UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant /X/
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))
/X/Definitive Proxy Statement
/ /Definitive Additional Materials
/ /Soliciting Material Pursuant to 14a-12
CENTRAL 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)
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.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[Central Bancorp, Inc. Letterhead]
August 20, 2004
ANNUAL MEETING
SEPTEMBER 20, 2004
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Central Bancorp, Inc.
(the "Company"), I cordially invite you to attend the 2004 Annual Meeting of
Stockholders (the "Annual Meeting"), which will be held at the Somerville
Holiday Inn, 30 Washington Street, Somerville, Massachusetts, on Monday,
September 20, 2004 at 11:00 a.m., local time. Accompanying this letter are a
Notice of Annual Meeting and a Proxy Statement describing the business to be
transacted, as well as a copy of the Company's Annual Report. Please review
these materials carefully.
At the Annual Meeting, you will be asked to elect three directors. The
Board of Directors unanimously recommends that you vote FOR its nominees. During
the meeting, we will report on the operations of the Company. Directors and
officers of the Company as well as a representative of our independent auditors,
Vitale, Caturano & Company, P.C., will be present to respond to any questions
stockholders may have.
Whether or not you plan to attend the Annual Meeting, please sign and date
the enclosed proxy card and mail it in the accompanying postage-paid return
envelope as promptly as possible. This will not prevent you from voting in
person at the Annual Meeting, but will assure that your vote is counted if you
are unable to attend. PLEASE SIGN, DATE AND PROMPTLY MAIL THE PROXY CARD TODAY.
YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
Your continued interest and support of Central Bancorp, Inc. are sincerely
appreciated.
Sincerely,
/s/ John D. Doherty
John D. Doherty
Chairman, President and Chief Executive Officer
CENTRAL BANCORP, INC.
399 HIGHLAND AVENUE
SOMERVILLE, MASSACHUSETTS 02144
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 20, 2004
Notice is hereby given that the 2004 Annual Meeting of Stockholders (the
"Annual Meeting") of Central Bancorp, Inc. (the "Company") will be held at the
Somerville Holiday Inn, 30 Washington Street, Somerville, Massachusetts on
Monday, September 20, 2004 at 11:00 a.m., local time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed
herewith.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Company; and
2. Such other matters as may properly come before the
Annual Meeting or any adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to come
before the Annual Meeting.
Any action may be taken on any one of the foregoing proposals at the Annual
Meeting on the date specified above, or on any date or dates to which, by
original or later adjournment, the Annual Meeting may be adjourned. Stockholders
of record at the close of business on August 3, 2004 are the stockholders
entitled to vote at the Annual Meeting and any adjournments thereof.
Whether or not you expect to be present at the Annual Meeting, please sign
and date the enclosed proxy card and mail it promptly in the enclosed
postage-paid envelope. If you do attend the Annual Meeting and wish to vote in
person, you may do so even though you have signed an earlier proxy.
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
YOU ARE ENCOURAGED TO VOTE BY PROXY SO THAT YOUR SHARES WILL BE REPRESENTED AND
VOTED AT THE MEETING EVEN IF YOU CANNOT ATTEND. ALL STOCKHOLDERS OF RECORD CAN
VOTE BY WRITTEN PROXY CARD. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE
NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM
YOUR RECORD HOLDER TO VOTE PERSONALLY AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Rhoda K. Astone
RHODA K. ASTONE
ASSISTANT VICE PRESIDENT,
SECRETARY AND CLERK
Somerville, Massachusetts
August 20, 2004
CENTRAL BANCORP, INC.
399 Highland Avenue
Somerville, Massachusetts 02144
(617) 628-4000
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
September 20, 2004
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GENERAL
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This Proxy Statement and the enclosed Proxy Card are furnished in
connection with the solicitation of proxies by the Board of Directors of Central
Bancorp, Inc. ("Central" or the "Company"), the holding company for Central
Co-operative Bank (the "Bank"), to be used at the Company's 2004 Annual Meeting
of Stockholders (hereinafter called the "Annual Meeting") which will be held at
the Somerville Holiday Inn, 30 Washington Street, Somerville, Massachusetts, on
Monday, September 20, 2004 at 11:00 a.m., local time. The accompanying Notice of
Annual Meeting and this Proxy Statement are being first mailed to stockholders
on or about August 20, 2004.
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VOTING AND PROXY PROCEDURES
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WHO CAN VOTE AT THE ANNUAL MEETING
You are only entitled to vote at the Annual Meeting if the Company's
records show that you held shares of Central's common stock, $1.00 par value
(the "Common Stock"), as of the close of business on August 3, 2004 (the "Record
Date"). If your shares are held by a broker or other intermediary, you can only
vote your shares at the Annual Meeting if you have a properly executed proxy
from the record holder of your shares (or their designee). As of the Record
Date, a total of 1,665,732 shares of Common Stock were outstanding. Each share
of Common Stock has one vote.
VOTING BY PROXY
The Board of Directors is sending you this proxy statement for the purpose
of requesting that you allow your shares of Common Stock to be represented at
the Annual Meeting by the persons named in the enclosed proxy card. All shares
of Common Stock represented at the Annual 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 the 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 A VOTE "FOR" EACH OF ITS NOMINEES FOR
DIRECTOR.
If any matters not described in this proxy statement are properly presented
at the Annual Meeting, the persons named in the proxy card will vote your shares
as determined by a majority of the Board of Directors. If the Annual Meeting is
postponed or adjourned, your Common Stock may be voted by the persons named in
the proxy card on the new Annual Meeting dates as well, unless you have revoked
your proxy. The Company does not know of any other matters to be presented at
the Annual Meeting.
You may revoke your proxy at any time before the vote is taken at the
Annual Meeting. To revoke your proxy you must either advise the Company's
Secretary and Clerk in writing before your Common Stock has been voted at the
Annual Meeting, deliver a later-dated proxy, or attend the Annual Meeting and
vote your shares in person. Attendance at the Annual Meeting will not in itself
constitute revocation of your proxy.
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If you hold your Common Stock in "street name," you will receive
instructions from your broker, bank or other nominee that you must follow in
order 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 see the instruction form provided by your broker, bank or other nominee
that accompanies this proxy statement.
PARTICIPANTS IN THE CENTRAL CO-OPERATIVE BANK ESOP
If you are a participant in the Central Co-operative Bank Employee Stock
Ownership Plan (the "ESOP"), you will receive a voting instruction form that
reflects all shares you may vote under the ESOP. Under the terms of the ESOP,
all shares held by the ESOP are voted by the ESOP trustees, but each participant
in the ESOP may direct the trustees how to vote the shares of Common Stock
allocated to his or her account. Unallocated shares and allocated shares for
which no timely voting instructions are received will be voted by the ESOP
trustees in the same proportion as the shares for which the trustees have
received timely voting instructions, provided that in the absence of any voting
directions as to allocated stock, the Board of Directors of the Bank will direct
the ESOP Trustees as to the voting of all shares of stock in the ESOP. The
deadline for returning your voting instruction form to the ESOP trustees is
September 15, 2004.
VOTE REQUIRED
The Annual Meeting will be held if a majority of the outstanding shares of
Common Stock entitled to vote is represented at the Annual Meeting. If you
return valid proxy instructions or attend the Annual Meeting in person, your
shares will be counted for purposes of determining whether there is a quorum
even if you withhold your vote or do not vote your shares at the Annual Meeting.
Broker non-votes 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 have discretionary voting power with
respect to the agenda 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 vote in favor of all nominees
except nominees you specify as to which you withhold your vote. There is no
cumulative voting in the election of directors. Directors must be 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.
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PRINCIPAL HOLDERS OF VOTING SECURITIES
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Persons and groups beneficially owning in excess of 5% of the Common Stock
are required to file certain reports regarding such ownership pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act"). The following table sets
forth certain information as to those persons who the Company believes were the
beneficial owners of more than five percent (5%) of the Company's outstanding
shares of Common Stock as of June 30, 2004.
