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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K/A NO. 1
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-25251
CENTRAL BANCORP, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
MASSACHUSETTS 04-3447594
- ------------------------------------------ ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
399 HIGHLAND AVENUE, SOMERVILLE, MASSACHUSETTS 02144
- -------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (617) 628-4000
--------------
Securities registered under Section 12(b) of the Act: NONE
----
Securities registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $1.00 PER SHARE
---------------------------------------
(Title of Class)
STOCK PURCHASE RIGHTS
---------------------
(Title of Class)
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $25.5 million based on the closing sales price of
the registrant's common stock as reported on the Nasdaq National Market SM on
June 21, 2002 ($30.00 per share). Solely for purposes of this calculation,
directors, executive officers and greater than 5% stockholders are treated as
affiliates.
As of June 21, 2002, there were issued and outstanding 1,632,789 shares of
the registrant's common stock, par value $1.00 per share (of which 781,028
shares were deemed held by affiliates).
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EXPLANATION FOR AMENDMENT:
The Annual Report on Form 10-K of Central Bancorp, Inc. (the "Company") for
the fiscal year ended March 31, 2002 (the "2002 Form 10-K") filed with the
Securities and Exchange Commission (the "Commission") on June 28, 2002 is being
amended hereby to include the items listed below:
ITEM DESCRIPTION
---- -----------
Item 10. Directors and Executive Officers of the
Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions
As originally filed, the Company's 2002 Form 10-K incorporated the
information required by Items 10, 11, 12 and 13 of Form 10-K by reference to the
Company's Definitive Proxy Statement for its 2002 Annual Meeting of Stockholders
(the "Proxy Statement") as permitted by Instruction G.(3). Since the Proxy
Statement is not expected to be filed with the Commission within 120 days of the
close of the Company's fiscal year ended March 31, 2002 as required by
Instruction G.(3), Items 10, 11, 12 and 13 in Part III of the 2002 Form 10-K are
hereby amended by deleting the texts thereof in their entirety and substituting
therefor the following:
2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Set forth below is information about the directors and executive officers
and significant employees of the Company. The Board of Directors is divided into
three classes. Directors serve for three-year terms with one class of directors
standing for election each year. Executive officers are elected annually by the
Board of Directors. Each current director became a director of the Company upon
its incorporation in 1998, except for John G. Quinn who was elected to the Board
of Directors in 1999 and Nancy D. Neri, who was appointed to the Board of
Directors in 1999. Unless indicated otherwise, the positions stated for each
individual are positions held in the Company's principal subsidiary, Central
Co-operative Bank (the "Bank"), and the positions stated are positions which are
currently held.
YEAR FIRST
ELECTED OR PRESENT
POSITIONS WITH APPOINTED TERM TO
NAME AGE THE COMPANY DIRECTOR OF BANK EXPIRE
- ---- --- --------------- ---------------- -------
Marat E. Santini 77 Director of the Company and the 1972 2002
Bank
John F. Gilgun, Jr. 78 Director of the Company and the 1987 2002
Bank
John G. Quinn 39 Director of the Company and the 1999 2002
Bank
Joseph R. Doherty 78 Chairman, Director of the 1958 2003
Company and the Bank
Terence D. Kenney 86 Director of the Company and the 1975 2003
Bank
Nancy D. Neri 46 Director of the Company and the 1999 2003
Bank
Gregory W. Boulos 45 Director of the Company and the 1998 2004
Bank
John D. Doherty 44 President, Chief Executive 1983 2004
Officer and Director of the
Company, the Bank, Central
Securities Corporation ("Central
Securities") and Central
Preferred Capital Corporation
("Central Preferred")
David W. Kearn 60 Senior Vice President - Lending -- --
and Retail Banking; Director of
Central Securities and Central
Preferred
Michael K. Devlin 51 Senior Vice President, -- --
Treasurer/Chief Financial
Officer of the Company
and the Bank; Treasurer and
Director of Central Securities
Paul S. Feeley 55 Senior Vice President and -- --
Chief Information Officer;
Treasurer and Director of
Central Preferred
William P. Morrissey 74 Senior Vice President - -- --
Corporate Affairs
3
MARAT E. SANTINI was the Office Manager of Santini, Inc., a general
construction contractor located in Arlington, Massachusetts, until January 31,
1990. He is now retired and acts as a consultant to Santini, Inc.
JOHN F. GILGUN, JR., is the sole owner of the John F. Gilgun Agency, a real
estate agency located in Woburn, Massachusetts. He is a member of the Woburn
Lodge of Elks and the American Legion. Mr. Gilgun is the former Mayor of the
City of Woburn, Massachusetts.
JOHN G. QUINN has been the President of Quinn Printing Company, Inc., a
printing and graphics firm located in Newton, Massachusetts, since 1990. He is a
member of Catholic Charities, the Genesis Fund, the Art Institute of Boston, the
Treasurers Club of Boston, the Financial Executives Institute of Boston,
Printing Industry of New England, Printing Industry of America and the Small
Business Association of New England. Mr. Quinn is also active in Tenacity, a
non-profit program for inner-city youth, and Coats for Kids.
