the Committee. Any
Stock Option may be either an Incentive Stock Option (an “ISO”) that is intended
to satisfy the requirements applicable to an “Incentive Stock Option” described
in Code Section 422(b), or a Non-Qualified Stock Option (a “Non-Qualified
Option”) that is not intended to be an ISO; provided, however, that no ISOs may
be granted: (i) after the ten-year anniversary of the Effective Date; or
(ii) to a non-Employee. Unless otherwise specifically provided by
its terms, any Stock Option granted to an Employee under this Plan shall be an
ISO. Any ISO granted under this Plan that does not qualify as an ISO
for any reason (whether at the time of grant or as the result of a subsequent
event) shall be deemed to be a Non-Qualified Option. In addition, any
ISO granted under this Plan may be unilaterally modified by the Committee
to
disqualify
such Stock Option from ISO treatment such that it shall become a Non-Qualified
Option; provided, however, that any such modification shall be ineffective if it
causes the Award to be subject to Code Section 409A (unless, as modified, the
Award complies with Code Section 409A).
(b)
Stock Appreciation
Rights.
A stock appreciation right (a “SAR”) means a grant under
Section 2.2, which represents the right to receive in shares of Stock an amount
equal to or based upon the excess of: (i) the Fair Market Value of a share
of Stock at the time of exercise; over (ii) the Exercise Price established
by the Committee in accordance with Section 2.2.
(c)
Restricted Stock
Awards.
A Restricted Stock Award means a grant of shares of Stock
under Section 2.3 for no consideration or such minimum consideration as may be
required by applicable law, either alone or in addition to other Awards granted
under the Plan, subject to a vesting schedule or the satisfaction of market
conditions or performance conditions.
Section
2.2
Stock
Options and
SARs
.
(a)
Grant of Stock Options and
SARs
. Each Stock Option or SAR shall be evidenced by an Award
Agreement that shall: (i) specify the number of Stock Options or SARs covered by
the Award; (ii) specify the date of grant of the Stock Option or SAR; (iii)
specify the vesting period or conditions to vesting; and (iv) contain such other
terms and conditions not inconsistent with the Plan, including the effect of
termination of a Participant’s employment or Service with the Company as the
Committee may, in its discretion, prescribe.
(b)
Terms and
Conditions
. A Stock Option or SAR shall be exercisable in
accordance with such terms and conditions and during such periods as may be
established by the Committee. In no event, however, shall a Stock Option or SAR
expire later than ten (10) years after the date of its grant (or five (5) years
with respect to ISOs granted to an Employee who is a 10% Stockholder). The
“Exercise Price” of each Stock Option and SAR shall not be less than 100% of the
Fair Market Value of a share of Stock on the date of grant (or, if greater, the
par value of a share of Stock);
provided, however,
that the
Exercise Price of an ISO shall not be less than 110% of Fair Market Value of a
share of Stock on the date of grant if granted to a 10% Stockholder;
provided further,
that the
Exercise Price may be higher or lower in the case of Stock Options or SARs
granted or exchanged in replacement of existing Awards held by an Employee or
Director of, or service provider to, an acquired entity. The payment of
the Exercise Price of a Stock Option shall be by cash or, subject to limitations
imposed by applicable law, by such other means as the Committee may from time to
time permit, including: (i) by tendering, either actually or
constructively by attestation, shares of Stock valued at Fair Market Value as of
the day of exercise; (ii) by irrevocably authorizing a third party,
acceptable to the Committee, to sell shares of Stock (or a sufficient portion of
the shares) acquired upon exercise of the Stock Option and to remit to the
Company a sufficient portion of the sale proceeds to pay the entire Exercise
Price and any tax withholding resulting from such exercise; (iii) by personal,
certified or cashiers’ check; (iv) by other property deemed acceptable by
the Committee; or (v) by any combination thereof. The total
number of shares that may be acquired upon the exercise of a Stock Option or SAR
shall be rounded down to the nearest whole share.
Section
2.3
Restricted Stock
Awards
.
(a)
Grant of Restricted Stock
Awards
. Each Restricted Stock Award shall be evidenced by an
Award Agreement that shall: (i) specify the number of shares of Stock covered by
the Restricted Stock Award; (ii) specify the date of grant of the
Restricted Stock Award; (iii) specify the vesting period; and (iv) contain such
other terms and conditions not inconsistent with the Plan, including the effect
of termination of a Participant’s employment or Service with the Company, as the
Committee may, in its discretion, prescribe. All Restricted Stock Awards shall
be in the form of issued
and
outstanding shares of Stock that shall be either: (x) registered in the name of
the Participant and held by the Company, together with a stock power executed by
the Participant in favor of the Company, pending the vesting or forfeiture of
the Restricted Stock Award; or (y) registered in the name of, and delivered to,
the Participant. In any event, the certificates evidencing the Restricted Stock
Award shall at all times prior to the applicable vesting date bear the following
legend:
The Stock
evidenced hereby is subject to the terms of an Award Agreement with Meridian
Interstate Bancorp, Inc. dated [Date], made pursuant to the terms of the
Meridian Interstate Bancorp, Inc. 2008 Equity Incentive Plan, copies of which
are on file at the executive offices of Meridian Interstate Bancorp, Inc., and
may not be sold, encumbered, hypothecated or otherwise transferred except in
accordance with the terms of such Plan and Award Agreement,
or such
other restrictive legend as the Committee, in its discretion, may
specify. Notwithstanding the foregoing, the Company may in its sole
discretion issue Restricted Stock Awards in any other approved format (
e.g. electronically
) in order
to facilitate the paperless transfer of such Awards. In the event
Restricted Stock Awards are not issued in certificate form, the Company and the
transfer agent shall maintain appropriate bookkeeping entries that evidence
Participants’ ownership of such Awards. Restricted Stock Awards that
are not issued in certificate form shall be subject to the same terms and
conditions of the Plan as certificated shares, including the restrictions on
transferability and the provision of a stock power executed by the Participant
in favor of the Company, until the satisfaction of the conditions to which the
Restricted Stock Award is subject.
(b)
Terms and
Conditions.
(i)
Dividends.
Unless
the Committee determines otherwise with respect to any Restricted Stock Award
and specifies such determination in the relevant Award Agreement, any dividends
or distributions declared and paid with respect to shares of Stock subject to
the Restricted Stock Award, other than a stock dividend consisting of shares of
Stock, shall be immediately distributed to the Participant. If the
Committee determines to delay the distribution of dividends to a Participant
until the vesting of a Restricted Stock Award, the Committee shall cause the
dividend (and any earnings thereon) to be distributed to the Participant no
later than two and one-half months following the date on which the Restricted
Stock Award vests.
(ii)
Voting Rights.
Unless the
Committee determines otherwise with respect to any Restricted Stock Award and
specifies such determination in the relevant Award Agreement, voting rights
appurtenant to the shares of Stock subject to the Restricted Stock Award shall
be exercised by the Participant in his or her discretion.
(iii)
Tender Offers and Merger
Elections.
Each Participant to whom a Restricted Stock Award
is granted shall have the right to respond, or to direct the response, with
respect to the related shares of Stock, to any tender offer, exchange offer,
cash/stock merger consideration election or other offer made to, or elections
made by, the holders of shares of Stock. Such a direction for any such shares of
Stock shall be given by proxy or ballot (if the Participant is the beneficial
owner of the shares of Stock for voting purposes) or by completing and filing,
with the inspector of elections, the trustee or such other person who shall be
independent of the Company as the Committee shall designate in the direction (if
the Participant is not such a beneficial owner), a written direction in the form
and manner prescribed by the Committee. If no such direction is
given, then the shares of Stock shall not be tendered.
Section
2.4
Performance-Based
Compensation
. Any Award under the Plan that is intended to be
“performance-based compensation” within the meaning of Code Section 162(m) shall
be conditioned on the achievement of one or more objective performance measures,
to the extent required by Code Section 162(m), as may be determined by the
Committee. The grant of any Award and the establishment of
performance measures that are intended to be performance-based compensation
shall be made during the period required under Code Section 162(m) and shall
comply with all applicable requirements of Code Section 162(m).
(a)
Performance Measures.