Percent of Shares
Name and Address Amount and Nature of Common Stock
of Beneficial Owner Beneficial Ownership (1) Outstanding (2)
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Central Co-operative Bank
Employee Stock Ownership Plan Trust
399 Highland Avenue
Somerville, Massachusetts 02144 239,706 (3) 14.40%
John D. Doherty
Joseph R. Doherty
Joseph R. Doherty Family Limited
Partnership, L.P.
399 Highland Avenue
Somerville, Massachusetts 02144 212,877 (4) 12.79
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 (5) 9.69
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
Richard J. Fates
20 East Jefferson Avenue, Suite 22
Naperville, Illinois 60540
Richard Fates
95 Rock Maple Avenue
Hamilton, Massachusetts 01982 154,268 (6) 9.27
Mendon Capital Advisors Corp.
Anton Villars Schutz
150 Allens Creek Road
Rochester, New York 14618 126,100 (7) 7.57
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(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 June 30, 2004. 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 June 30, 2004.
(3) Of the shares beneficially owned by the Central Co-operative Bank Employee
Stock Ownership Plan Trust ("ESOP"), 127,425 shares have been allocated to
participating employees over which shares Directors Boulos and Bulman, as
co-trustees of the ESOP (the "ESOP Trustees"), may be deemed to have shared
voting and sole investment power, and 112,281 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.
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(4) Includes 14,633 shares of Common Stock allocated to the account of John D.
Doherty in the ESOP. John D. Doherty disclaims beneficial ownership of any
shares held by Joseph R. Doherty or the Joseph R. Doherty Family Limited
Partnership, L.P., and Joseph R. Doherty and the Joseph R. Doherty Family
Limited Partnership, L.P. disclaim beneficial ownership of any shares held
by John D. Doherty.
(5) According to their statement on Schedule 13G as amended filed January 22,
2002, each of the reporting persons shares voting and dispositve power over
the listed shares.
(6) According to Amendment No. 16 to their Schedule 13D, filed August 12, 2003,
includes 113,900 and 27,100 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. 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 and Lashley are
the managing members and 600 and 500 shares beneficially owned by Messrs.
Lashley and Fates, respectively, in their individual capacities.
(7) According to their statement on Schedule 13G as amended filed February 17,
2004, each of the reporting persons shares voting and dispositive power
over the listed shares. Additionally, based on information filed in a
Schedule 13G with the U.S. Securities and Exchange Commission on February
17, 2004 by Burnham Financial Services Fund ("Burnham"), Burnham
beneficially owns 113,100 of the listed shares. Burnham is a registered
investment company that has delegated its sole right to vote and dispose of
such shares to Mendon Capital Advisors Corp. ("Mendon") in Mendon's
capacity as an investment sub-adviser.
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PROPOSAL I -- ELECTION OF DIRECTORS
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The Company's Board of Directors is currently composed of ten members.
Under the Company's Articles of Organization and Bylaws, directors are divided
into three classes, with one class standing for election for a three-year term
at each Annual Meeting. Three directors will be elected at the Annual Meeting,
each to serve for a three-year period or until their respective successors have
been elected and qualified. The Nominating Committee of the Board of Directors
has nominated Gregory W. Boulos, John D. Doherty and Albert J. Mercuri, Jr. for
election as directors, all to serve for three-year terms. Each of these persons
has consented to being named in this Proxy Statement and has indicated that they
will serve if elected.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF GREGORY W. BOULOS, JOHN D. DOHERTY AND ALBERT J. MERCURI, JR. AS
DIRECTORS OF THE COMPANY.
Proxies solicited by the Board of Directors will be voted for the election
of the above named nominees. If a nominee is unable to serve, the shares
represented by all valid proxies will be voted for the election of such
substitute nominee as the Board of Directors may recommend or the Board may also
decide to reduce the number of Directors to eliminate the vacancy. At this time,
the Board of Directors knows of no reason why any nominee might be unavailable
to serve.
The following table sets forth for each Board nominee and for each director
continuing in office, his name, age, the year he first became a director of the
Company and/or the Bank, which is the Company's principal operating subsidiary,
and the year of expiration of his present term. For information regarding Common
Stock beneficially owned by directors, see "Security Ownership of Management."
Directors Joseph R. Doherty, Gregory W. Boulos and John D. Doherty were
appointed as directors of the Company in 1998 in connection with the
incorporation and organization of the Company. All other directors were
appointed to the Board of Directors of the Company in the years indicated on the
table below.
4
Year First
Elected or
Appointed Present
Age as of Director of Term to
Name Record Date Company or Bank Expire
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BOARD NOMINEES FOR TERMS TO EXPIRE IN 2007
Gregory W. Boulos 47 1998 2004
John D. Doherty 47 1983 2004
Albert J. Mercuri, Jr. 47 2003 2004
DIRECTORS CONTINUING IN OFFICE
Paul E. Bulman 66 2002 2005
James F. Linnehan 83 2003 2005
Richard J. Fates 59 2002 2005
John J. Morrissey 37 2003 2005
Joseph R. Doherty 80 1958 2006
Richard J. Lashley 46 2003 2006
Edward F. Sweeney, Jr. 63 2003 2006
Presented below is certain information concerning each of the Board's
nominees and Directors continuing in office. Unless otherwise stated, all such
nominees and Directors have held the positions listed for at least the last five
years.
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, Mercy Hospital 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 and the National Association of Realtors, and Director
of Wayneflete School.
JOHN D. DOHERTY is the Chairman, President and Chief Executive Officer of
the Company and President and Chief Executive Officer of 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 1992, Mr.
Doherty also became the Chief Executive Officer of the Bank. In November 2002,
Mr. Doherty became Chairman of the Board of the Company. Mr. Doherty also serves
as the president and a director of the Bank's subsidiaries, Central Securities
Corporation and Central Securities Corporation II. 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 Banks Employees 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 and a past president of the Economy
Club of Cambridge. Mr. Doherty is the son of Board member Joseph R. Doherty.
ALBERT J. MERCURI, JR. has served since 1987 as President and Chief
Executive Officer of Data Direct, Inc., a national distributor of digital media
publishing systems, optical media and copiers, located in Needham Heights,
Massachusetts. Mr. Mercuri is a 1979 graduate of Babson College where he earned
a Bachelor of Science degree in Marketing.
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PAUL E. BULMAN has served as Chairman of the Policy Holders Protective
Board of the Savings Bank Life Insurance Company since 2000. From 1996 to 2000,
he was President and Chief Executive Officer of Haymarket Co-operative Bank. Mr.
Bulman had previously served as President, Chief Executive Officer and Director
of Hingham Institution for Savings which he had joined in 1988. Prior to that,
he had been Senior Vice President, Lending at New Bedford Institution for
Savings since 1987. Mr. Bulman served as Commissioner for Banks for the
Commonwealth of Massachusetts from 1983 to 1987 after serving as First Deputy
Commissioner and Clerk, Deputy Commissioner, Bank Supervisor and Director,
Commercial Bank Examinations. He joined the State Banking Department in 1960.
Mr. Bulman is a volunteer at the Scituate Senior Center.
JAMES F. LINNEHAN is an attorney and a Certified Public Accountant. Mr.
Linnehan has served as the Assistant Attorney General for the Commonwealth of
Massachusetts and as a Special Investigator for the Suffolk County District
Attorney's office. He is a life trustee of the Board of Trustees of Suffolk
University. He is a former director and chairman of the audit and trust
committees of Bay Bank Middlesex.
RICHARD J. FATES is a financial planner with Baystate Financial Services
and the principal and owner of Fates Financial Advisors. He was formerly a
Regional President at Bank of Boston. Mr. Fates is the Chairman of the Board of
Trustees of the Pomfret School and the Coordinator for the North Shore United
Way Campaign for the Hamilton-Wenham area.
JOHN J. MORRISSEY is a partner with the law firm of Quinn and Morris in
Boston, Massachusetts. Since 1999, he has served as a member of the Board of Bar
Overseers' Hearing Committee for Plymouth and Norfolk Counties in Massachusetts,
which investigates complaints of attorney misconduct and makes findings and
recommendations for discipline to the Supreme Judicial Court. Since 2000, Mr.