JOSEPH R. DOHERTY served as President of the Bank from 1958 until April
1986. From April 1986 until March 31, 1992, Mr. Doherty served as Chairman of
the Board of Directors and Chief Executive Officer, responsible for guiding the
overall operations of the Bank. As of March 31, 1992, Mr. Doherty retired as
Chief Executive Officer of the Bank, although he remains Chairman of the Board.
Mr. Doherty is the father of President and Chief Executive Officer, John D.
Doherty.
TERENCE D. KENNEY was Senior Vice President of the Bank from 1975 to
September 1986. He recently retired as Chairman of the Board of Assessors of the
City of Woburn, Massachusetts, a post he had held for 23 years. Mr. Kenney is a
member of the Woburn Elks Lodge, the Woburn Knights of Columbus and Woburn
Kiwanis Club.
NANCY D. NERI is the President and Funeral Director for the George L.
Doherty Funeral Service, Inc., a funeral home located in Somerville,
Massachusetts.
GREGORY W. BOULOS is a partner in CB Richard Ellis/The Boulos Company of
Portland, Maine, which is Maine's largest commercial real estate brokerage and
development firm, specializing in the sale and leasing of commercial/industrial
properties and the brokerage of investment properties. Mr. Boulos is a past
director of Junior Achievement, The Center for Dental Health, and The Portland
Symphony Orchestra. He is also a past Chairman of both the Cumberland County
Civic Center and Catholic Charities Maine Board of Directors. Mr. Boulos is a
member of the Portland Chamber of Commerce, the Maine Commercial Association of
Realtors, the National Association of Realtors, a Trustee of Mercy Hospital, and
Director of Wayneflete School.
JOHN D. DOHERTY is the President and Chief Executive Officer of the Company
and the Bank. He was elected President of the Bank in April 1986. As President,
Mr. Doherty is responsible for the day-to-day operations of the Bank and reports
on the Bank's operations directly to the Board of Directors. Commencing April 1,
1992, Mr. Doherty also became the Chief Executive Officer of the Bank. Mr.
Doherty also serves as the president and a director of the Bank's subsidiaries,
Central Securities Corporation and Central Preferred Capital Corporation. He has
been employed by the Bank in various capacities since 1981. Mr. Doherty holds an
M.B.A. degree from Boston University and a B.A. in Business Administration from
Babson College. Mr. Doherty is Chairman of the Co-operative Central Bank and a
Trustee of the Co-operative Bank Employee Retirement Association. He is a member
of the Somerville Kiwanis Club, a former director of the Somerville Chamber of
Commerce, former Treasurer of the Woburn Development Corporation and a former
member of the Somerville High School Scholarship Committee, the Woburn Kiwanis
Club, and the Needham Business Association, a past president of the Economy Club
of Cambridge and a former Lieutenant of the Hamilton Auxiliary Police. Mr.
Doherty is the son of Chairman of the Board Joseph R. Doherty.
DAVID W. KEARN joined the Bank in June 1993 as Senior Vice President -
Retail Banking. From 1990 to 1993, Mr. Kearn was a Vice President of Loan
Administration at Somerset Savings Bank, Somerville, Massachusetts and was
Senior Vice President/Branch Administration at United States Trust Company from
1987 to 1990. He serves on the Board of Directors of the Somerville Boys Club.
He also serves as a director of the Bank's subsidiaries, Central Securities
Corporation and Central Preferred Capital Corporation.
4
MICHAEL K. DEVLIN joined the Bank in February 2002 as Senior Vice
President, Treasurer and Chief Financial Officer. He also serves as a director
and treasurer of the Bank's subsidiary, Central Securities Corporation. From
1997 until joining the Bank, Mr. Devlin, who is a Certified Public Accountant,
was a Financial Consultant to the banking industry in Massachusetts. Between
1973 and 1997, he was a member of the accounting and business advisory practice
of Arthur Andersen LLP, where he served as a partner for 11 years.
PAUL S. FEELEY joined the Bank in July 1997 as Senior Vice President,
Treasurer and Chief Financial Officer and became Senior Vice President and Chief
Information Officer in February 2002. Mr. Feeley is a member of the Financial
Managers Society of which he is a former local chapter President and National
Director. He is also a member of the Massachusetts Society of CPAs and serves on
its Financial Institutions Committee. From 1993 to 1997, Mr. Feeley was Senior
Vice President and Treasurer of Bridgewater Credit Union. Prior to 1993, Mr.
Feeley was Senior Vice President, Chief Financial Officer and Clerk of the
Corporation at The Cooperative Bank of Concord, Acton, Massachusetts. Mr. Feeley
also serves as a director and treasurer of Central Preferred Capital
Corporation.
WILLIAM P. MORRISSEY joined the Bank in November 1992 as Senior Vice
President for Corporate Affairs representing the Bank in outside banking and
business organizations. Mr. Morrissey is Chairman of the Board of the Federal
Home Loan Bank of Boston. Prior to 1986, Mr. Morrissey served as Executive Vice
President for Corporate Affairs at The Boston Five Cents Savings Bank, and as
Deputy Commissioner of Banks for the Commonwealth of Massachusetts.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the Securities Exchange Act of 1934, the Company's officers and
directors and all persons who own more than ten percent of the Common Stock
("Reporting Persons") are required to file reports detailing their ownership and
changes of ownership in the Common Stock and to furnish the Company with copies
of all such ownership reports that are filed. Based solely on the Company's
review of the copies of such ownership reports which it has received in the past
fiscal year or with respect to the past fiscal year, or written representations
from such persons that no annual reports of changes in beneficial ownership were
required, the Company believes during the fiscal year ended March 31, 2002 and
the prior fiscal year all Reporting Persons have complied with these reporting
requirements, except for John F. Gilgun, Jr. who was delinquent reporting one
transaction.