Such performance measures may be based on any one or more of the
following:
(i) basic
earnings per share;
(ii) basic
cash earnings per share;
(iii)
diluted earnings per share;
(iv) diluted
cash earnings per share;
(v) net
income;
(vi) cash
earnings;
(vii) net
interest income;
(viii) non-interest
income;
(ix) general
and administrative expense to average assets ratio;
(x)
cash general and administrative expense to average
assets ratio;
(xi) efficiency
ratio;
(xii) cash
efficiency ratio;
(xiii) return
on average assets;
(xiv)
cash return on average assets;
(xv) return
on average stockholders' equity;
(xvi)
cash return on average stockholders' equity;
(xvii) return
on average tangible stockholders' equity;
(xviii) cash
return on average tangible stockholders' equity;
(xix) core
earnings;
(xx) operating
income;
(xxi) operating
efficiency ratio;
(xxii) net
interest rate spread;
(xxiii) growth
in assets, loans, or deposits;
(xxiv) loan
production volume;
(xxv) non-performing
loans;
(xxvi) cash
flow;
(xxvii) strategic
business objectives, consisting of one or more objectives based upon meeting
specified cost targets, business expansion goals, and goals relating to
acquisitions or divestitures, or goals relating to capital raising and capital
management; or
(xxviii) any
combination of the foregoing.
Performance
measures may be based on the performance of the Company as a whole or on any one
or more Subsidiaries or business units of the Company or a Subsidiary and may be
measured relative to a peer group, an index or a business plan. In
establishing any performance measures, the Committee may provide for the
exclusion of the effects of the following items, to the extent identified in the
audited financial statements of the Company, including footnotes, or in the
Management’s Discussion and Analysis section of the Company’s annual report or
in the Compensation Discussion and Analysis Section, if any, of the Company’s
annual proxy statement: (i) extraordinary, unusual, and/or
nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a
business; (iii) changes in tax or accounting principles, regulations or laws; or
(iv) mergers or acquisitions. To the extent not specifically excluded,
such effects shall be included in any applicable performance
measure.
(b)
Adjustments
. Pursuant
to this Section 2.4, in certain circumstances the Committee may adjust
performance measures;
provided, however,
no
adjustment may be made with respect to an Award that is intended to be
performance-based compensation within the meaning of Code Section 162(m), except
to the extent the Committee exercises such negative discretion as is permitted
under applicable law for purposes of an exception under Code Section
162(m). If the Committee determines that a change in the business,
operations, corporate structure or capital structure of the Company or the
manner in which the Company or its Subsidiaries conducts its business or other
events or circumstances render current performance measures to be unsuitable,
the Committee may modify such performance measures, in whole or in part, as the
Committee deems appropriate. If a Participant is promoted, demoted or
transferred to a different business unit during a performance period, the
Committee may determine that the selected performance measures or applicable
performance period are no longer appropriate, in which case, the Committee, in
its sole discretion, may: (i) adjust, change or eliminate the performance
measures or change the applicable performance period; or (ii) cause to be made a
cash payment to the Participant in an amount determined by the
Committee.
Section
2.5
Vesting
of Awards
.
(a) If
the right to become vested in an Award under the Plan (including the right to
exercise a Stock Option or SAR) is conditioned on the completion of a specified
period of Service with the Company or its Subsidiaries, without achievement of
performance measures or other performance objectives being required as a
condition of vesting, and without it being granted in lieu of, or in exchange
for, other compensation, then the required period of Service for full vesting
shall be determined by the Committee and evidenced in the Award Agreement
(subject to acceleration of vesting, to the extent permitted by the Committee,
including in the event of the Participant’s death, Disability, or to the extent
not prohibited by applicable law or regulations or in the event of an applicable
regulatory waiver, a Change in Control);
provided, however
, that to
the extent required by applicable law or regulations or in the absence of an
applicable regulatory waiver, no Awards
under the
Plan shall vest at a rate exceeding twenty percent (20%) per year, commencing
one year after the date of grant. Unless otherwise provided by the
Committee, Service as a director emeritus or advisory director shall constitute
Service for purposes of vesting.
(b) Notwithstanding
Section 2.8 and Article IV hereof, to the extent permitted by applicable law or
regulations, or pursuant to an applicable regulatory waiver, the Committee may
determine that all Stock Options and SARs then held by the Participant shall
become fully exercisable (subject to the expiration provisions otherwise
applicable to the Stock Option or SAR), and all Restricted Stock Awards
described in Section 2.1(c) shall be fully earned and vested
immediately.
Section
2.6
Deferred
Compensation
. If any Award would be considered “deferred
compensation” as defined under Code Section 409A (“Deferred Compensation”), the
Committee reserves the absolute right (including the right to delegate such
right) to unilaterally amend the Plan or the Award Agreement, without the
consent of the Participant, to maintain exemption from, or to comply with, Code
Section 409A. Any amendment by the Committee to the Plan or an Award
Agreement pursuant to this Section 2.6 shall maintain, to the extent
practicable, the original intent of the applicable provision without violating
Code Section 409A. A Participant’s acceptance of any Award under the
Plan constitutes acknowledgement and consent to such rights of the Committee,
without further consideration or action. Any discretionary authority
retained by the Committee pursuant to the terms of this Plan or pursuant to an
Award Agreement shall not be applicable to an Award which is determined to
constitute Deferred Compensation, if such discretionary authority would
contravene Code Section 409A.
Section
2.7
Prohibition
Against Option Repricing
. Except for adjustments pursuant to
Section 3.4, and reductions of the Exercise Price approved by the Company’s
stockholders, neither the Committee nor the Board shall have the right or
authority to make any adjustment or amendment that reduces or would have the
effect of reducing the Exercise Price of a Stock Option or SAR previously
granted under the Plan, whether through amendment, cancellation (including
cancellation in exchange for a cash payment in excess of the Stock Option’s
in-the-money value) or replacement grants, or other means.
Section
2.8
Effect of
Termination of Service on Awards.
The Committee shall
establish the effect of a Termination of Service on the continuation of rights
and benefits available under an Award or the Plan and, in so doing, may make
distinctions based upon, among other things, the cause of Termination of Service
and type of Award. Unless the Committee shall specifically state
otherwise at the time an Award is granted, all Awards to an Employee, Director
or service provider shall vest immediately upon such individual’s death or
Disability. Unless otherwise provided in an Award Agreement, the
following provisions shall apply to each Award granted under this
Plan:
(a) Upon
a Participant’s Termination of Service for any reason other than Retirement,
Disability, death or termination for Cause, Stock Options and SARs shall be
exercisable only as to those shares that were immediately exercisable by such
Participant at the date of termination, and Stock Options and SARs may be
exercised only for a period of three months following termination;
provided
,
however
, that upon a
Participant’s Termination of Service due to Retirement, the Participant’s vested
Stock Options and SARs shall remain exercisable for the duration of the term set
forth in the Award Agreement. Unless the Committee specifies that an
unvested Award shall be forfeited on Retirement, any Stock Options, SARs and/or
Restricted Stock Awards that have not vested as of the date of Termination of
Service due to Retirement shall continue to vest in accordance with the schedule
set forth in the Award Agreement. No Stock Options will be considered
ISOs unless exercised within 3 months of Termination of Service, except to the
extent set forth in 2.8(c) hereof.
(b) In
the event of a Termination of Service for Cause, all Stock Options, SARs and
Restricted Stock Awards granted to a Participant under the Plan not exercised or
vested shall expire and be forfeited.
(c) Upon
Termination of Service for reason of Disability or death, all Stock Options and
SARs shall be exercisable as to all shares subject to an outstanding Award,
whether or not then exercisable, and all Restricted Stock Awards shall vest as
to all shares subject to an outstanding Award, whether or not otherwise
immediately vested, at the date of Termination of Service, and Stock Options and
SARs may be exercised for a period of one year following Termination of Service,
provided, however
, that
no Stock Option shall be eligible for treatment as an ISO in the event such
Stock Option is exercised more than one year following Termination of Service
due to Disability and
provided, however
, in order
to obtain ISO treatment for Stock Options exercised by heirs or devisees of an
optionee, the optionee’s death must have occurred while employed or within three
(3) months of Termination of Service.
(d) Notwithstanding
anything herein to the contrary, no Stock Option or SAR shall be exercisable
beyond the last day of the original term of such Stock Option or
SAR.