Morrissey has served as a member of the Medical Malpractice Tribunal for Suffolk
County, Massachusetts, which hears medical malpractice claims to determine if
the evidence is sufficient for judicial inquiry without posting a statutory
bond. Mr. Morrissey also serves as a member of the Board of Governors of the
Massachusetts Academy of Trial Attorneys and as a Regional Delegate of the
Massachusetts Bar Association. John J. Morrissey is the son of William P.
Morrissey, the Company's and the Bank's Senior Vice President for Corporate
Affairs.
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. In March 1992, Mr. Doherty retired as Chief
Executive Officer of the Bank, although he remains Chairman of the Board of the
Bank. Mr. Doherty served as Chairman of the Board of the Company until November
2002. Mr. Doherty is the father of John D. Doherty, the Chairman of the Board,
President and Chief Executive Officer of the Company and the President and Chief
Executive Officer of the Bank.
RICHARD J. LASHLEY is a Principal, and co-founder and co-owner, of PL
Capital, LLC, an investment management and investment banking firm located in
Naperville, Illinois, specializing in the banking and financial services
industries. He also is a General Partner, and co-founder and co-manager, of the
following investment partnerships: Financial Edge Fund, LP (since 1996),
Financial Edge-Strategic Fund, LP (since September 1998) and Goodbody/PL
Capital, LP (since December 2000). PL Capital, LLC, Financial Edge Fund, LP,
Financial Edge-Strategic Fund, LP, Goodbody/PL Capital, LLC and Goodbody/PL
Capital, LP collectively beneficially own in excess of 5% of the Company's
outstanding Common Stock. See "Principal Holders of Voting Securities." From
1998 to 2001, he served as Managing Member of Bureaus/PL Portfolio LLC,
Evanston, Illinois, an investor in non-performing credit card receivables. He
has served since 1997 as an advisory board member of Clever Ideas-LeCard, Inc.,
Chicago, Illinois, a specialty finance and marketing company. He served as a
director of Haven Bancorp, Inc., Westbury, New York, from 2000 to 2001, Security
Financial Bancorp, Inc., St. John, Indiana, from 2000 to 2003 and Franklin
Bancorp, Inc., Southfield, Michigan, from 2001 to 2004. Mr. Lashley was
appointed a director of the Company pursuant to an Agreement entered into
between the Company and its affiliated persons and entities and PL Capital, LLC
and its affiliated persons and entities, pursuant to which the parties settled
all outstanding litigation between them.
EDWARD F. SWEENEY, JR. has served since December 2002 as a Business
Consultant to the Malden Redevelopment Authority, an agency funded by the
Department of Housing and Urban Development to work with communities to promote
home ownership for low and moderate income families. Mr. Sweeney has also served
6
since March 1990 as a Commissioner, and is a former Chairman, of the Malden
Housing Authority, an agency that provides and manages housing for seniors and
disabled persons. From December 2000 to September 2002 he was a Field Auditor
with RGIS Inc. of Belmont, Massachusetts, where he conducted field audits of
retail clients and schedules assignments for staff auditors. From June to
December 2000, Mr. Sweeney served as a financial consultant to New England
Credit Union Services, Inc., in Southborough, Massachusetts, where he advised
credit unions on financial, structural and strategic issues. From May 1998 to
December 2000, he served as Senior Vice President of US Trust, a $6 billion
multi-bank holding company in Boston, Massachusetts. In this capacity, Mr.
Sweeney reported directly to the Chairman and Chief Executive Officer and was
responsible for instituting action plans for potential bank acquisitions, bank
activity and expanded banking power. From 1996 to May 1998, Mr. Sweeney served
as Senior Vice President of Somerset Savings Bank, Somerville, Massachusetts, a
$500 million bank, where he was responsible for review of loan administration,
liaison with the bank's outside counsel, external auditors and regulatory
authorities. From 1994 to 1996, Mr. Sweeney was President, Chief Executive
Officer and a Director of Meetinghouse Co-Operative Bank in Dorchester,
Massachusetts. From 1966 to 1994, Mr. Sweeney served with the Division of
Banking for the Commonwealth of Massachusetts. He was Senior Deputy Commissioner
from 1992 to 1994, Deputy Commissioner of Stock Institutions from 1989 to 1992
and Deputy Commissioner of Thrift Institutions from 1978 to 1989.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following sets forth the information, including the ages, as of the
Record Date with respect to executive officers of the Company who do not serve
on the Board of Directors. Executive officers are appointed annually by the
Board of Directors
DAVID W. KEARN, 62, joined the Bank in June 1993 and currently serves as
the Senior Vice President - Lending of the Company and the Bank. 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
Securities Corporation II.
MICHAEL K. DEVLIN, 53, joined the Bank in February 2002 and serves as
Senior Vice President, Treasurer and Chief Financial Officer of the Company and
the Bank. He also serves as a director and treasurer of the Bank's subsidiaries,
Central Securities Corporation and Central Securities Corporation II. 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, 57, joined the Bank in July 1997 as Senior Vice President,
Treasurer and Chief Financial Officer and became Senior Vice President and Chief
Information Officer of the Company and the Bank 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 Executive Vice President, Chief Financial
Officer and Clerk of the Corporation at The Cooperative Bank of Concord, Acton,
Massachusetts.
WILLIAM P. MORRISSEY, 76, joined the Bank in November 1992 and serves as
Senior Vice President for Corporate Affairs representing the Company and the
Bank in outside banking and business organizations. Mr. Morrissey is former
chairman and a current member 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. Mr. Morrissey is
the father of Director John J. Morrissey.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The Board of Directors conducts its business through meetings of the Board
and through its committees. During the year ended March 31, 2004, the Board of
Directors of the Company held 10 meetings, and the Board of Directors of the
Bank met 13 times. No Director attended fewer than 75% of the total number of
meetings of the Board of Directors and meetings of committees on which the
director served during this period.
NOMINATING COMMITTEE
General. The Board of Directors' Nominating Committee nominates directors
to be voted on at the Annual Meeting and recommends nominees to fill any
vacancies on the Board of Directors. The Nominating Committee currently consists
of Directors Paul E. Bulman, James F. Linnehan and Richard J. Fates. The members
of the Nominating Committee are "independent directors" as defined in Nasdaq
listing standards. The Board of Directors has adopted a Charter for the
Nominating Committee, a copy of which is attached hereto as Appendix A. The
Nominating Committee met once during the year ended March 31, 2004.
It is the policy of the Nominating Committee to consider director
candidates recommended by security holders who appear to be qualified to serve
on the Company's Board of Directors. Any stockholder wishing to recommend a
candidate for consideration by the Nominating Committee as a possible director
nominee for election at an upcoming annual meeting of stockholders must provide
written notice to the Nominating Committee of such stockholder's recommendation
of a director nominee no later than March 31 preceding the annual meeting of
stockholders. Notice should be provided to: Secretary and Clerk, Central
Bancorp, Inc., 399 Highland Avenue, Somerville, Massachusetts 02144.
In its deliberations, the Nominating Committee considers a candidate's
personal and professional integrity, knowledge of the banking business and
involvement in community, business and civic affairs, and also considers whether
the candidate would provide for adequate representation of the Bank's market
area. Any nominee for director made by the Nominating Committee must be highly
qualified with regard to some or all the attributes listed in the preceding
sentence. In searching for qualified director candidates to fill vacancies on
the Board, the Nominating Committee solicits the Company's then current
directors for the names of potential qualified candidates. Moreover, the
Nominating Committee may ask the Company's directors to pursue their own
business contacts for the names of potentially qualified candidates. The
Nominating Committee would then consider the potential pool of director
candidates, select a candidate based on the candidate's qualifications and the
Board's needs, and conduct a thorough investigation of the proposed candidate's
background to ensure there is no past history that would cause the candidate not
to be qualified to serve as a director of the Company. In the event a
stockholder has submitted a proposed nominee, the Nominating Committee would
consider the proposed nominee, along with any other proposed nominees
recommended by individual directors, in the same manner in which the Nominating
Committee would evaluate nominees for director recommended by directors.
With respect to nominating an existing director for re-election to the
Board of Directors, the Nominating 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.