5
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
SUMMARY COMPENSATION TABLE. The following table sets forth cash and noncash
compensation for each of the last three fiscal years awarded to or earned by the
Chief Executive Officer and each other executive officer of the Company whose
salary and bonus earned in fiscal year 2002 exceeded $100,000 for services
rendered in all capacities to the Company and its subsidiaries (the "Named
Executive Officers").
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------------- SECURITIES
NAME AND FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS COMPENSATION(3)
- ------------------ ---- ------ -------- --------------- ------- ---------------
John D. Doherty 2002 $ 272,160 $ -- $ -- -- $ 31,842
President and Chief 2001 259,200 51,760 -- 12,573 32,401
Executive Officer 2000 244,915 45,000 -- 13,066 29,731
David W. Kearn 2002 133,505 -- -- -- 20,644
Senior Vice President/ 2001 127,148 20,343 -- 4,354 23,311
Lending and Retail Banking 2000 121,536 20,000 -- 4,524 21,929
Paul S. Feeley 2002 124,405 -- -- -- 12,874
Senior Vice President/ 2001 120,781 14,493 -- 2,757 15,299
Chief Information Officer 2000 114,942 10,000 -- 2,865 15,873
William P. Morrissey 2002 121,133 -- -- -- 19,359
Senior Vice President for 2001 115,365 13,843 -- 2,634 21,450
Corporate Affairs 2000 109,731 10,000 -- 2,736 19,316
<FN>
____________
(1) Reflects fiscal year for which bonus was earned. For fiscal 2002, no bonus
was earned under the Bank's Management Incentive Plan.
(2) Does not include perquisites which totaled less than ten percent of annual
salary and bonus.
(3) For fiscal year 2002, consists of $4,250, $2,625, $636 and $2,625,
respectively, in Company contributions to the defined contribution
retirement plan, $1,123, $1,207, $1,207 and $1,207, respectively, in paid
life insurance premiums and the value of 1,195, 759, 498 and 701 shares,
based on $22.15 per share (the last reported sale price of such shares on
the effective date of the allocation, October 31, 2001), allocated to the
ESOP accounts of Messrs. Doherty, Kearn, Feeley and Morrissey,
respectively.
</FN>
OPTION EXERCISES AND FISCAL YEAR-END VALUES. The following table sets forth
information regarding option exercises during the last fiscal year and the
values of options held by the Named Executive Officers at the end of fiscal year
2002.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (2)
ACQUIRED ON VALUE ---------------------------- -----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ----------- ------------- ----------- -------------
John D. Doherty 25,000 $116,010 25,639 -- $ 237,869 $ --
David W. Kearn -- -- 8,878 -- 82,369 --
Paul S. Feeley -- -- 5,622 -- 52,160 --
William P. Morrissey -- -- 5,370 -- 49,824 --
<FN>
- --------
(1) Based on the difference between the aggregate exercise price and aggregate
market value of shares acquired as of the date of exercise.
(2) Value is based on the difference between the aggregate market value of
shares underlying the unexercised in-the-money options at March 31, 2002
($27.75 per share based on the closing sale price reported on the Nasdaq
National Market SM) and the aggregate exercise price of these options.
Options are considered in-the-money if the value of the underlying
securities exceeds the exercise price of the options.
</FN>
6
EMPLOYMENT, CONSULTING AND SEVERANCE AGREEMENTS. The Bank has entered into
an employment agreement (the "Employment Agreement") with John D. Doherty,
President. The Employment Agreement provides for a term of five years and an
automatic annual extension of the term of employment for an additional one-year
period beyond the then-effective expiration date unless either the Bank or Mr.
John D. Doherty gives written notice that the Employment Agreement will not be
extended further. The current base annual salary of John D. Doherty is $272,160.
The Employment Agreement also provides for annual salary review by the Board of
Directors, as well as inclusion of Mr. John D. Doherty in any discretionary
bonus plans, customary fringe benefits, vacation and sick leave and disability
payments of the Bank. The Employment Agreement is terminated upon death and is
terminable by the Bank for "just cause" as defined in the Employment Agreement.
If the Bank terminates Mr. John D. Doherty without just cause, he is entitled to
a continuation of his salary for the remaining term of the Employment Agreement.
Mr. John D. Doherty may terminate the Employment Agreement upon 90 days notice
to the Bank.