(e) Notwithstanding
the provisions of this Section 2.8, the effect of a Change in Control on the
vesting/exercisability of Stock Options, SARs and Restricted Stock Awards is as
set forth in Article 4.
ARTICLE 3 -
SHARES SUBJECT TO
PLAN
Section
3.1
Available
Shares
. The shares of Stock with respect to which Awards may be
made under the Plan shall be shares currently authorized but unissued, currently
held or, to the extent permitted by applicable law, subsequently acquired by the
Company as treasury shares, including shares purchased in the open market or in
private transactions.
Section
3.2
Share
Limitations
.
(a)
Share
Reserve
. Subject to the following provisions of this Section
3.2, the maximum number of shares of Stock that may be delivered to Participants
and their beneficiaries under the Plan shall be equal to One Million Four
Hundred Forty-Nine Thousand (1,449,000) shares of Stock. The maximum
number of shares of Stock that may be delivered pursuant to the exercise of
Stock Options (all of which may be granted as ISOs) and/or SARs, in the
aggregate, is One Million Thirty-Five Thousand (1,035,000) shares of
Stock. The maximum number of shares of Stock that may be issued in
conjunction with Restricted Stock Awards shall be Four Hundred Fourteen Thousand
(414,000) shares of Stock. The aggregate number of shares available
for grant under the Plan and the number of shares of Stock subject to
outstanding Awards shall be subject to adjustment as provided in Section
3.4.
(b)
Computation of Shares
Available.
For purposes of this Section 3.2 and in connection
with the granting of a Stock Option or SAR (other than a tandem SAR), or a
Restricted Stock Award, the number of shares of Stock available for the granting
of additional Stock Options, SARs and Restricted Stock Awards shall be reduced
by the number of shares of Stock in respect of which the Stock Option, SAR or
Restricted Stock Award is granted or denominated. To the extent any
shares of Stock covered by an Award (including Restricted Stock Awards) under
the Plan are not delivered to a Participant or beneficiary for any reason,
including because the Award is forfeited or canceled or because a Stock Option
or SAR is not exercised, then such shares shall not be deemed to have been
delivered for purposes of determining the maximum number of shares of Stock
available for delivery under the Plan. To the extent (i) a Stock
Option is exercised by using an actual or constructive exchange of shares of
Stock to pay the Exercise Price, (ii) shares of Stock are withheld to
satisfy
withholding
taxes upon exercise or vesting of an Award granted hereunder, or
(iii) SARs are settled in shares of Stock upon exercise, the number of shares of
Stock available shall be reduced by the gross number of Stock Options or SARs
exercised rather than by the net number of shares of Stock issued.
Section
3.3
Limitations
on Grants to Individuals
.
(a)
Options and SARs.
The maximum
number of shares of Stock, in the aggregate, that may be subject to Stock
Options or SARs granted to any one Employee Participant under the Plan shall be
Two Hundred Fifty-Eight Thousand Seven Hundred Fifty (258,750), all of
which may be granted during any calendar year. For
purposes of this Section 3.3(a), if a Stock Option is granted in tandem with an
SAR, such that the exercise of the Stock Option or SAR with respect to a share
of Stock cancels the tandem SAR or Stock Option, respectively, with respect to
such share, the tandem Stock Option and SAR with respect to each share of Stock
shall be counted as covering only one share of Stock for purposes of applying
the limitations of this Section 3.3.
(b)
Restricted Stock Awards
.
To the extent required
by applicable law or regulations or in the absence of an applicable regulatory
waiver, the maximum number of shares of Stock that may be subject to Restricted
Stock Awards described under Section 2.1(c) that are granted to any one Employee
Participant under the Plan shall be One Hundred Three Thousand Five Hundred
(103,500) all of which may be granted during any calendar year.
(c)
Director
Awards.
To the extent required by applicable law or
regulations or in the absence of an applicable regulatory waiver, the maximum
number of shares of Stock that may be covered by Awards granted to any one
individual non-Employee Director pursuant to Section 2.1(a) (relating to Stock
Options) and Section 2.1(b) (relating to SARs) shall be five percent of all
shares of Stock that may be granted pursuant to Section 2.1(a) and Section
2.1(b), and the maximum number of shares that may be covered by Awards granted
to any one individual non-Employee Director pursuant to Section 2.1(c) (relating
to Restricted Stock Awards) shall be five percent of all shares of Stock that
may be granted pursuant to Section 2.1(c). In addition, to the extent
required by applicable law or regulations or in the absence of an applicable
regulatory waiver, the maximum number of shares of stock that may be covered by
Awards granted to all non-Employee Directors, in the aggregate, pursuant to
Section 2.1(a) (relating to Stock Options) and Section 2.1(b) (relating to SARs)
shall be 30% of all shares of Stock to be granted pursuant to Section 2.1(a) and
Section 2.1(b), and the maximum number of shares of stock that may be covered by
Awards granted to all non-Employee Directors, in the aggregate, under Section
2.1(c) (relating to Restricted Stock Awards) shall be 30% of all shares of Stock
to be granted pursuant to Section 2.1(c).
Section
3.4
Corporate
Transactions
.
(a)
General
. In the
event any recapitalization, forward or reverse stock split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or exchange of shares
of Stock or other securities, stock dividend or other special and nonrecurring
dividend or distribution (whether in the form of cash, securities or other
property), liquidation, dissolution, or other similar corporate transaction or
event, affects the shares of Stock such that an adjustment is appropriate in
order to prevent dilution or enlargement of the rights of Participants under the
Plan and/or under any Award granted under the Plan, then the Committee shall, in
an equitable manner, adjust any or all of (i) the number and kind of securities
deemed to be available thereafter for grants of Stock Options, SARs and
Restricted Stock Awards in the aggregate to all Participants and individually to
any one Participant, (ii) the number and kind of securities that may be
delivered or deliverable in respect of outstanding Stock Options, SARs and
Restricted Stock Awards, and (iii) the Exercise Price of Stock Options and
SARs. In addition, the Committee is authorized to make adjustments in
the terms and conditions of, and the criteria included in, Stock Options, SARs
and Restricted Stock Awards (including, without limitation, cancellation of
Stock
Options,
SARs and Restricted Stock Awards in exchange for the in-the-money value, if any,
of the vested portion thereof, or substitution or exchange of Stock Options,
SARs and Restricted Stock Awards using stock of a successor or other
entity) in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence) affecting the Company or
any parent or Subsidiary or the financial statements of the Company or any
parent or Subsidiary, or in response to changes in applicable laws, regulations,
or accounting principles. Unless otherwise determined by the Committee, any such
adjustment to an Award intended to qualify as “performance-based compensation”
shall conform to the requirements of Code Section 162(m) and the regulations
thereunder then in effect.
(b)
Merger in which Company is Not
Surviving Entity.
In the event of any merger, consolidation, or other
business reorganization (including, but not limited to, a Change in Control) in
which the Company is not the surviving entity, unless otherwise determined by
the Committee at any time at or after grant and prior to the consummation of
such merger, consolidation or other business reorganization, any Stock Options
or SARs granted under the Plan which remain outstanding shall be converted into
Stock Options to purchase or SARs to acquire voting common equity securities of
the business entity which survives such merger, consolidation or other business
reorganization having substantially the same terms and conditions as the
outstanding Stock Options or SARs under this Plan and reflecting the same
economic benefit (as measured by the difference between the aggregate Exercise
Price and the value exchanged for outstanding shares of Stock in such merger,
consolidation or other business reorganization), all as determined by the
Committee prior to the consummation of such merger; provided, however, that the
Committee may, at any time prior to the consummation of such merger,
consolidation or other business reorganization, direct that all, but not less
than all, outstanding Stock Options and SARs be canceled as of the effective
date of such merger, consolidation or other business reorganization in exchange
for a cash payment per share of Stock equal to the excess (if any) of the value
exchanged for an outstanding share of Stock in such merger, consolidation or
other business reorganization over the Exercise Price of the Stock Option or SAR
being canceled.
Section
3.5
Delivery
of Shares
. Delivery of shares of Stock or other amounts under the
Plan shall be subject to the following:
(a)
Compliance with Applicable
Laws.
Notwithstanding any other provision of the Plan, the Company
shall have no obligation to deliver any shares of Stock or make any other
distribution of benefits under the Plan unless such delivery or distribution
complies with all applicable laws (including, the requirements of the Securities
Act), and the applicable requirements of any securities exchange or similar
entity.