AUDIT COMMITTEE
The Company has a separately designated Audit Committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. The Company's Audit
Committee meets quarterly to review reports prepared by the Company's internal
auditing firm. In addition, the Audit Committee engages the Company's
independent auditors with whom it meets to review the planning for and the
results of the annual audit of the Company's consolidated financial statements.
The members of the Audit Committee are Directors James F. Linnehan (Chairman),
Richard J. Fates and Albert J. Mercuri, Jr. All of the members of the Audit
Committee are independent within the meaning of the National Association of
Securities Dealers, Inc.'s listing standards. The Company's Board of Directors
has determined that one member of the Audit Committee, James F. Linnehan,
qualifies as an "audit committee financial expert" as defined in Section 401(h)
of Regulation S-K promulgated by the U.S.
8
Securities and Exchange Commission. Director Linnehan is "independent," as such
term is defined in Item 7(d)(3)(iv)(A) of Schedule 14A under the Exchange Act.
The Company's Board of Directors has adopted a written charter for the Audit
Committee, a copy of which is attached hereto as Appendix B. The Audit Committee
met 12 times during the year ended March 31, 2004.
COMPENSATION COMMITTEE
Prior to April 2004, the Finance Committee of the Bank served as the
Company's Compensation Committee. In April 2004, the Company's Board of
Directors established a Compensation Committee consisting of Directors Paul E.
Bulman (Chairman), Gregory W. Boulos and Edward F. Sweeney, Jr. The Compensation
Committee sets compensation for the officers and directors of the Company and
Bank and reviews various personnel issues such as wage and salary programs and
incentive compensation. During the year ended March 31, 2004, the Finance
Committee of the Bank met two times in its capacity as a Compensation Committee.
BOARD POLICIES REGARDING COMMUNICATIONS WITH THE BOARD OF DIRECTORS AND
ATTENDANCE AT ANNUAL MEETINGS
The Board of Directors maintains a process for stockholders to communicate
with the Board of Directors. Stockholders wishing to communicate with the Board
of Directors should send any communication to Rhoda K. Astone, Secretary and
Clerk, Central Bancorp, Inc., 399 Highland Avenue, Somerville, Massachusetts
02144. All communications that relate to matters that are within the scope of
the responsibilities of the Board and its Committees are to be presented to the
Board no later than its next regularly scheduled meeting. Communications that
relate to matters that are within the responsibility of one of the Board
Committees are also to be forwarded to the Chair of the appropriate Committee.
Communications that relate to ordinary business matters that are not within the
scope of the Board's responsibilities, such as customer complaints, are to be
sent to the appropriate officer. Solicitations, junk mail and obviously
frivolous or inappropriate communications are not to be forwarded, but will be
made available to any director who wishes to review them.
Directors are expected to prepare themselves for and to attend all Board
meetings, the Annual Meeting of Stockholders and the meetings of the Committees
on which they serve, with the understanding that on occasion a director may be
unable to attend a meeting. All of the Company's directors attended the
Company's 2003 Annual Meeting of Stockholders.
- --------------------------------------------------------------------------------
DIRECTOR COMPENSATION
- --------------------------------------------------------------------------------
Directors of the Company and the Bank are each paid a fee of $950 and $450,
respectively, per Board meeting attended. The Chairman of the Company's Audit
Committee and the Bank's Finance and Security Committees each are paid a fee of
$660 for each meeting of the respective committee which they attend in their
capacities as chairman. Members of the Audit, Finance and Security Committees
each receive a fee of $350 per meeting attended. The President does not receive
any director's or committee fees. Former Director Terence D. Kenney, who retired
from the Board of Directors in August 2003, receives $567 per month as a
consulting fee for services rendered in connection with the Bank's Woburn
branches. Bank Chairman Joseph R. Doherty receives group health and life
insurance benefits under the Bank's group plans. Premiums paid by the Bank on
behalf of Joseph R. Doherty amounted to $4,240 during the year ended March 31,
2004.
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 Company's Board of Directors. During the year ended March 31,
2004, 904, 459, 87, 52 and 322 shares were credited to the accounts of Directors
Boulos, Bulman, Mercuri and Morrissey and former Director Nancy Neri,
respectively, who were the only directors participating in the Deferred
Compensation Plan for Non-Employee Directors.
9
EXECUTIVE COMPENSATION AND OTHER BENEFITS
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 the four other most highly compensated executive
officers of the Company in fiscal year 2004 (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 2004 $ 298,102 $ -- -- -- $ 38,097
Chairman, President 2003 286,144 66,214 -- -- 40,867
and Chief Executive Officer 2002 272,160 -- -- -- 31,842
Michael K. Devlin 2004 153,866 -- -- -- 14,757
Senior Vice President, 2003 147,694 28,904 -- -- 1,267
Treasurer and Chief 2002 11,346 -- -- -- --
Financial Officer
David W. Kearn 2004 146,231 -- -- -- 27,300
Senior Vice President/ 2003 140,365 27,469 -- -- 24,653
Lending 2002 133,505 -- -- -- 20,644
Paul S. Feeley 2004 136,263 -- -- -- 18,325
Senior Vice President/ 2003 130,797 25,597 -- -- 13,330
Chief Information Officer 2002 124,405 -- -- -- 12,874
William P. Morrissey 2004 153,866 -- -- -- 25,955
Senior Vice President for 2003 131,496 25,734 -- -- 22,607
Corporate Affairs 2002 121,133 -- -- -- 19,359
- ---------------------
(1) Reflects fiscal year for which bonus was earned.
(2) Does not include perquisites which totaled less than ten percent of annual
salary and bonus.
(3) For fiscal year 2004, consists of $5,000, $3,738, $4,429, $816 and $4,416,
respectively, in Company contributions to the defined contribution
retirement plan, the value of 796, 255, 555, 431 and 552 shares, based on
$34.99 per share (the last reported sale price of such shares on the
effective date of the allocation, October 31, 2003), allocated to the ESOP
accounts of Messrs. Doherty, Devlin, Kearn, Feeley and Morrissey,
respectively, and $2,160, $2,079, $1,980, $1,854 and $780 in paid life
insurance premiums for Messrs. Doherty, Devlin, Kearn, Feeley and
Morrissey, respectively.
OPTION EXERCISES AND FISCAL YEAR-END VALUES. The following table sets forth
information regarding the values of options held by the Named Executive Officers
at the end of fiscal year 2004. No option grants were made to any of the Named
Executive Officers in fiscal year 2004, and no Named Executive Officer exercised
options during fiscal year 2004.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year-End at Fiscal Year-End (1)
--------------------------- ------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
John D. Doherty -- -- -- $ --
David W. Kearn 8,878 -- $173,368 --
Paul S. Feeley 3,122 -- 56,347 --
William P. Morrissey 5,370 -- 104,866 --
Michael K. Devlin -- -- -- --
- --------
(1) Value is based on the difference between the aggregate market value of
shares underlying the unexercised in-the-money options at March 31, 2004
($38.00 per share based on the closing sale price reported on the Nasdaq
National MarketSM) 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.
10
EMPLOYMENT 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 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 $307,245.
The Employment Agreement also provides for annual salary review by the Board of
Directors, as well as inclusion of 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 John D. Doherty without just cause, he is entitled to a
continuation of his salary for the remaining term of the Employment Agreement.
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, 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 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 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
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 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 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 John D. Doherty and the Bank, as to the
terms or interpretation of the Employment Agreement, 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
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, 2004, John D. Doherty would have received up to approximately
$1,046,000.
The Bank has entered into severance agreements (the "Severance Agreements")
with David W. Kearn, Senior Vice President/Lending, 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 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
11
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, 2004, Messrs. Kearn, Devlin, Feeley and Morrissey
would have received up to approximately $292,000, $308,000, $273,000 and
$307,000, 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 5,330 7,996 10,661 13,326 15,991 18,656
100,000 12,830 19,246 25,661 32,076 38,491 44,906
150,000 20,330 30,496 40,661 50,826 60,991 71,156
175,000 24,080 36,121 48,161 60,201 72,241 84,281
200,000 27,830 41,746 55,661 69,576 83,491 97,406
250,000 28,080 42,121 56,161 70,201 84,241 98,282
300,000 28,080 42,121 56,161 70,201 84,241 98,282
Benefits are hypothetical amounts only. Currently, the maximum annual
benefit payable under the pension plan is $165,000. 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 $201,667 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 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, 2004, Messrs. Doherty, Kearn, Devlin, Feeley and Morrissey
had approximately 23, 11, two, six and 11 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.