The Employment Agreement provides that in the event of his involuntary
termination of employment in connection with, or within three years after, any
change in control of the Bank or the Company, Mr. John D. Doherty will be paid
within 10 days of such termination an amount equal to the difference between (i)
2.99 times his "base amount," as defined in Section 280G(b)(3) of the Internal
Revenue Code, and (ii) the sum of any other parachute payments, as defined under
Section 280G(b)(2) of the Internal Revenue Code, that Mr. John D. Doherty
receives on account of the change in control. The term "change in control" is
defined as the acquisition, by any person or entity, of the ownership, holding
or power to vote more than 25% of the Company's or the Bank's voting stock, the
control of the election of a majority of the Company's or the Bank's directors,
or the exercise of a controlling influence over the management or policies of
the Company or the Bank. In addition, under the Employment Agreement, a change
in control occurs when, during any consecutive two-year period, directors of the
Company or the Bank at the beginning of such period cease to constitute a
majority of the Board of Directors of the Company or the Bank, unless the
election of replacement directors was approved by a two-thirds vote of the
initial directors then in office. The Employment Agreement also provides for a
similar lump sum payment to be made in the event of Mr. John D. Doherty's
voluntary termination of employment within three years following a change in
control, upon the occurrence, or within 90 days thereafter, of certain specified
events following a change in control, which have not been consented to in
writing by Mr. John D. Doherty, including (i) the requirement that he perform
his principal executive functions more than 35 miles away from his primary
office, (ii) a reduction in his base compensation as in effect prior to the
change in control, (iii) the failure of the Bank to provide Mr. John D. Doherty
with compensation and benefits substantially similar to those provided to him at
the time of the change in control under any employee benefit plans in which he
becomes a participant, (iv) the assignment to Mr. John D. Doherty of material
duties and responsibilities other than those normally associated with his
position with the Bank, and (v) a material reduction in his authority and
responsibility. In the event that a dispute arises between Mr. John D. Doherty
and the Bank, as to the terms or interpretation of the Employment Agreement, Mr.
John D. Doherty will be reimbursed for all reasonable expenses arising from such
dispute. Payments made under these "change in control" provisions are in lieu of
any rights to which Mr. John D. Doherty would be entitled in the event his
employment was terminated without just cause. If the change in control
provisions had been triggered as of March 31, 2002, Mr. John D. Doherty would
have received up to approximately $850,000.
In connection with Joseph R. Doherty's retirement as Chief Executive
Officer of the Bank effective March 31, 1992, the Bank and Joseph R. Doherty
entered into a Consulting Agreement whereby the Bank retained Mr. Doherty as a
consultant to the Bank and its Board of Directors and as Chairman of the Board.
Pursuant to the Consulting Agreement, Mr. Doherty receives $100,000 annually in
addition to use of an office and secretary, reimbursement for certain
business-related dues and expenses, group health and life insurance benefits for
him and his dependents and use of an automobile. The Consulting Agreement
currently provides for a term of one year and is subject to automatic annual
extensions for additional one-year periods, unless written notice from the Bank
or Mr. Doherty directs otherwise. Mr. Doherty's Consulting Agreement may be
terminated by the Board of Directors at any time for "just cause," as defined in
the Consulting Agreement. In addition, the Board may terminate Mr. Doherty at
any time for reasons other than "just cause," however, under such circumstances
Mr. Doherty shall be entitled to the salary and benefits payable under the
Consulting Agreement until its expiration. Mr. Doherty may terminate the
Consulting Agreement upon giving the Board of Directors 60 days prior written
notice. During fiscal 2002, Mr. Doherty waived the receipt of all compensation
and the use of the automobile under this Consulting Agreement due to health
reasons. He did receive directors fees of $10,050 for Board meetings attended
during fiscal 2002 and health and life insurance benefits in the amount of
$3,437 and $1,146, respectively.
7
The Bank has entered into severance agreements (the "Severance Agreements")
with David W. Kearn, Senior Vice President/Lending & Retail Banking, Michael K.
Devlin, Senior Vice President, Treasurer, and Chief Financial Officer, Paul S.
Feeley, Senior Vice President/Chief Information Officer and William P.
Morrissey, Senior Vice President for Corporate Affairs. The Severance Agreements
each provide for a term of three years and an automatic annual extension of the
term of employment for an additional one-year period beyond the then-effective
expiration date, unless either the Bank or Messrs. Kearn, Devlin, Feeley or
Morrissey gives written notice that the Severance Agreement will not be extended
further. The Severance Agreements provide that in the event of their involuntary
termination of employment in connection with, or within one year after, any
change in control of the Company or the Bank, Messrs. Kearn, Devlin, Feeley and
Morrissey will be paid within 10 days of such termination an amount equal to two
times their annual base salary at the rate just prior to the change in control
provided, however, the amount received shall in no event exceed the difference
between (i) 2.99 times their "base amount," as defined in Section 280G(b)(3) of
the Internal Revenue Code, and (ii) the sum of any other parachute payments, as
defined under Section 280G(b)(2) of the Internal Revenue Code, that they receive
on account of the change in control. "Control" generally refers to the
acquisition, by any person or entity, of the ownership, holding, or power to
vote more than 25% of the Company's or the Bank's voting stock, the control of
the election of a majority of the Company's or the Bank's directors, or the
exercise of a controlling influence over the management or policies of the
Company or the Bank. In addition, a change in control occurs when, during any
consecutive two-year period, directors of the Company or the Bank at the
beginning of such period cease to constitute a majority of the Board of
Directors of the Company or the Bank, unless the election of replacement
directors was approved by a two-thirds vote of the initial directors then in
office. The Severance Agreements also provide for a similar lump sum payment in
the event of Messrs. Kearn's, Devlin's, Feeley's or Morrissey's voluntary
termination of employment within one year following a change in control, upon
the occurrence, or within 90 days thereafter, of certain specified events
following a change in control, which have not been consented to in writing by
Messrs. Kearn, Devlin, Feeley or Morrissey, including (i) the requirement that
they perform their principal executive functions more than 35 miles away from
their primary office, (ii) a reduction in the their base compensation as in
effect prior to the change in control, (iii) the failure of the Company or the
Bank to provide them with compensation and benefits substantially similar to
those provided to them at the time of the change in control under any employee
benefit plans in which they become a participant, (iv) the assignment to them of
material duties and responsibilities other than those normally associated with
their position with the Bank, and (v) a material reduction in their authority
and responsibility. In the event that a dispute arises between Messrs. Kearn,
Devlin, Feeley or Morrissey and the Bank, as to the terms or interpretation of
the Severance Agreements, they will be reimbursed for all reasonable expenses
arising from such dispute. If the change in control provisions had been
triggered as of March 31, 2002, Messrs. Kearn, Devlin, Feeley and Morrissey
would have received up to approximately $267,000, $295,000, $249,000 and
$242,000, respectively.