(b)
Certificates.
To the
extent that the Plan provides for the issuance of shares of Stock, the issuance
may be effected on a non-certificated basis, to the extent not prohibited by
applicable law or the applicable rules of any stock exchange.
ARTICLE 4
- CHANGE IN
CONTROL
Section
4.1
Consequence
of a Change in Control
. Subject to the provisions of Section
2.5 (relating to vesting and acceleration) and Section 3.4
(relating to the
adjustment of shares), and except as otherwise provided in the Plan or as
determined by the Committee and set forth in the terms of any Award
Agreement:
(a) In
the event of a Change in Control, all Stock Options and SARs then held by the
Participant shall continue to vest and be exercisable pursuant to their original
terms (subject to the expiration provisions otherwise applicable to the Stock
Option or SAR) whether or not the Participant has a Termination of Service
(other than for Cause).
(b) In
the event of a Change in Control, all Restricted Stock Awards described in
Section 2.1(c) shall continue to vest pursuant to their original vesting
schedule whether or not the Participant has a Termination of Service (other than
for Cause).
Section
4.2
Definition
of Change in Control
. For purposes of the Plan, unless otherwise
provided in an Award Agreement, a “Change in Control” shall be deemed to have
occurred upon the earliest to occur of the following:
(a) any
“person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act
(a “Person”), is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing twenty five percent (25%) or more of the combined voting power of
the Company’s then outstanding Voting Securities, provided that, notwithstanding
the foregoing and for all purposes of this Plan: (a) the term “Person” shall not
include (1) the MHC, the Company or any of its Subsidiaries, (2) an employee
benefit plan of the Company or any of its Subsidiaries (including the Plan), and
any trustee or other fiduciary holding securities under any such plan (but only
with respect to securities held under any such plan), or (3) a corporation or
other entity owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of Stock of the
Company; (b) no Person shall be deemed the beneficial owner of any securities
acquired by such Person in an Excluded Transaction; and (c) no Director or
officer of the Company or any direct or indirect Subsidiary of the Company (or
any affiliate of any such Director or officer) shall, by reason of any or all of
such Directors or officers acting in their capacities as such, be deemed to
beneficially own any securities beneficially owned by any other such Director or
officer (or any affiliate thereof); or
(b) the
Incumbent Directors cease, for any reason, to constitute a majority of the Whole
Board; or
(c) a
plan of reorganization, merger, consolidation or similar transaction involving
the Company and one or more other corporations or entities is consummated, other
than a plan of reorganization, merger, consolidation or similar transaction that
is an Excluded Transaction, or the stockholders of the Company approve a plan of
complete liquidation of the Company, or a sale, liquidation or other disposition
of all or substantially all of the assets of the Company or any bank Subsidiary
of the Company is consummated; or
(d) a
tender offer is made for 25% or more of the outstanding Voting Securities of the
Company and the stockholders owning beneficially or of record 25% or more of the
outstanding Voting Securities of the Company have tendered or offered to sell
their shares pursuant to such tender offer and such tendered shares have been
accepted by the tender offeror; or
(e) a
Potential Change in Control occurs, and the Board determines, pursuant to the
vote of a majority of the Whole Board, with at least two-thirds (2/3) of the
Incumbent Directors then in office voting in favor of such determination, to
deem the Potential Change in Control to be a Change in Control for the purposes
of the Plan.
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because
any Person (the “Subject Person”) acquired beneficial ownership of more than the
permitted amount of the then outstanding common stock or Voting Securities as a
result of the acquisition of Stock or Voting Securities by the Company, which by
reducing the number of shares of Stock or Voting Securities then outstanding,
increases the proportional number of shares beneficially owned by the Subject
Person;
provided,
however,
that if a Change in Control would occur (but for the operation
of this sentence) as a result of the acquisition of Stock or Voting Securities
by the Company, and after such share acquisition by the Company, the Subject
Person becomes the beneficial owner of any additional Stock or
Voting
Securities
which increases the percentage of the then outstanding Stock or Voting
Securities beneficially owned by the Subject Person, then a Change in Control
shall occur. In addition, and notwithstanding the foregoing, a Change
in Control shall not be deemed to occur as a result of or in connection with a
second step conversion of the MHC, unless otherwise provided in the Award
Agreement. In the event that an Award constitutes Deferred
Compensation, and the settlement of, or distribution of benefits under, such
Award is to be triggered solely by a Change in Control, then with respect to
such Award, a Change in Control shall be defined as required under Code Section
409A, as in effect at the time of such transaction.
ARTICLE 5 -
COMMITTEE
Section
5.1
Administration
. The
Plan shall be administered by the members of the Compensation Committee of the
Company who are Disinterested Board Members. If the Committee
consists of fewer than three Disinterested Board Members, then the Board shall
appoint to the Committee such additional Disinterested Board Members as shall be
necessary to provide for a Committee consisting of at least three Disinterested
Board Members. Any members of the Committee who do not qualify as
Disinterested Board Members shall abstain from participating in any discussion
to make or administer Awards that are made to Participants who at the time of
consideration for such Award: (i) are persons subject to the short-swing profit
rules of Section 16 of the Exchange Act, or (ii) are reasonably anticipated to
be Covered Employees during the term of the Award. The Board (or
those members of the Board who are “independent directors” under the corporate
governance statutes of any national securities exchange on which the Company
lists its securities) may, in its discretion, take any action and exercise any
power, privilege or discretion conferred on the Committee under the Plan with
the same force and effect under the Plan as if done or exercised by the
Committee.
Section
5.2
Powers of
Committee
. The Committee’s administration of the Plan shall be
subject to the following:
(a) Subject
to the provisions of the Plan, the Committee will have the authority and
discretion to select from among the Company’s and its Subsidiaries’ Employees,
Directors and service providers those persons who shall receive Awards, to
determine the time or times of receipt, to determine the types of Awards and the
number of shares covered by the Awards, to establish the terms, conditions,
performance criteria, restrictions (including without limitation, provisions
relating to non-competition, non-solicitation and confidentiality), and other
provisions of such Awards (subject to the restrictions imposed by Article 6) to
cancel or suspend Awards and to reduce, eliminate or accelerate any restrictions
or vesting requirements applicable to an Award at any time after the grant of
the Award.
(b) The
Committee will have the authority and discretion to interpret the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan, and
to make all other determinations that may be necessary or advisable for the
administration of the Plan.
(c) The
Committee will have the authority to define terms not otherwise defined
herein.
(d) Any
interpretation of the Plan by the Committee and any decision made by it under
the Plan is final and binding on all persons.
(e) In
controlling and managing the operation and administration of the Plan, the
Committee shall take action in a manner that conforms to the charter and bylaws
of the Company and applicable corporate law.
Section
5.3
Delegation
by Committee
. Except to the extent prohibited by applicable law,
the applicable rules of a stock exchange or the Plan, or as necessary to comply
with the exemptive
provisions
of Rule 16b-3 promulgated under the Exchange Act or Code Section 162(m), the
Committee may allocate all or any portion of its responsibilities and powers to
any one or more of its members and may delegate all or any part of its
responsibilities and powers to any person or persons selected by it,
including: (a) delegating to a committee of one or more members
of the Board who are not “outside directors” within the meaning of Code Section
162(m), the authority to grant Awards under the Plan to eligible persons who are
not persons with respect to whom the Company wishes to comply with Code Section
162(m); and/or (b) delegating to a committee of one or more members of the Board
who are not “non-employee directors,” within the meaning of Rule 16b-3, the
authority to grant Awards under the Plan to eligible persons who are not then
subject to Section 16 of the Exchange Act. The acts of such
delegates shall be treated hereunder as acts of the Committee and such delegates
shall report regularly to the Committee regarding the delegated duties and
responsibilities and any Awards so granted. Any such allocation or
delegation may be revoked by the Committee at any time.
Section
5.4
Information
to be Furnished to Committee
. As may be permitted by applicable
law, the Company and its Subsidiaries shall furnish the Committee with such data
and information as it determines may be required for it to discharge its
duties. The records of the Company and its Subsidiaries as to a
Participant’s employment, termination of employment, leave of absence,
reemployment and compensation shall be conclusive on all persons unless
determined by the Committee to be manifestly incorrect. Subject to
applicable law, Participants and other persons entitled to benefits under the
Plan must furnish the Committee such evidence, data or information as the
Committee considers desirable to carry out the terms of the Plan.