12
- --------------------------------------------------------------------------------
CERTAIN TRANSACTIONS
- --------------------------------------------------------------------------------
The Company engages in transactions with affiliates of the Company 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 $500,000 for a mortgage on a primary
residence, $150,000 loans for educational purposes and $35,000 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 of
the Company and Bank.
In October 2003, the ESOP obtained a loan from an outside lender and used
the proceeds from such loan to repay its indebtedness of $3,506,000 to the
Company. The ESOP's trustees are Directors Boulos and Bulman.
Pursuant to the Agreement entered into between the Company and its
affiliated persons and entities and PL Capital, LLC and its affiliated persons
and entities, pursuant to which the parties settled all outstanding litigation
between them, the Company made a payment of $400,000 in August 2003 to PL
Capital, LLC, of which Director Richard J. Lashley is a Managing Member and in
which he holds a 50% equity interest.
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
GENERAL. For fiscal year 2004, the function of administering the Company's
executive compensation policies was performed by the Finance Committee (the
"Committee") of the Board of Directors of the Bank, which is composed entirely
of independent directors. This Committee is responsible for developing and
making recommendations to the Board concerning compensation paid to the Chief
Executive Officer 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. In April 2004, the Company's Board of Directors
established a Compensation Committee composed entirely of independent directors
to administer the Company's executive compensation policies.
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 an outside consultant, the
Committee has sought to develop 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.
13
Management Incentive Program. The Bank has a management incentive program
which provides cash incentives payments to eligible members of management
provided that certain corporate performance criteria are met. This plan is
reviewed and performance goals are evaluated annually. Under the Incentive Plan,
eligible officers may receive bonuses equal to a specified percentage of their
salary provided that established performance goals have been satisfied.
Performance goals for fiscal 2004 were based solely on return on average assets.
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 it should have the ability to compensate officers through grants of stock
options based on their contribution to the achievement of corporate performance
goals and individual merit. 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 2004.
Compensation of Chief Executive Officer. For fiscal year 2004, the
Committee determined to increase the Chief Executive Officer's base salary by
approximately 3.5% 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 received no cash bonus in fiscal 2004.
MEMBERS OF THE FINANCE COMMITTEE
(as the Compensation Committee)
GREGORY W. BOULOS
PAUL E. BULMAN
EDWARD F. SWEENEY, JR.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The Company
and the Bank had no "interlocking" relationships that existed during the year
ended March 31, 2004 in which (i) any executive officer of the Company or 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 (other than the Bank and Company),
one of whose executive officers served on the Audit Committee of the Company or
the Finance Committee of the Bank, (ii) any executive officer of the Company or
the Bank served as a director of another entity, one of whose executive officers
served on the Audit Committee of the Company or the Finance Committee of the
Bank, or (iii) any executive officer of the Company or 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 (other than the Company and Bank), one of whose
executive officers served as a member of the Company or the Bank's Board of
Directors. No member of the Audit Committee of the Board of Directors of the
Company or Finance Committee of 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, 2004, (b) 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 and directly or indirectly engaged in transactions
with the Company, the Bank, or any subsidiary involving more than $60,000 during
the fiscal year ended March 31, 2004.
14
- --------------------------------------------------------------------------------
SECURITY OWNERSHIP OF MANAGEMENT
- --------------------------------------------------------------------------------
The following table sets forth, as of June 30, 2004, the beneficial
ownership of the Common Stock by each of the Company's directors, nominees and
Named Executive Officers, and by all directors, nominees and executive officers
as a group.
Beneficial Ownership (1)
-------------------------------------------------
Number Percentage of
Name of Shares Shares Outstanding(2)
- ---- ------------ ---------------------
James F. Linnehan 70 *%
Richard J. Fates 500 *
Paul E. Bulman 40 (3)(4) *
Joseph R. Doherty 69,375 (5) 4.17
Gregory W. Boulos 294 (3)(4) *
Albert J. Mercuri, Jr. 200 *
Edward F. Sweeney, Jr. 100 *
John D. Doherty 143,502 (6) 8.62
Richard J. Lashley 153,768 (7) 9.24
John J. Morrissey 60 *
Michael K. Devlin 255 (8) *
David W. Kearn 15,905 (9) *
Paul S. Feeley 5,931 (10) *
William P. Morrissey 12,330 (11) *
All directors, nominees and executive
officers as a group (14 persons) 407,065 (12) 24.20
- -----------
(1) For definition of beneficial ownership, see footnote 1 to the table in
"Principal Holders of Voting Securities."
(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 June 30,
2004 held by that individual or group.
(3) Excludes shares credited to their accounts in the Deferred Compensation
Plan for Non-Employee Directors.
(4) Does not include 239,706 shares held by the ESOP, over which shares the
ESOP Trustees, Directors Boulos and Bulman, may be deemed to have shared or
sole voting and/or investment power.
(5) Shares held by the Joseph R. Doherty Family Limited Partnership, L.P. of
which he is the sole general partner.
(6) Includes 14,633 shares of Common Stock allocated to his account in the
ESOP.
(7) Consists of 600 shares as to which Mr. Lashley has sole voting and
dispositive power and 153,168 shares as to which Mr. Lashley shares voting
and dispositive power.
(8) Includes 255 shares allocated to his ESOP account.
(9) Includes 7,027 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 June 30, 2004.
(10) Includes 2,809 shares allocated to his account in the ESOP and 3,122 shares
which he has the right to acquire pursuant to options exercisable within 60
days of June 30, 2004.
(11) Includes 6,960 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 June 30, 2004.
(12) Includes 17,370 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of June 30, 2004, 31,684 shares
allocated to the ESOP accounts of executive officers and 4,735 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.
* Represents less than 1% of the Company's outstanding Common Stock.
15
- --------------------------------------------------------------------------------
STOCK PRICE PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The graph and table which follow show the cumulative total return on the
Common Stock of the Company from March 31, 1999 through March 31, 2004 compared
with the cumulative total return of (i) an index of Nasdaq 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, 1999, 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, 1999 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.
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
Banks Index and $100 invested in the S&P 500. Line graph begins at March 31,
1999 and plots the cumulative return at March 31, 1999, 2000, 2001, 2002, 2003
and 2004. The plot points are provided below.]
- ------------------------------- ----------- ------------ ----------- ---------- ---------- ----------
3/31/99 3/31/00 3/31/01 3/31/02 3/31/03 3/31/04
- ------------------------------- ----------- ------------ ----------- ---------- ---------- ----------
Central Bancorp, Inc. $100.00 $ 90.49 $112.04 $175.78 $199.98 $247.20
- ------------------------------- ----------- ------------ ----------- ---------- ---------- ----------
S&P 500 100.00 117.94 92.37 92.59 69.67 94.15
- ------------------------------- ----------- ------------ ----------- ---------- ---------- ----------
NASDAQ Banks Index 100.00 89.68 113.14 143.80 137.14 189.93
- ------------------------------- ----------- ------------ ----------- ---------- ---------- ----------
16
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Vitale, Caturano & Company, P.C. ("Vitale"), independent public
accountants, served as the Company's independent auditors for the 2004 fiscal
year, and the Audit Committee of the Board of Directors has renewed the
Company's arrangements with Vitale to be the Company's auditors for the 2005
fiscal year. A representative of Vitale will be present at the meeting to
respond to stockholders' questions and will have the opportunity to make a
statement if he or she so desires.
KPMG was previously the principal accountants for the Company. On November
17, 2003, that firm's appointment as principal accountants was terminated and
the Company engaged Vitale as its principal accountants. The engagement of
Vitale was approved by the Audit Committee of the Company's Board of Directors.