PENSION PLAN. The following table illustrates the maximum estimated annual
benefits payable upon retirement pursuant to the Bank's defined benefit pension
plan based upon the pension plan formula for specified final average earnings
and specified years of service.
FINAL YEARS OF SERVICE
AVERAGE --------------------------------------------------------------------------------------------
EARNINGS 10 15 20 25 30 35
-------- -------- -------- ------- ------- ------- -------
$ 25,000 $ 2,500 $ 3,750 $ 5,000 $ 6,250 $ 7,500 $ 8,750
50,000 5,528 8,292 11,056 13,820 16,583 19,347
100,000 13,028 19,542 26,056 32,570 39,083 45,597
150,000 20,528 30,792 41,056 51,320 61,583 71,847
175,000 24,278 36,417 48,556 60,695 72,833 84,972
200,000 25,028 37,542 50,056 62,570 75,083 87,597
250,000 25,028 37,542 50,056 62,570 75,083 87,597
300,000 25,028 37,542 50,056 62,570 75,083 87,597
Benefits are hypothetical amounts only. Currently, the maximum annual
benefit payable under the pension plan is $160,000. Final average earnings in
excess of $228,973 are not covered under the pension plan for pre-1994 accruals,
and final average earnings in excess of $180,000 are not covered under the
pension plan for post-1993 accruals. "Final average earnings," which are based
upon a participant's highest three consecutive years of compensation, consist of
compensation that would appear under the "Salary" and "Bonus" columns of the
Summary Compensation Table. Benefits under the pension plan become 100% vested
over a six-year period, with 20% of
8
such benefits vesting upon the completion of each of the second through sixth
years of credited service under the pension plan. As of March 31, 2002, Messrs.
Doherty, Kearn, Feeley and Morrissey had approximately 20, eight, four and nine
years, respectively, of credited service under the pension plan. Benefits set
forth in the preceding table are computed as a single life annuity and are not
subject to any deduction for Social Security or other offset amounts.
DIRECTOR COMPENSATION
Directors of the Company are each paid a fee of $450 per Board meeting
attended. The Chairmen of the Finance Committee and the Security (or loan
review) Committee each are paid a fee of $660 for each meeting of the respective
committee which they attend in their capacities as chairman. Members of both the
Finance and Security Committees each receive a fee of $350 per meeting attended.
The President does not receive any director's or committee fees. Director
Terence D. Kenney receives an additional $567 per month as a consulting fee for
services rendered in connection with the Bank's Woburn branches. Chairman
Doherty receives $800 per meeting as a Director and a member of the Security
Committee.
The Company has established a Deferred Compensation Plan for Non-Employee
Directors pursuant to which directors who are not employees of the Company or
the Bank are eligible to defer all or a portion of their director fees. Deferred
fees are credited to an account in a grantor trust and invested in shares of the
Common Stock. Shares allocated to a director's account are to be paid out in
equal annual installments over a three-year period beginning six months after
the director ceases to be a director. Shares held in the Deferred Compensation
Plan for Non-Employee Directors are voted by the trustees in accordance with the
direction of the Board of Directors. During the year ended March 31, 2002, 1,100
and 403 shares were credited to the accounts of Directors Boulos and Neri,
respectively, who were the only directors participating in the Deferred
Compensation Plan for Non-Employee Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL. The function of administering the Company's executive compensation
policies is currently performed by the Finance Committee of the Board of
Directors, which is composed entirely of outside directors. The Committee is
responsible for developing and making recommendations to the Board concerning
compensation paid to the Chief Executive Officer and each of the other executive
officers and for overseeing all aspects of the Company's executive compensation
program, including employee and executive benefit plans. Because the Company
does not have any executive officers who are not also executive officers of the
Bank, this discussion refers to the executive officers of the Bank, rather than
the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. The Committee has
sought to design and implement an executive compensation program that will
achieve the following goals:
o attract and retain qualified executives through competitive base
salaries and benefits;
o motivate executive management to achieve short-term corporate
performance goals through cash incentives; and
o align the interests of senior management with those of stockholders
and promote the long-term performance of the Bank through equity
incentives.