Section
5.5
Committee
Action
.
The
Committee shall hold such meetings, and may make such administrative rules and
regulations, as it may deem proper. A majority of the members of the Committee
shall constitute a quorum, and the action of a majority of the members of the
Committee present at a meeting at which a quorum is present, as well as actions
taken pursuant to the unanimous written consent of all of the members of the
Committee without holding a meeting, shall be deemed to be actions of the
Committee. All actions of the Committee shall be final and conclusive and shall
be binding upon the Company, Participants and all other interested parties. Any
person dealing with the Committee shall be fully protected in relying upon any
written notice, instruction, direction or other communication signed by a member
of the Committee or by a representative of the Committee authorized to sign the
same in its behalf.
ARTICLE 6
- AMENDMENT AND
TERMINATION
Section
6.1
General
.
The Board may, as permitted by law, at any time, amend or terminate the Plan,
and may amend any Award Agreement, provided that no amendment or termination
(except as provided in Section 2.6, Section 3.4 and Section 6.2) may cause
the Award to violate Code Section 409A, or, in the absence of written consent to
the change by the affected Participant (or, if the Participant is not then
living, the affected beneficiary), adversely impair the rights of any
Participant or beneficiary under any Award granted under the Plan prior to the
date such amendment is adopted by the Board;
provided, however
, that, no
amendment may (a) materially increase the benefits accruing to Participants
under the Plan; (b) materially increase the aggregate number of securities
which may be issued under the Plan, other than pursuant to Section 3.4, or
(c) materially modify the requirements for participation in the Plan,
unless the amendment under (a), (b) or (c) above is approved by the Company’s
stockholders.
Section
6.2
Amendment
to Conform to Law and Accounting Changes
. Notwithstanding any
provision in this Plan or any Award Agreement to the contrary, the Committee may
amend the Plan or an Award Agreement, to take effect retroactively or otherwise,
as deemed necessary or advisable for the purpose of (i) conforming the Plan or
the Award Agreement to any present or future law relating to plans of this or
similar nature (including, but not limited to, Code Section 409A), or (ii)
avoiding an accounting treatment resulting from an accounting pronouncement or
interpretation thereof issued by the
Securities
and Exchange Commission or Financial Accounting Standards Board subsequent to
the adoption of the Plan or the making of the Award affected thereby, which, in
the sole discretion of the Committee, may materially and adversely affect the
financial condition or results of operations of the Company. By
accepting an Award under this Plan, each Participant agrees and consents to any
amendment made pursuant to this Section 6.2 or Section 2.6 to any Award granted
under the Plan without further consideration or action.
ARTICLE 7 - GENERAL
TERMS
Section
7.1
No
Implied Rights
.
(a)
No Rights to Specific Assets.
Neither a Participant nor any other person shall by reason of
participation in the Plan acquire any right in or title to any assets, funds or
property of the Company or any Subsidiary whatsoever, including any specific
funds, assets, or other property which the Company or any Subsidiary, in its
sole discretion, may set aside in anticipation of a liability under the
Plan. A Participant shall have only a contractual right to the shares of
Stock or amounts, if any, payable or distributable under the Plan, unsecured by
any assets of the Company or any Subsidiary, and nothing contained in the Plan
shall constitute a guarantee that the assets of the Company or any Subsidiary
shall be sufficient to pay any benefits to any person.
(b)
No Contractual Right to Employment
or Future Awards.
The Plan does not constitute a contract of
employment, and selection as a Participant will not give any participating
Employee the right to be retained in the employ of the Company or any Subsidiary
or any right or claim to any benefit under the Plan, unless such right or claim
has specifically accrued under the terms of the Plan. No individual shall
have the right to be selected to receive an Award under the Plan, or, having
been so selected, to receive a future Award under the Plan.
(c)
No Rights as a
Stockholder
. Except as otherwise provided in the Plan, no
Award under the Plan shall confer upon the holder thereof any rights as a
stockholder of the Company prior to the date on which the individual fulfills
all conditions for receipt of such rights.
Section
7.2
Transferability
.
Except as otherwise so provided by the Committee, ISOs under the Plan are not
transferable except (i) as designated by the Participant by will or by the laws
of descent and distribution, (ii) to a trust established by the Participant, if
under Code Section 671 and applicable state law, the Participant is considered
the sole beneficial owner of the Stock Option while held in trust, or (iii)
between spouses incident to a divorce or pursuant to a domestic relations order,
provided, however, in the case of a transfer within the meaning of this Section
7.2(iii), the Stock Option shall not qualify as an ISO as of the day of such
transfer. The Committee shall have the discretion to permit the
transfer of Stock Options (other than ISOs) and SARs (other than SARs granted in
tandem with ISOs) under the plan;
provided, however,
that such
transfers shall be limited to Immediate Family Members of Participants, trusts
and partnerships established for the primary benefit of such family members or
to charitable organizations, and;
provided, further,
that such
transfers are not made for consideration to the
Participant. Restricted Stock Awards shall not be transferable prior
to the time that such Awards vest in the Participant.
Section
7.3
Designation
of Beneficiaries
. A Participant hereunder may file with the Company
a written designation of a beneficiary or beneficiaries under the Plan and may
from time to time revoke or amend any such designation. Any
designation of beneficiary under the Plan shall be controlling over any other
disposition, testamentary or otherwise (unless such disposition is pursuant to a
domestic relations order);
provided, however,
that if
the Committee is in doubt as to the entitlement of any such beneficiary to any
Award, the Committee may determine to recognize only the legal representative of
the
Participant,
in which case the Company, the Committee and the members thereof shall not be
under any further liability to anyone.
Section
7.4
Non-Exclusivity
.
Neither the adoption of the Plan by the Board nor the submission of the Plan to
the stockholders of the Company for approval shall be construed as creating any
limitations on the power of the Board or the Committee to adopt such other
incentive arrangements as either may deem desirable, including, without
limitation, the granting of Stock Options, SARs or Restricted Stock Awards
otherwise than under the Plan or an arrangement that is or is not intended to
qualify under Code Section 162(m), and such arrangements may be either generally
applicable or applicable only in specific cases.
Section
7.5
Award
Agreement
. Each Award granted under the Plan shall be evidenced by
an Award Agreement signed by the Participant. A copy of the Award
Agreement, in any medium chosen by the Committee, shall be provided (or made
available electronically) to the Participant.
Section
7.6
Form and
Time of Elections
. Unless otherwise specified herein, each election
required or permitted to be made by any Participant or other person entitled to
benefits under the Plan, and any permitted modification, or revocation thereof,
shall be filed with the Company at such times, in such form, and subject to such
restrictions and limitations, not inconsistent with the terms of the Plan, as
the Committee shall require.
Section
7.7
Evidence
.
Evidence required of anyone under the Plan may be by certificate, affidavit,
document or other information which the person acting on it considers pertinent
and reliable, and signed, made or presented by the proper party or
parties.
Section
7.8
Tax
Withholding
. Where a Participant is entitled to receive shares of
Stock upon the vesting or exercise of an Award, the Company shall have the right
to require such Participant to pay to the Company the amount of any tax that the
Company is required to withhold with respect to such vesting or exercise, or, in
lieu thereof, to retain, or to sell without notice, a sufficient number of
shares of Stock to cover the minimum amount required to be withheld. To the
extent determined by the Committee and specified in an Award Agreement, a
Participant shall have the right to direct the Company to satisfy the minimum
required federal, state and local tax withholding by: (i) with respect to a
Stock Option or SAR settled in stock, reducing the number of shares of Stock
subject to the Stock Option or SAR (without issuance of such shares of Stock to
the Stock Option holder) by a number equal to the quotient of (a) the total
minimum amount of required tax withholding divided by (b) the excess of the Fair
Market Value of a share of Stock on the exercise date over the Exercise Price
per share of Stock; and (ii) with respect to a Restricted Stock Award,
withholding a number of shares (based on the Fair Market Value on the vesting
date) otherwise vesting that would satisfy the minimum amount of required tax
withholding. Provided there are no adverse accounting consequences to
the Company (a requirement to have liability classification of an award under
SFAS 123(R) is an adverse consequence), a Participant who is not required to
have taxes withheld may require the Company to withhold in accordance with the
preceding sentence as if the Award were subject to minimum tax withholding
requirements.