In connection with the audits of the two fiscal years ended March 31, 2003
and 2002 and the subsequent interim period from April 1, 2003 through November
17, 2003, there were no disagreements with KPMG LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of KPMG LLP,
would have caused KPMG LLP to make reference to the subject matter of the
disagreements in their report on the Company's financial statements for such
years.
KPMG LLP's audit reports on the Company's financial statements as of and
for each of the years ended March 31, 2003 and 2002 did not contain an adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.
For the years ended March 31, 2004 and 2003, the Company was billed by its
independent auditors for fees aggregating $134,439 and $164,240, respectively.
Such fees were comprised of the following:
AUDIT FEES
The aggregate fees billed for the audit of the Company's annual financial
statements for the fiscal years ended March 31, 2004 and 2003 and for the
reviews of the financial statements included in the Company's Quarterly Reports
on Form 10-Q were $95,500 and $108,000, respectively.
AUDIT-RELATED FEES
The aggregate fees billed for audit-related services for the fiscal years
ended March 31, 2004 and 2003 were $6,200 and $900, respectively. The fees for
fiscal year 2004 related to accounting research matters and the transition to
new independent auditors. The fee for fiscal year 2003 related to the filing of
an amended Form 10-K.
TAX FEES
The aggregate fees billed for tax services for the fiscal years ended March
31, 2004 and 2003 were $32,739 and $55,340, respectively. For fiscal year 2004,
$25,000 was paid for the preparation of tax returns and estimated tax payments,
$4,738 for tax consulting and $3,000 for tax planning services. For fiscal year
2003, $41,275 was paid for the preparation of tax returns and estimated tax
payments, $9,065 for tax consulting and $5,000 for tax planning services.
ALL OTHER FEES
For fiscal years 2004 and 2003, there were no other fees paid by the
Company to its independent auditors besides fees for those services listed
above.
17
PRE-APPROVAL OF SERVICES BY THE INDEPENDENT AUDITOR
The Audit Committee does not have a policy for the pre-approval of
non-audit services to be provided by the Company's independent auditor. Any such
services would be considered on a case-by-case basis. All non-audit services
provided by the independent auditors in fiscal years 2004 and 2003 were approved
by the Audit Committee.
- --------------------------------------------------------------------------------
AUDIT COMMITTEE REPORT
- --------------------------------------------------------------------------------
The Audit Committee has reviewed and discussed the audited financial
statements of the Company with management and has discussed with Vitale, the
Company's independent auditors, the matters required to be discussed under
Statement of Auditing Standards No. 61 ("SAS 61"). In addition, the Audit
Committee received from Vitale the written disclosures and the letter required
to be delivered by Vitale under Independence Standards Board Standard No. 1
("ISB Standard No. 1") and has discussed with representatives of Vitale their
independence.
The Audit Committee has reviewed the non-audit services currently provided
by the Company's independent auditors and has considered whether the provision
of such services is compatible with maintaining the independence of the
Company's independent auditors.
Based on its review of the financial statements, its discussion with Vitale
regarding SAS 61, and the written materials provided by Vitale under ISB
Standard No. 1 and the related discussion with Vitale of their independence, the
Audit Committee has recommended that the audited financial statements of the
Company be included in its Annual Report on Form 10-K for the year ended March
31, 2004, for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
JAMES F. LINNEHAN
RICHARD J. FATES
ALBERT J. MERCURI, JR.
- --------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- --------------------------------------------------------------------------------
Under the Exchange Act, 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 report of changes in beneficial ownership were required, the
Company believes during the fiscal year ended March 31, 2004 all Reporting
Persons have complied with these reporting requirements, except that Directors
Lashley and Sweeney each filed one late report on Form 3.
- --------------------------------------------------------------------------------
EXPENSES OF SOLICITATION
- --------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. 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 Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph, telephone, facsimile or overnight courier without
additional compensation.
18
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
OTHER BUSINESS
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Annual Meeting, it
is intended that proxies in the accompanying form will be voted in respect
thereof in accordance with the determination of a majority of the Board of
Directors.
BYLAW AMENDMENTS
On April 18, 2004, the Board of Directors adopted an amendment to Section 1
of Article VI of the Company's Bylaws to provide that the Company's independent
accountants will be appointed by the Audit Committee of the Board of Directors
rather than by the full Board of Directors as was previously provided for in
Section 1 of Article VI of the Company's Bylaws.
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
The Company's 2004 Annual Report to Stockholders, including financial
statements prepared in conformity with accounting principles generally accepted
in the United States of America, has been mailed to all stockholders of record
as of the Record Date. Any stockholder who has not received a copy of such
Annual Report may obtain a copy by writing the Company. Such Annual Report is
not to be treated as part of the proxy solicitation materials nor as having been
incorporated herein by reference. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED
WITHOUT CHARGE TO STOCKHOLDERS UPON WRITTEN REQUEST TO RHODA K. ASTONE,
SECRETARY AND CLERK, CENTRAL BANCORP, INC., 399 HIGHLAND AVENUE, SOMERVILLE,
MASSACHUSETTS 02144.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the proxy materials of the Company
for next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's main office at 399
Highland Avenue, Somerville, Massachusetts no later than April 22, 2005. Any
such proposals shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
Stockholder proposals to be considered at such Annual Meeting, other than
those submitted pursuant to the Exchange Act, must be stated in writing,
delivered or mailed to the Secretary and Clerk of the Company at the above
address, not less than 30 days nor more than 60 days prior to the date of any
such Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Rhoda K. Astone
RHODA K. ASTONE
ASSISTANT VICE PRESIDENT,
SECRETARY AND CLERK
Somerville, Massachusetts
August 20, 2004
19
Appendix A
CENTRAL BANCORP, INC.
CHARTER OF THE NOMINATING COMMITTEE
OF THE BOARD OF DIRECTORS
I. AUTHORITY AND COMPOSITION
The Committee is established pursuant to Article III Section 15 of the Bylaws of
Central Bancorp, Inc. (the "Corporation"). Committee members should be appointed
annually by the Board and may be replaced by the Board. None of the Committee
members may be an officer of the Corporation. The Committee may appoint a
Secretary, who need not be a Director. The Committee Chairman shall be appointed
by the Board.
The Committee shall be comprised of at least three (3) members, each of whom
shall meet the independence requirements of the Nasdaq and shall meet any other
standards of independence as may be prescribed for purposes of any federal
securities laws relating to the Committee's duties and responsibilities.
II. PURPOSE OF THE COMMITTEE
The Committee's purpose is to assist the Board in identifying qualified
individuals to become Board members and in determining the composition of the
Board of Directors.
III. RESPONSIBILITIES OF THE COMMITTEE
In furtherance of this purpose, the Committee shall have the following authority
and responsibilities:
1. To lead the search for individuals qualified to become members of the
Board of Directors and to select director nominees to be presented for
stockholder approval at the annual meeting. The Committee shall select
individuals as director nominees who shall have the highest personal
and professional integrity, who shall have demonstrated exceptional
ability and judgment and who shall be most effective, in conjunction
with the other nominees to and existing members of the Board, in
collectively serving the long-term interests of the stockholders.
2. Recommend to the Board persons to be appointed as Directors in the
interval between annual meetings of the Corporation's shareholders;
3. Review the qualifications and independence of the members of the Board
on a regular periodic basis and make any recommendations the Committee
A-1
members may deem appropriate from time to time concerning any
recommended changes in the composition of the Board; and
4. Establish a policy, if deemed appropriate by the Committee, with
regard to the consideration of director candidates recommended by
stockholders.
With respect to the responsibilities listed above, the Committee shall:
1. Report regularly to the Board on its activities;
2. Maintain minutes of its meetings and records relating to those
meetings and the Committee's activities;
3. Form and delegate authority to subcommittees of one or more Committee
members when appropriate;
4. Review and reassess the adequacy of this Charter annually and
recommend to the Board any proposed changes to this Charter; and
5. Annually review the Committee's own performance.
IV. GENERAL
In performing their responsibilities, Committee members are entitled to rely in
good faith on information, opinions, reports or statements prepared or presented
by:
1. One or more officers and employees of the Corporation whom the
Committee member reasonably believes to be reliable and competent in
the matters presented;
2. Counsel, independent auditors, or other persons as to matters which
the Committee member reasonably believes to be within the professional
or expert competence of such person; or
3. Another committee of the Board as to matters within its designated
authority which committee the Committee member reasonably believes to
merit confidence.