To achieve these goals, the Committee has incorporated the following
elements into the Bank's executive compensation program:
BASE SALARIES AND BENEFITS. Working with outside consultants, the Committee
has developed a competitive salary and benefit structure for the Bank's
executive officers. Based on surveys of compensation practices at similarly
sized institutions in the northeastern United States, the Committee has
established recommended salary ranges for each position level. The salary
structure has been developed so that the midpoint for each salary range
approximates the competitive market midpoint for the range. Salaries are
reviewed and adjusted within the range annually based on competitive
considerations. The Committee seeks to maintain the competitiveness of its
salary structure by reviewing a comprehensive analysis of market compensation
practices at least every two years.
9
MANAGEMENT INCENTIVE PROGRAM. During the 2002 fiscal year, the Bank adopted
a management incentive program which provides cash incentives payments to
eligible members of management provided that certain corporate performance
criteria are met. Under the Incentive Plan, eligible officers may receive
bonuses equal to a specified percentage of their salary provided that various
corporate performance goals have been satisfied. Performance goals for fiscal
2002 focused on Bank profitability. The Incentive Plan provides for increased
incentives if corporate performance goals are exceeded.
STOCK OPTIONS. To better align the interests of management with those
stockholders and to promote long-term performance, the Committee has determined
that specified senior officers should be compensated through grants of stock
options based on their contribution to the achievement of corporate performance
goals and individual merit. For each fiscal year, the Committee reserves a
specified number of options for grant to eligible executive officers with one
half of such options reserved for contribution grants and half for merit grants.
All options are granted with an exercise price equal to the fair market value of
the Common Stock on the date of grant and a term of ten years. Option grants,
however, are discretionary with the Committee and no options were granted during
fiscal 2002.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. For fiscal year 2002, the
Committee determined to increase the Chief Executive Officer's base salary by
approximately 5% after considering a variety of factors, including the salary
ranges previously established, the relative positions of the Chief Executive
Officer and other executive officers within those ranges and an analysis of
salaries being paid by Northeast commercial banks and savings institutions in
the asset range of $250 million to $500 million. Based on the Bank's performance
relative to the targets established under the Management Incentive Plan, the
Chief Executive Officer did not receive a cash bonus.
MEMBERS OF THE FINANCE COMMITTEE
(which serves as the Compensation Committee)
GREGORY W. BOULOS
TERENCE D. KENNEY
NANCY D. NERI
JOHN G. QUINN
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The Company
and Bank had no "interlocking" relationships existing on or after January 1,
1997 in which (i) any executive officer of the Bank served as a member of the
compensation committee (or other board committee performing equivalent functions
or, in the absence of any such committee, the entire board of directors) of
another entity, one of whose executive officers served on the Finance Committee
of the Bank, (ii) any executive officer of the Bank served as a director of
another entity, one of whose executive officers served on the Finance Committee
of the Bank, or (iii) any executive officer of the Bank served as a member of
the compensation committee (or other board committee performing equivalent
functions or, in the absence of any such committee, the entire board of
directors) of another entity, one of whose executive officers served as a member
of the Bank's Board of Directors. No member of the Finance Committee of the
Board of Directors of the Company or the Bank was (a) an officer or employee of
the Company or the Bank or any of its subsidiaries during the fiscal year ended
March 31, 2002, (b) (other than Director Kenney) a former officer of the Company
or the Bank or any of its subsidiaries, or (c) an insider (i.e., director,
officer, director or officer nominee, greater than 5% stockholder, or immediate
family member of the foregoing) of the Company or the Bank and directly or
indirectly engaged in transactions with the Bank or any subsidiary involving
more than the $60,000 during the fiscal year ended March 31, 2002.
10
STOCK PRICE PERFORMANCE GRAPH
The graph and table which follow show the cumulative total return on the
Common Stock of the Bank and the Company from March 31, 1997 through March 31,
2002 compared with the cumulative total return of (i) an index of Nasdaq
commercial banks and (ii) the S&P 500 Index (the "S&P 500"). Cumulative total
return on the stock or the index equals the total increase in value since March
31, 1997, assuming reinvestment of all dividends paid on the stock or the index,
respectively. The graph and table were prepared assuming that $100 was invested
at the closing price on March 31, 1997 in the Common Stock of the Bank and in
each index. The stockholder returns shown on the performance graph are not
necessarily indicative of the future performance of the Common Stock or of any
particular index. Up to January 8, 1999, information is for the Common Stock of
Central Co-operative Bank. After January 8, 1999, information is for the Common
Stock of Central Bancorp, Inc.
CUMULATIVE TOTAL SHAREHOLDER RETURN
COMPARED WITH PEFORMANCE OF SELECTED INDICES
[Line graph appears here depicting the cumulative total shareholder return
of $100 invested in the Common Stock as compared to $100 invested in the Nasdaq
Bank Index and the S&P 500 Index. Line graph begins at March 31, 1997 and plots
the cumulative return at March 31, 1998, 1999, 2000, 2001 and 2002. The plot
points are provided below.]