Section
7.9
Action by
Company or Subsidiary
. Any action required or permitted to be taken
by the Company or any Subsidiary shall be by resolution of its board of
directors, or by action of one or more members of the Board (including a
committee of the Board) who are duly authorized to act for the Board, or (except
to the extent prohibited by applicable law or applicable rules of any stock
exchange) by a duly authorized officer of the Company or such
Subsidiary.
Section
7.10
Successors
.
All obligations of the Company under the Plan shall be binding upon and inure to
the benefit of any successor to the Company, whether the existence of such
successor is
the
result of a direct or indirect purchase, merger, consolidation or otherwise, of
all or substantially all of the business, stock, and/or assets of the
Company.
Section
7.11
Indemnification
.
To the fullest extent permitted by law and the Company’s governing documents or
each person who is or shall have been a member of the Committee, or of the
Board, or an officer of the Company to whom authority was delegated in
accordance with Section 5.3, or an Employee of the Company shall be indemnified
and held harmless by the Company against and from any loss (including amounts
paid in settlement), cost, liability or expense (including reasonable attorneys’
fees) that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action taken or failure to act under the Plan and against and from any
and all amounts paid by him or her in settlement thereof, with the Company’s
approval, or paid by him or her in satisfaction of any judgment in any such
action, suit, or proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her own behalf,
unless such loss, cost, liability, or expense is a result of his or her own
willful misconduct or except as expressly provided by statute or
regulation. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company’s charter or bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
Section
7.12
No
Fractional Shares
. Unless otherwise permitted by the Committee, no
fractional shares of Stock shall be issued or delivered pursuant to the Plan or
any Award. The Committee shall determine whether cash or other
property shall be issued or paid in lieu of fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
Section
7.13
Governing
Law
. The Plan, all Awards granted hereunder, and all actions taken
in connection herewith shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts without reference to principles of
conflict of laws, except as superseded by applicable federal law. The
federal and state courts located nearest to the Company’s home office within the
Commonwealth of Massachusetts, shall have exclusive jurisdiction over any claim,
action, complaint or lawsuit brought under the terms of the Plan. By
accepting any Award under the Plan, each Participant, and any other person
claiming any rights under the Plan, agrees to submit himself, and any such legal
action as he shall bring under the Plan, to the sole jurisdiction of such courts
for the adjudication and resolution of any such disputes.
Section
7.14
Benefits
Under Other Plans
. Except as otherwise provided by the Committee or
as set forth in a Qualified Retirement Plan, Awards to a Participant (including
the grant and the receipt of benefits) under the Plan shall be disregarded for
purposes of determining the Participant’s benefits under, or contributions to,
any Qualified Retirement Plan, non-qualified plan and any other benefit plans
maintained by the Participant’s employer. The term “Qualified
Retirement Plan” means any plan of the Company or a Subsidiary that is intended
to be qualified under Code Section 401(a).
Section
7.15
Validity
.
If any provision of this Plan is determined to be illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts
hereof, but the Plan shall be construed and enforced as if such illegal or
invalid provision has never been included herein.
Section
7.16
Notice
.
Unless otherwise provided in an Award Agreement, all written notices and all
other written communications to the Company provided for in the Plan or in any
Award Agreement, shall be delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid (provided that
international mail shall be sent via overnight or two-day delivery), or
sent
by
facsimile, email or prepaid overnight courier to the Company at its principal
executive office. Such notices, demands, claims and other
communications shall be deemed given:
(a) in
the case of delivery by overnight service with guaranteed next day delivery, the
next day or the day designated for delivery;
(b) in
the case of certified or registered U.S. mail, five (5) days after deposit in
the U.S. mail; or
(c) in
the case of facsimile or email, the date upon which the transmitting party
received confirmation of receipt;
provided, however,
that in no
event shall any such communications be deemed to be given later than the date
they are actually received, provided they are actually received.
In the
event a communication is not received, it shall only be deemed received upon the
showing of an original of the applicable receipt, registration or confirmation
from the applicable delivery service. Communications that are to be
delivered by the U.S. mail or by overnight service to the Company shall be
directed to the attention of the Company’s Chief Executive Officer and to the
Corporate Secretary.
Section
7.17
Forfeiture
Events
.
(a) The
Committee may specify in an Award Agreement that the Participant’s rights,
payments, and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture or recoupment upon the occurrence of certain specified
events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events include, but shall not be limited
to, termination of employment for Cause, termination of the Participant’s
provisions of Services to the Company or any Subsidiary, violation of material
Company or Subsidiary policies, breach of noncompetition, confidentiality, or
other restrictive covenants that may apply to the Participant, or other conduct
of the Participant that is detrimental to the business or reputation of the
Company or any Subsidiary.
(b) If
the Company is required to prepare an accounting restatement due to the material
noncompliance of the Company, as a result of misconduct, with any financial
reporting requirement under the securities laws, any Participant who is subject
to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002
shall reimburse the Company the amount of any payment in settlement of an Award
earned or accrued during the twelve (12) month period following the first public
issuance of filing with the Unites States Securities and Exchange Commission
(whichever just occurred) of the financial document embodying such financial
reporting requirement.
In addition, in the event of an
accounting restatement, the Committee, in its sole and exclusive discretion, may
require that any Participant reimburse the Company for all or any part of the
amount of any payment in settlement of any Award granted hereunder.
ARTICLE 8 - DEFINED
TERMS;
CONSTRUCTION
Section
8.1
In
addition to the other definitions contained herein, unless otherwise
specifically provided in an Award Agreement, the following definitions shall
apply:
(a) “10%
Stockholder” means an individual who, at the time of grant, owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company.
(b) “Award”
means any Stock Option, SAR and Restricted Stock Award or any or all of them, or
any other right or interest relating to stock or cash, granted to a Participant
under the Plan.
(c) “Award
Agreement” means the document (in whatever medium prescribed by the Committee)
which evidences the terms and conditions of an Award under the
Plan. Such document is referred to as an agreement, regardless of
whether a Participant’s signature is required.
(d) “Board”
means the Board of Directors of the Company.
(e) If
the Participant is subject to a written employment agreement (or other similar
written agreement) with the Company or a Subsidiary that provides a definition
of termination for “Cause,” then, for purposes of this Plan, the term “Cause”
shall have meaning set forth in such agreement. In the absence of
such a definition, “Cause” means (i) the conviction of the Participant of a
felony or of any lesser criminal offense involving moral turpitude; (ii) the
willful commission by the Participant of a criminal or other act that, in the
judgment of the Board, will likely cause substantial economic damage to the
Company or any Subsidiary or substantial injury to the business reputation of
the Company or any Subsidiary; (iii) the commission by the Participant of an act
of fraud in the performance of his duties on behalf of the Company or any
Subsidiary; (iv) the continuing willful failure of the Participant to perform
his duties to the Company or any Subsidiary (other than any such failure
resulting from the Participant’s incapacity due to physical or mental illness)
after written notice thereof; or (v) an order of a federal or state regulatory
agency or a court of competent jurisdiction requiring the termination of the
Participant’s Service with the Company.
(f) “Change
in Control” has the meaning ascribed to it in Section 4.2.
(g) “Code”
means the Internal Revenue Code of 1986, as amended, and any rules, regulations
and guidance promulgated thereunder, as modified from time to time.
(h) “Code
Section 409A” means the provisions of Section 409A of the Code and any rules,
regulations and guidance promulgated thereunder, as modified from time to
time.
(i) “Committee”
means the Committee acting under Article 5.
(j) “Covered
Employee” has the meaning given the term in Code Section 162(m), and shall also
include any other Employee who may become a Covered Employee before an Award
vests, as the Committee may determine in its sole discretion.
(k) “Director”
means a member of the Board of Directors of the Company or a Subsidiary, or a
member of the Board of Trustees of the MHC.