A-2
Appendix B
CENTRAL BANCORP, INC.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors of the Company to
assist the Board of Directors in fulfilling its oversight responsibilities. The
Audit Committee's primary duties and responsibilities are to:
o Oversee the accounting and financial reporting processes of the
Company and the audits of the Company's financial statements.
o Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and
compliance.
o Monitor the independence and performance of the Company's independent
auditors and internal auditing function.
o Provide an avenue of communication among the independent auditors,
management, the internal auditors and the Board of Directors.
o Report to the Board of Directors
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities and it has direct access to the independent
auditors as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the qualifications of the NASDAQ National
Market and such qualifications as may be required by the Securities and Exchange
Commission ("SEC"). The Audit Committee shall be comprised of at least three and
no more than six directors as determined by the Board, each of whom shall be
independent nonexecutive directors, free from any relationship that would
interfere with the exercise of his or her independent judgment. All members of
the Committee shall have a basic understanding of finance and accounting and be
able to read and understand fundamental financial statements, and at least one
member of the Committee shall have accounting or related financial management
expertise.
Audit Committee members shall be appointed by the Board. If an Audit Committee
Chairman is not designated or present, the members of the Committee may
designate a Chairman by majority vote of the Committee membership.
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. The Committee should meet privately, at least annually,
with the individual responsible
B-1
for the internal auditing function and the independent auditors to discuss any
matters that the Committee, or either of these groups, believe should be
discussed.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
Review Procedures
- -----------------
1. Review and reassess the adequacy of this Charter at least annually. Submit
the charter to the Board of Directors for approval and have the document
published at least every three years in accordance with Securities and
Exchange Commission (SEC) regulations.
2. Review the Company's annual audited financial statements prior to filing or
distribution. Review should include discussion with management and
independent auditors of significant issues regarding accounting principles,
practices and judgments. Review and discuss with the independent auditor
all necessary accounting policies and practices to be used, all alternative
treatments of financial information within generally accepted accounting
principles that have been discussed with management and the risks of using
such alternative treatments, and other material written communications
between the independent auditor and management.
3. In consultation with the management, the independent auditors and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control and report
such exposures. Review significant findings prepared by the independent
auditors and the internal auditing function together with management's
responses, including the status of previous recommendations.
4. Review with financial management and/or the independent auditors the
Company's quarterly financial results prior to the release of earnings
and/or the Company's quarterly financial statements prior to filing of its
Form 10-Q. Discuss any significant changes to the Company's accounting
principles and any items required to be communicated by the independent
auditors in accordance with Statement of Auditing Standards No. 61 (SAS
61). The Chairman of the Committee may represent the entire Audit Committee
for purposes of this review.
Independent Auditors
- --------------------
5. The independent auditors are ultimately accountable to the Audit Committee.
The Audit Committee shall review the independence and performance of the
auditors and annually appoint the independent auditors or approve any
discharge of the auditors when circumstances warrant.
6. Approve the fees and other significant compensation to be paid to the
independent auditors.
7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
8. Review the independent auditors' audit plan, including scope and general
audit approach.
B-2
9. Prior to releasing the year-end earnings and/or filing of the Annual Report
on Form 10-K, discuss the results of the audit with the independent
auditors.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
11. Review, evaluate and approve any permissible non-audit services the
independent auditor may perform for the Company and disclose such approved
non-auditor services in periodic reports to stockholders.
12. As required by law, the Audit Committee shall assure the regular rotation
of the lead and concurring audit partner, and consider whether there should
be a regular rotation of the auditor itself.
13. Review and discuss the types of presentation and information to be included
in earnings press releases, and any additional financial information and
earning guidance generally provided to analysts and rating agencies.
14. Review and discuss the form and content of the certification documents for
the quarterly reports on Form 10-Q and the annual report on Form 10-K with
the independent auditor, the chief financial officer and the chief
executive officer.
15. Discuss any difficulties encountered by the independent auditor during the
course of the audit, any restrictions on their activities, any restrictions
on their access to information, and any significant disagreements with
management.
Internal Audit Function and Legal Compliance
- --------------------------------------------
16. Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the internal audit function, as needed.
The internal audit function shall have a direct reporting responsibility to
the Board of Directors through the Audit Committee.
17. Review the appointment, performance and replacement of the internal audit
function.
18. Review significant reports prepared by the internal auditors together with
management's response and follow-up to these reports.
19. On at least an annual basis, review with the Company's management and, if
deemed necessary, with counsel, any legal matters that could have a
significant impact on the Company's financial statements, compliance with
applicable laws and regulations and inquiries received from regulators or
governmental agencies.
Other Audit Committee Responsibilities
- --------------------------------------
20. Annually prepare a report to shareholders as required by the Securities and
Exchange Commission. The report may be included in the Company's annual
proxy statement.
21. Perform any other activities consistent with this Charter, the Company's
By-laws and governing law, as the Committee or the Board deems necessary or
appropriate.
B-3
22. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
23. Supervise implementation of the Company's Code of Ethics for Directors,
Officers and Employees and review and decide whether to approve any
proposed waivers of the provisions of such Code.
24. Establish procedures for the receipt, retention, and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and the confidential, anonymous
submission by employees regarding questionable accounting or auditing
matters.
25. Review all related party transactions (i.e., transactions required to be
disclosed under SEC Regulation S-K, Item 404) for potential conflict of
interest situations on an ongoing basis and determine whether to approve
such transaction.
B-4
[x] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE CENTRAL BANCORP, INC.
WITH- FOR ALL
ANNUAL MEETING OF STOCKHOLDERS 1. The election as directors of all nominees listed FOR HOLD EXCEPT
SEPTEMBER 20, 2004 below (except as noted to the contrary). / / / / / /
NOMINEES:
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS (01) Gregory W. Boulos, (02) John D. Doherty and
(03) Albert J. Mercuri, Jr.
The undersigned hereby appoints James F. Linnehan
and Edward F. Sweeney, Jr., with full powers of
substitution to act, as attorneys and proxies for INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
the undersigned, to vote all shares of Common Stock MARK "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED
of Central Bancorp, Inc. which BELOW.
the undersigned is entitled to vote at the Annual
Meeting of Stockholders, to be -------------------------------------------------------------------------
held at the Somerville Holiday Inn, 30
Washington Street, Somerville, MARK BOX AT RIGHT IF YOU PLAN TO ATTEND THE ANNUAL MEETING. / /
Massachusetts on Monday, September 20, 2004,
at 11:00 a.m. and at any and all THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF
adjournments thereof, as follows on the reverse side. THE LISTED NOMINEES.
Should the undersigned be present and elect to vote at
the Annual Meeting or at any adjournment thereof and
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO after notification to the Secretary of the Company at the
INSTRUCTIONS ARE SPECIFIED, THIS Meeting of the stockholder's decision to terminate
PROXY WILL BE VOTED FOR EACH OF THE NAMED NOMINEES. this Proxy, then the power of said attorneys and
IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, proxies shall be deemed terminated and of no further
INCLUDING MATTERS RELATING TO THE CONDUCT OF THE force and effect.
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN
THIS PROXY AS DETERMINED BY A MAJORITY OF THE BOARD The undersigned acknowledges receipt from the Company
OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF prior to the execution of this Proxy of Notice of the
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED Annual Meeting, a Proxy Statement dated August 20, 2004,
AT THE MEETING. and the Company's 2004 Annual Report to Stockholders.
Please be sure to sign and date this Proxy.
Please be sure to sign and date ---------------
this Proxy in the box below. / Date /
- ------------------------------------------------------
/ /
/ /
/ /
- -Stockholder sign above-Co-holder (if any) sign above-
- ------------------------------------------------------------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage-prepaid envelope provided.
CENTRAL BANCORP, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
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 should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
- ------------------------------------------------------------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE
ENVELOPE PROVIDED.