3/31/97 3/31/98 3/31/99 3/31/00 3/31/01 3/31/02
------- ------- ------- ------- ------- -------
Central Bancorp, Inc. 100.0 197.4 107.8 97.5 120.8 189.6
S&P 500 100.0 148.3 176.1 208.3 163.0 163.6
NASDAQ Bank Index 100.0 160.8 131.1 120.5 143.5 176.1
11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
- --------------------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS
- ---------------------------
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 31, 2002, certain information
as to those persons who were the beneficial owners of more than five percent
(5%) of the Company's outstanding shares of Common Stock.
PERCENT OF SHARES
NAME AND ADDRESS AMOUNT AND NATURE OF COMMON STOCK
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OUTSTANDING (2)
- ------------------- ------------------------ -----------------
Central Co-operative Bank
Employee Stock Ownership Plan Trust
399 Highland Avenue
Somerville, Massachusetts 02144 150,636 (3) 9.23%
Jeffrey L. Gendell
Tontine Financial Partners, L.P.
Tontine Management, L.L.C.
200 Park Avenue, Suite 3910
New York, New York 10166 161,400 (4) 9.88%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401 102,400 6.27%
John D. Doherty
Joseph R. Doherty
Joseph R. Doherty Family Limited
Partnership, L.P.
399 Highland Avenue
Somerville, Massachusetts 02144 202,205 (5) 12.19%
Financial Edge Fund, L.P.
Financial Edge - Strategic Fund, L.P.
Goodbody/PL Capital, L.P.
PL Capital, LLC
Goodbody/PL Capital LLC
John Wm. Palmer
Richard J. Lashley
Garrett Goodbody
20 East Jefferson Avenue, Suite 22
Naperville, Illinois 60540
Richard Fates
95 Rock Maple Avenue
Hamilton, Massachusetts 01982 155,368 (6) 9.52%
<FN>
_______________
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be the beneficial owner, for purposes of this table, of any shares of the
Common Stock as to which he or she has sole or shared voting or investment
power, or has a right to acquire beneficial ownership at any time within 60
days of March 31, 2002. As used herein, "voting power" is the power to vote
or direct the voting of shares and "investment power" is the power to
dispose or direct the disposition of shares. Unless otherwise indicated,
the listed persons have direct ownership and sole voting and dispositive
power.
(2) For purposes of calculating percentage ownership, the number of shares of
Common Stock outstanding includes any shares which the beneficial owner has
the right to acquire within 60 days of March 31, 2002.
(3) Of the shares beneficially owned by the Central Co-operative Bank Employee
Stock Ownership Plan Trust ("ESOP"), 125,973 shares have been allocated to
participating employees over which shares Directors Boulos and Kenney, as
co-trustees of the ESOP (the "ESOP Trustees"), may be deemed to have shared
voting and sole investment power, and 24,663 shares have not been
allocated, as to which shares the ESOP Trustees generally would vote in the
same proportion as voting directions received from voting ESOP
participants.
(4) According to their statement on Schedule 13G as amended January 22, 2002,
each of the reporting persons shares voting and dispositve power over the
listed shares.
(5) Includes 25,639 shares of Common Stock which John D. Doherty has the right
to acquire pursuant to stock options exercisable within 60 days of March
31, 2002 and 12,661 shares allocated to his account in the ESOP. Each of
John D. Doherty, Joseph R. Doherty and the Joseph R. Doherty Family Limited
Partnership, L.P. disclaims beneficial ownership of any shares held by the
other.
(6) According to Amendment No. 6 to their Schedule 13D, filed June 12, 2002,
includes 113,900 and 23,200 shares owned by Financial Edge Fund, L.P. and
Financial Edge-Strategic Fund, L.P., respectively, whose general partner is
PL Capital, LLC of which Messrs.
12
Palmer and Lashley are the managing members, 12,168 shares held by
Goodbody/PL Capital, L.P. whose general partner is Goodbody/PL Capital, LLC
of which Messrs. Palmer, Lashley and Goodbody are the managing members and
600, 5,000 and 500 shares beneficially owned by Messrs. Lashley, Goodbody
and Fates, respectively, in their individual capacities.
</FN>
(b) SECURITY OWNERSHIP OF MANAGEMENT
The following table provides information as of March 31, 2002 concerning
ownership of the Company's Common Stock (which constitutes its only class of
equity securities) each of its directors, the Named Executive Officers and all
executive officers and directors as a group. Each person listed has sole voting
and investment power with respect to the shares listed across from his name
except as noted otherwise.
BENEFICIAL OWNERSHIP (1)
------------------------------------------------
NUMBER PERCENTAGE OF
NAME OF SHARES SHARES OUTSTANDING(2)
- ---- --------- ---------------------
Marat E. Santini 2,363 0.14%
John F. Gilgun, Jr. 1,575 0.09%
John G. Quinn 1,200 0.07%
Joseph R. Doherty 60,675 3.72%
Terence D. Kenney1, 541 (3) 0.09%
Nancy D. Neri 200 (4) 0.01%
Gregory W. Boulos 5,500 (3)(4) 0.34%
John D. Doherty 141,530 (5) 8.53%
David W. Kearn 14,706 (6) 0.90%
Paul S. Feeley 7,610 (7) 0.46%
William P. Morrissey 11,162 (8) 0.68%
All directors and executive
officers as a group (12 persons) 249,565 (9) 14.87%
<FN>
- -----------
(1) For definition of beneficial ownership, see footnote 1 to the table in Item
12(a) of this Annual Report on Form 10-K.