(l) If
the Participant is subject to a written employment agreement (or other similar
written agreement) with the Company or a Subsidiary that provides a definition
of “Disability” or “Disabled,” then, for purposes of this Plan, the terms
“Disability” or “Disabled” shall have meaning set forth in such
agreement. In the absence of such a definition, “Disability” or
“Disabled” means that a Participant: (i) is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve (12) months; or
(ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than three (3) months under an
accident and health plan covering the Company’s Employees, or (iii) is
determined to be totally disabled by the Social Security
Administration. Except to
the
extent prohibited under Code Section 409A, if applicable, the Committee shall
have discretion to determine if a termination due to Disability has
occurred.
(m) “Disinterested
Board Member” means a member of the Board who: (a) is not a current Employee of
the Company or a Subsidiary; (b) is not a former employee of the Company who
receives compensation for prior Services (other than benefits under a Qualified
Retirement Plan) during the taxable year; (c) has not been an officer of the
Company; (d) does not receive remuneration from the Company or a Subsidiary,
either directly or indirectly, in any capacity other than as a Director except
in an amount for which disclosure would not be required pursuant to Item 404 of
SEC Regulation S-K in accordance with the proxy solicitation rules of the SEC,
as amended or any successor provision thereto; and (e) does not possess an
interest in any other transaction, and is not engaged in a business relationship
for which disclosure would be required pursuant to Item 404(a) of SEC Regulation
S-K under the proxy solicitation rules of the SEC, as amended or any successor
provision thereto. The term Disinterested Board Member shall be interpreted in
such manner as shall be necessary to conform to the requirements of section
162(m) of the Code, Rule 16b-3 promulgated under the Exchange Act and the
corporate governance standards imposed on compensation committees under the
listing requirements imposed by any national securities exchange on which the
Company lists or seeks to list its securities.
(n) “Employee”
means any person employed by the Company, MHC or any Subsidiary. Directors who
are also employed by the Company or a Subsidiary shall be considered Employees
under the Plan.
(o) “Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to
time.
(p) “Excluded
Transaction” means (I) a plan of reorganization, merger, consolidation or
similar transaction that would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving corporation or any parent thereof) at least 50% of the combined voting
power of the Voting Securities of the entity surviving the plan of
reorganization, merger, consolidation or similar transaction (or the parent of
such surviving entity) immediately after such plan of reorganization, merger,
consolidation or similar transaction, and (II) a second-step conversion of the
MHC.
(q) “Exercise
Price” means the price established with respect to a Stock Option or SAR
pursuant to Section 2.2.
(r) “Fair
Market Value” means, with respect to a share of Stock on a specified
date:
(I) the final reported
sales price on the date in question (or if there is no reported sale on such
date, on the last preceding date on which any reported sale occurred) as
reported in the principal consolidated reporting system with respect to
securities listed or admitted to trading on the principal United States
securities exchange on which the shares of Stock are listed or admitted to
trading, as of the close of the market in New York City and without regard to
after-hours trading activity; or
(II) if the shares of
Stock are not listed or admitted to trading on any such exchange, the closing
bid quotation with respect to a share of Stock on such date, as of the close of
the market in New York City and without regard to after-hours trading activity,
or, if no such quotation is provided, on another similar system, selected by the
Committee, then in use; or
(III) if (I) and (II) are not applicable, the Fair Market Value of a
share of Stock as the Committee may determine in good faith and in accordance
with Code Section 422 and the applicable requirements of Code Section 409A and
the regulations promulgated thereunder. For purposes of the exercise
of a Stock Option, Fair Market Value on such date shall be the date a notice of
exercise is received by the Company, or if not a day on which the market is
open, the next day that it is open.
(s) A
termination of employment by an Employee Participant shall be deemed a
termination of employment for “Good Reason” as a result of the Participant’s
resignation from the employ of the Company or any Subsidiary upon the occurrence
of any of the following events following a Change in Control: (a) the failure of
the Company or Subsidiary to appoint or re-appoint or elect or re-elect the
Employee Participant to the position(s) with the Company or Subsidiary held
immediately prior to the Change in Control; (b) a material change in the
functions, duties or responsibilities of the Employee Participant compared to
those functions, duties or responsibilities in effect immediately prior to the
Change in Control; (c) any reduction of the rate of the Employee Participant’s
base salary in effect immediately prior to the Change in Control; (d) any
failure (other than due to reasonable administrative error that is cured
promptly upon notice) to pay any portion of the Employee Participant’s
compensation as and when due; (e) any change in the terms and conditions of any
compensation or benefit program in which the Employee Participant participated
immediately prior to the Change in Control which, either individually or
together with other changes, has a material adverse effect on the aggregate
value of his total compensation package; or (f) a change in the Employee
Participant’s principal place of employment, without his consent, to a place
that is both more than twenty-five (25) miles away from the Employee
Participant’s principal residence and more than fifteen (15) miles away from the
location of the Employee Participant’s principal executive office prior to the
Change in Control.
(t) “Immediate
Family Member” means with respect to any Participant: (a) any of the
Participant’s children, stepchildren, grandchildren, parents, stepparents,
grandparents, spouses, former spouses, siblings, nieces, nephews,
mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law
or sisters-in-law, including relationships created by adoption; (b) any natural
person sharing the Participant’s household (other than as a tenant or employee,
directly or indirectly, of the Participant); (c) a trust in which any
combination of the Participant and persons described in section (a) and (b)
above own more than fifty percent (50%) of the beneficial interests; (d) a
foundation in which any combination of the Participant and persons described in
sections (a) and (b) above control management of the assets; or (e) any other
corporation, partnership, limited liability company or other entity in which any
combination of the Participant and persons described in sections (a) and (b)
above control more than fifty percent (50%) of the voting
interests.
(u) “Incumbent
Directors” means:
(I) the
individuals who, on the date hereof, constitute the Board; and
(II) any
new Director whose appointment or election by the Board or nomination for
election by the Company’s stockholders was approved or recommended: (a) by the
vote of at least two-thirds (2/3) of the Whole Board, with at least two-thirds
of the Incumbent Directors then in office voting in favor of such approval or
recommendation; or (b) by a Nominating Committee of the Board whose members were
appointed by the vote of at least two-thirds (2/3) of the Whole Board, with at
least two-thirds of the Incumbent Directors then in office voting in favor of
such appointments
(v) “Involuntary
Termination of Employment” means the Termination of Service by the Company or
Subsidiary other than a termination for Cause, or termination of employment by a
Participant Employee for Good Reason.
(w) “ISO”
has the meaning ascribed to it in Section 2.1(a).
(x) “MHC”
means Meridian Financial Services, Incorporated.
(y) “Non-Qualified
Option” means the right to purchase shares of Stock that is either (i) granted
to a Participant who is not an Employee, or (ii) granted to an Employee and
either is not designated by the Committee to be an ISO or does not satisfy the
requirements of Section 422 of the Code.
(z) “Participant”
means any individual who has received, and currently holds, an outstanding Award
under the Plan.
(aa)
“
Potential Change in Control”
means:
(I) the
public announcement by any Person of an intention to take or to consider taking
actions which, if consummated, would constitute a Change in Control;
or
(II) one
or more transactions, events or occurrences that result in a change in control
of the Company or any Subsidiary within the meaning of the Home Owners’ Loan
Act, as amended, and the applicable rules and regulations promulgated
thereunder, as in effect at the time of the Change in Control; or
(III) a
proxy statement soliciting proxies from stockholders of the Company is filed or
distributed, seeking stockholder approval of a plan of reorganization, merger,
consolidation or similar transaction involving the Company and one or more other
entities, but only if such plan of reorganization, merger, consolidation or
similar transaction has not been approved by the vote of at least two-thirds
(2/3) of the Whole Board, with at least two-thirds (2/3) of the Incumbent
Directors then in office voting in favor of such plan of reorganization, merger,
consolidation or similar transaction.
(bb) “Restricted
Stock Award” has the meaning ascribed to it in Section 2.3.