- -----------------------------------
- -----------------------------------
- -----------------------------------
[Central Bancorp Letterhead]
TO: PARTICPANTS IN THE CENTRAL CO-OPERATIVE BANK EMPLOYEE STOCK OWNERSHIP PLAN
Under the terms of the Central Co-operative Bank Employee Stock Ownership
Plan (the "ESOP"), you have the right to direct the ESOP Trustees as to the
manner in which you wish to vote the shares of common stock of Central Bancorp,
Inc. ("Central") allocated to your ESOP account at Central's 2004 Annual Meeting
of Stockholders. Under the terms of the ESOP and subject to the Trustees'
responsibilities under applicable law, the ESOP Trustees will vote your
allocated shares in accordance with your instructions. Allocated shares for
which timely voting instructions are not received will be voted by the Trustees
in the same proportion as participants vote allocated stock, provided that in
the absence of any voting directions as to allocated stock, the Board of
Directors of Central Co-operative Bank will direct the ESOP Trustees as to the
voting of all shares of stock in the ESOP. Therefore, we encourage you to
exercise your right to direct the voting of your allocated shares at the
meeting.
HOW TO EXERCISE YOUR RIGHTS. You may direct the voting of shares allocated
to your account by completing, signing and returning the enclosed ESOP
Participant Direction Form. Proxy cards supplied with proxy materials are not
appropriate for the purpose of instructing the ESOP Trustees in connection with
the voting of shares allocated to your ESOP account.
CONFIDENTIALITY OF VOTING INSTRUCTIONS. Your instructions to the ESOP
Trustees will be completely confidential. Central has engaged an independent
firm, Registrar and Transfer Company ("RTCO"), which also serves as Central's
transfer agent, to serve as the ESOP's confidential voting agent. ESOP
Participant Direction Forms are to be sent (using the postage-paid envelopes
provided therewith) to RTCO and should NOT be sent to Central.
RTCO will count your votes and report the aggregate totals of all voting
instructions to the ESOP Trustees. RTCO has agreed to maintain your voting
instructions in strict confidence. In no event, will your voting instructions be
reported to Central.
DELIVERY OF PROXY MATERIALS. A copy of Central's proxy statement and a copy
of its 2004 Annual Report to Stockholders are enclosed for your review. As noted
in the proxy statement, the 2004 Annual Meeting is scheduled for Monday,
September 20, 2004, at 11:00 a.m., in Somerville, Massachusetts.
Enclosed is a ESOP Participant Direction Form which you should use if you
wish to direct the ESOP Trustees to vote shares allocated to your account in
connection with the slate of directors endorsed by the Board of Directors of
Central. PLEASE NOTE THAT TO DIRECT THE ESOP TRUSTEES TO VOTE WITH RESPECT TO
ANY OF THE FOREGOING, YOU MUST SPECIFICALLY MARK YOUR INSTRUCTIONS ON THE ESOP
PARTICIPANT DIRECTION FORM. ITEMS LEFT BLANK WILL NOT BE CONSIDERED INSTRUCTIONS
TO THE ESOP TRUSTEES.
Voting instructions for shares allocated to your ESOP account must be
received by RTCO by 5:00 p.m. Eastern time on September 15, 2004 on the ESOP
Participant Direction Forms provided by the ESOP Trustees for that purpose.
AGAIN, ALL ESOP PARTICIPANT DIRECTION FORMS SHOULD BE FORWARDED TO RTCO AND
SHOULD NOT BE MAILED TO CENTRAL.
In order to make an informed judgment concerning how to instruct the ESOP
Trustees to vote your allocated shares, YOU SHOULD READ ALL PROXY MATERIALS
CAREFULLY AND THOROUGHLY. The ESOP Trustees will not recommend how you should
complete your ESOP Participant Direction Form.
WHEN TO SUBMIT YOUR ESOP PARTICIPANT DIRECTION FORM. You may submit your
voting instructions to the confidential voting agent at any time, except that in
order to be effective your instructions MUST BE RECEIVED by not later than 5:00
p.m. Eastern time on September 15, 2004. If RTCO receives more than one ESOP
Participant Direction Form from you, the Form bearing the LATEST date will be
considered to have cancelled all Forms bearing an earlier date. If more than one
ESOP Participant Direction Form is received from you as of the same date, RTCO
will consider the Form bearing the latest postmark as controlling. You may
request additional Forms at any time by contacting Michael K. Devlin at (617)
629-4244.
If you have any questions regarding the procedures for instructing the ESOP
Trustees, please call (617) 629-4244.
Gregory W. Boulos
Paul E. Bulman
ESOP Trustees
August 20, 2004
[x] PLEASE MARK VOTES
AS IN THIS EXAMPLE CENTRAL BANCORP, INC.
WITH- FOR ALL
ANNUAL MEETING OF STOCKHOLDERS 1. The election as directors of all nominees listed FOR HOLD EXCEPT
SEPTEMBER 20, 2004 below (except as noted to the contrary). / / / / / /
NOMINEES:
THIS DIRECTION FORM IS SOLICITED ON Gregory W. Boulos, John D. Doherty and Albert J. Mercuri, Jr.
BEHALF OF THE BOARD OF DIRECTORS
CENTRAL CO-OPEATIVE BANK
EMPLOYEE STOCK OWNERSHIP PLAN
REVOCABLE ESOP PARTICIPANT DIRECTION FORM INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE
SPACE PROVIDED BELOW.
The undersigned hereby instructs the ESOP Trustee(s)
(currently Gregory W. Boulos and Paul E. Bulman), ----------------------------------------------------------------------
or their successors, to vote, either by ballot or by
proxy, all shares of common stock of Central Bancorp, THE ESOP TRUSTEE(S) WILL VOTE AS DIRECTED HEREIN.
Inc. (the "Company") which are allocated to the THIS REVOCABLE ESOP PARTICIPANT DIRECTION FORM
account(s) of the undersigned pursuant to the Central CONFERS DISCRETIONARY AUTHORITY TO VOTE ON ANY
Co-operative Bank Employee Stock Ownership Plan (the OTHER BUSINESS PRESENTED AT THE MEETING. IF
"ESOP") at the Annual Meeting of Stockholders to be held ANY OTHER BUSINESS IS PRESENTED AT THE MEETING,
at the Somerville Holiday Inn, 30 Washington Street, INCLUDING MATTERS RELATING TO THE CONDUCT OF
Somerville, Massachusetts on Monday, September 20, 2004 THE MEETING, THE ESOP TRUSTEE(S) WILL VOTE IN
at 11:00 a.m., and at any and all adjournments thereof, as HIS(THEIR) DISCRETION AND IN ACCORDANCE WITH
set forth on the reverse side hereof. THE APPLICABLE FIDUCIARY PRINCIPLES. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING. IF
NO INSTRUCTIONS ARE SPECIFIED, THIS DIRECTION
FORM WILL HAVE NO FORCE OR EFFECT AND ALL SHARES'
ALLOCATED TO YOUR ACCOUNT(S) WILL BE VOTED BY
THE ESOP TRUSTEE(S) IN ACCORDANCE WITH THE
TERMS OF THE ESOP, SUBJECT TO THE ESOP
TRUSTEE(S) RESPONSIBILITIES UNDER APPLICABLE LAW.
The undersigned acknowledges receipt from the
Company prior to the execution of this Form of
Notice of the Annual Meeting, a Proxy Statement dated
August 20, 2004, and the Company's 2004 Annual
Report to Stockholders.
In order to be effective, voting instructions
must be received by Registrar and Transfer Company,
the confidential voting agent, no later than
Please be sure to sign and date --------------- September 15, 2004. You must specifically mark
this Proxy in the box below. / Date / your instructions on this form. Items left
- ------------------------------------------------------ blank will not be considered instructions to the
/ / ESOP Trustee(s).
/ /
/ / The Board of Directors of the Company recommends
- -Stockholder sign above-Co-holder (if any) sign above- a vote "FOR" each of the listed nominees.
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Detach above card, sign, date and mail in postage-prepaid envelope provided.
CENTRAL BANCORP, INC.
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PLEASE COMPLETE, DATE, SIGN AND MAIL
THIS PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
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IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE
ENVELOPE PROVIDED.
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