(2) In calculating percentage ownership for a given individual or group of
individuals, the number of shares of the Common Stock outstanding includes
unissued shares subject to options exercisable within 60 days of March 31,
2002 held by that individual or group.
(3) Does not include 150,636 shares held by the ESOP, over which shares the
ESOP Trustees, Directors Boulos and Kenney, may be deemed to have shared or
sole voting and/or investment power.
(4) Excludes shares credited to their accounts in the Deferred Compensation
Plan for Non-Employee Directors.
(5) Includes 25,639 shares of Common Stock which he has the right to acquire
pursuant to stock options exercisable within 60 days of March 31, 2002 and
12,661 shares allocated to his account in the ESOP.
(6) Includes 5,828 shares allocated to his account in the ESOP and 8,878 shares
which he has the right to acquire pursuant to options exercisable within 60
days of March 31, 2002.
(7) Includes 1,988 shares allocated to his account in the ESOP and 5,622 shares
which he has the right to acquire pursuant to options exercisable within 60
days of March 31, 2002.
(8) Includes 5,792 shares allocated to his account in the ESOP and 5,370 shares
which he has the right to acquire pursuant to options exercisable within 60
days of March 31, 2002.
(9) Includes 45,509 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of March 31, 2002, 26,269 shares
allocated to the ESOP accounts of directors and executive officers and
1,503 shares held by the trust for the Deferred Compensation Plan for
Non-Employee Directors which are voted as directed by the Board of
Directors. Does not include unallocated shares held by the ESOP, over which
shares the ESOP Trustees may be deemed to have shared or sole voting and/or
investment power.
</FN>
(c) CHANGES IN CONTROL
The Company is not aware of any arrangements, including any pledge by any
person of securities of the Company, the operation of which may at a subsequent
date result in a change of control of the Company.
(D) EQUITY COMPENSATION PLANS
The Company has adopted the 1999 Stock Option and Incentive Plan pursuant
to which equity may be awarded to participants. This plan has been approved by
stockholders.
13
The following table sets forth certain information with respect to the
Company's Equity Compensation Plans:
NUMBER OF SECURITIES REMAINING
AVAILABLE FOR FUTURE ISSUANCE
NUMBER OF SECURITIES TO BE ISSUED WEIGHTED-AVERAGE EXERCISE UNDER EQUITY COMPENSATION
UPON EXERCISE OF OUTSTANDING PRICE OF OUTSTANDING PLANS (EXCLUDING SECURITIES
PLAN CATEGORY OPTIONS, WARRANTS AND RIGHTS OPTIONS, WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
- ------------- --------------------------------- ---------------------------- ------------------------------
Equity compensation plans
approved by security holders 59,613 $ 18.448 33,299
Equity compensation plans not
approved by security holders 0 0 0
Total (1)
<FN>
- ----------
(1) The 1999 Stock Option and Incentive Plan provides for a proportionate
adjustment to the number of shares reserved thereunder in the event of
a stock split, stock dividend reclassification, recapitalization or
similar event.
</FN>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The Bank engages in transactions with affiliates of the Bank on the same
terms and other conditions as those offered to unaffiliated parties. Loans by
the Bank made to Directors, officers and employees are made in the ordinary
course of business, on substantially the same terms, including interest rates,
collateral and repayment terms as those prevailing at the time for comparable
transactions with other persons, and do not involve more than the normal risk of
collectibility or present other unfavorable features. Massachusetts law provides
that co-operative banks are limited in the amount of money they may lend an
officer of the Bank. These limits are $275,000 for a mortgage on a primary
residence, $75,000 loans for educational purposes and $20,000 for all other
types of loans in total. This restriction does not apply to non-officer
employees of the Bank or to its outside Directors. Any loans existing prior to
the implementation of this restriction are grandfathered. The same loans
available to the public are available to Directors, officers and employees.
In August 2001, the Company agreed to lend the ESOP sufficient funds to
acquire up to an additional 5% of the outstanding Common Stock. The ESOP's
trustees are Directors Boulos and Kenney. As of March 31, 2002, the Company had
lent the ESOP an aggregate of $199,000 which was the highest amount of
indebtedness outstanding since the beginning of the 2002 fiscal year. The ESOP
loan bears interest at the prime rate. In addition, the ESOP was indebted to the
Bank in the amount of $107,000 on a loan originally made in 1997. From time to
time, the Bank retains Santini, Inc., a firm controlled by members of Director
Santini's immediate family, to perform various general contracting services.
During fiscal 2002, the Bank paid Santini, Inc. a total of $145,420 for such
services.
14
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CENTRAL BANCORP, INC.
Date: July 24, 2002 By:/s/ Michael K. Devlin
----------------------------------------------
Michael K. Devlin
Senior Vice President, Treasurer, Chief
Financial Officer and Duly Authorized
Representative