(cc) “Retirement”
means, unless otherwise specified in an Award Agreement, retirement from
employment as an Employee on or after the attainment of age 65, or Termination
of Service as a Director on or after the attainment of age 72, provided,
however, that unless otherwise specified in an Award Agreement, an Employee who
is also a Director shall not be deemed to have terminated due to Retirement
until both Service as an Employee and Service as a Director has
ceased. A non-Employee Director will be deemed to have terminated due
to Retirement under the provisions of this Plan only if the non-Employee
Director has terminated Service on the Board(s) of Directors of the Company and
any Subsidiary or affiliate in accordance with applicable Company policy,
following the provision of written notice to such Board(s) of Directors of the
non-Employee Director’s intention to retire. Moreover, a non-Employee
Director who terminates Service as a Director but who continues to serve as a
director emeritus or advisory director shall not be deemed to have terminated
due to Retirement until both Service as a Director and Service as a director
emeritus or advisory director has terminated. Years of employment as
an Employee or Service as a Director shall be aggregated for the purposes of
this definition for any years of employment as an Employee or Service as a
Director that did not occur simultaneously.
(dd) “SAR”
has the meaning ascribed to it in Section 2.1(b).
(ee) “SEC”
means the Securities and Exchange Commission.
(ff) “Securities
Act” means the Securities Act of 1933, as amended from time to
time.
(gg) “Service”
means service as an Employee, service provider, or non-employee Director of the
Company or a Subsidiary, as the case may be, and shall include service as a
director emeritus or advisory director.
(hh) “Stock”
means the common stock of the Company, no par value per share.
(ii) “Stock
Option” means an ISO or a Non-Qualified Option.
(jj) “Subsidiary”
means any corporation, affiliate, bank or other entity which would be a
subsidiary corporation with respect to the Company as defined in Code
Section 424(f) and, other than with respect to an ISO, shall also mean any
partnership or joint venture in which the Company and/or other Subsidiary owns
more than fifty percent (50%) of the capital or profits interests.
(kk) “Termination
of Service” means the first day occurring on or after a grant date on which the
Participant ceases to be an Employee or Director of, or service provider to, the
Company or any Subsidiary, regardless of the reason for such cessation, subject
to the following:
(I) The
Participant’s cessation as an Employee or service provider shall not be deemed
to occur by reason of the transfer of the Participant between the Company and a
Subsidiary or between two Subsidiaries.
(II) The
Participant’s cessation as an Employee or service provider shall not be deemed
to occur by reason of the Participant’s being on a bona fide leave of absence
from the Company or a Subsidiary approved by the Company or Subsidiary otherwise
receiving the Participant’s Services, provided such leave of absence does not
exceed six months, or if longer, so long as the Employee retains a right to
reemployment with the Company or Subsidiary under an applicable statute or by
contract. For these purposes, a leave of absence constitutes a bona
fide leave of absence only if there is a reasonable expectation that the
Employee will return to perform Services for the Company or
Subsidiary. If the period of leave exceeds six months and the
Employee does not retain a right to reemployment under an applicable statute or
by contract, the employment relationship is deemed to terminate on the first day
immediately following such six month period. For purposes of this
sub-section (ii), to the extent applicable, an Employee’s leave of absence shall
be interpreted by the Committee in a manner consistent with Treasury Regulation
Section 1.409A-1(h)(1).
(III) If,
as a result of a sale or other transaction, the Subsidiary for whom Participant
is employed (or to whom the Participant is providing Services) ceases to be a
Subsidiary, and the Participant is not, following the transaction, an Employee
of the Company or an entity that is then a Subsidiary, then the occurrence of
such transaction shall be treated as the Participant’s Termination of Service
caused by the Participant being discharged by the entity for whom the
Participant is employed or to whom the Participant is providing
Services.
(IV) A
service provider whose Services to the Company or a Subsidiary are governed by a
written agreement with the service provider will cease to be a service provider
at the time the term of such written agreement ends (without renewal); and a
service provider whose Services to the Company or a Subsidiary are not governed
by a written agreement with the service provider will cease to be a service
provider on the date that is ninety (90) days after the date the service
provider last provides Services requested by the Company or any Subsidiary (as
determined by the Committee).
(
V) Except
to the extent Section 409A of the Code may be applicable to an Award, and
subject to the foregoing paragraph of this sub-section (kk), the Committee shall
have discretion to determine if a Termination of Service has occurred and the
date on which it occurred.
In the event that any
Award under the Plan constitutes Deferred Compensation (as defined in Section
2.6 hereof), the term Termination of Service shall be interpreted by the
Committee in a manner consistent with the definition of “Separation from
Service” as defined under Code Section 409A and under Treasury Regulation
Section 1.409A-1(h)(ii). For purposes of this Plan, a “Separation
from Service” shall have occurred if the Bank and Participant reasonably
anticipate that no further Services will be performed by the Participant after
the date of the Termination of Service (whether as an employee or as an
independent contractor) or the level of further Services performed will not
exceed 20% of the average level of bona fide Services in the 36 months
immediately preceding the Termination of Service. If a Participant is
a “Specified Employee,” as defined in Code Section 409A and any payment to be
made hereunder shall be determined to be subject to Code Section 409A, then if
required by Code Section 409A, such payment or a portion of such payment (to the
minimum extent possible) shall be delayed and shall be paid on the first day of
the seventh month following Participant’s Separation from Service.
(VI) With
respect to a Participant who is a director, cessation as a Director will not be
deemed to have occurred if the Participant continues as a director emeritus or
advisory director.
(ll) “Voting
Securities” means any securities which ordinarily possess the power to vote in
the election of directors without the happening of any pre-condition or
contingency.
(mm) “Whole
Board” means the total number of Directors that the Company would have if there
were no vacancies on the Board at the time the relevant action or matter is
presented to the Board for approval.
Section
8.2
In
the Plan, unless otherwise stated or the context otherwise requires, the
following uses apply:
(a) actions
permitted under the Plan may be taken at any time and from time to time in the
actor’s
reasonable
discretion;
(b) references
to a statute shall refer to the statute and any successor statute, and to all
regulations promulgated under or implementing the statute or its successor, as
in effect at the relevant time;
(c) in
computing periods from a specified date to a later specified date, the words
“from” and “commencing on” (and the like) mean “from and including,” and the
words “to,” “until” and “ending on” (and the like) mean “to, but
excluding”;
(d) references
to a governmental or quasi-governmental agency, authority or instrumentality
shall also refer to a regulatory body that succeeds to the functions of the
agency, authority or instrumentality;
(e) indications
of time of day mean Massachusetts time;
(f) “including”
means “including, but not limited to”;
(g) all
references to sections, schedules and exhibits are to sections, schedules and
exhibits in or to this Plan unless otherwise specified;
(h) all
words used in this Plan will be construed to be of such gender or number as the
circumstances and context require;
(i)
the captions and headings of articles, sections, schedules and
exhibits appearing in or attached to this Plan have been inserted solely for
convenience of reference and shall not be considered a part of this Plan nor
shall any of them affect the meaning or interpretation of this Plan or any of
its provisions;
(j)
any reference to a document or set of documents in this Plan,
and the rights and obligations of the parties under any such documents, shall
mean such document or documents as amended from time to time, and any and all
modifications, extensions, renewals, substitutions or replacements thereof;
and
(k) all
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
REVOCABLE
PROXY
MERIDIAN
INTERSTATE BANCORP, INC.
ANNUAL
MEETING OF STOCKHOLDERS
August
19, 2008
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 August 19, 2008 at 11:00 a.m., local time, at the
Peabody 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:
|
|
1.
|
The
election as directors of all nominees listed (unless the “For All Except”
box is marked and the instructions below are complied
with).
|
Vincent
D. Basile, James P. Del Rossi, James G. Sartori and Paul T.
Sullivan
|
FOR
ALL
|
|||
|
FOR
|
WITHHOLD
|
EXCEPT
|
|
|
o
|
o
|
o
|
INSTRUCTION: To
withhold your vote for any individual nominee, mark “FOR ALL EXCEPT” and write
that nominee’s name on the line provided below.
|
|
2.
|
The
approval of the
Meridian
Interstate Bancorp, Inc. 2008 Equity Incentive
Plan.
|
|
FOR
|
AGAINST
|
ABSTAIN
|
|
|
o
|
o
|
o
|
|
|
3.
|
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,
2008.
|
|
FOR
|
AGAINST
|
ABSTAIN
|
|
|
o
|
o
|
o
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE LISTED
PROPOSALS.
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. 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.
|
Dated:
|
|||
|
SIGNATURE
OF STOCKHOLDER
|
|||
|
SIGNATURE
OF CO-HOLDER (IF ANY)
|
|||
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.
_____________________________
PLEASE
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY
IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.