EXHIBIT 20
LSB CORPORATION
30 MASSACHUSETTS AVENUE
NORTH ANDOVER, MASSACHUSETTS 01845
(978) 725-7500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 2002
Dear Stockholder of LSB Corp.:
Notice is hereby given that the annual meeting of stockholders (the "Annual
Meeting") of LSB Corporation (the "Company") will be held at 10:00 a.m. local
time on Tuesday, May 7, 2002 at the Andover Country Club, Canterbury Street,
Andover, Massachusetts, for the following purposes:
1. To elect four Class C Directors for a three-year term.
2. To elect Robert P. Perreault as the Clerk of the Company.
3. To ratify the appointment of KPMG LLP as the Company's independent
auditors for the current fiscal year.
4. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
Pursuant to the By-Laws, the Board of Directors has fixed the close of
business on March 8, 2002 as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting.
The above matters are described in detail in the accompanying Proxy
Statement.
By Order of the Board of Directors,
ROBERT P. PERREAULT,
Clerk
March 28, 2002
PURSUANT TO RULES OF THE FEDERAL DEPOSIT INSURANCE CORPORATION (12 C.F.R.
PART 350) AND THE REQUIREMENT THAT LAWRENCE SAVINGS BANK MAKE AVAILABLE ITS
ANNUAL DISCLOSURE STATEMENT, ANY PERSON, UPON REQUEST, IS ENTITLED TO RECEIVE A
COPY OF THE 2001 ANNUAL REPORT OF THE COMPANY ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. TO RECEIVE A COPY OF THIS REPORT WITHOUT
CHARGE, PLEASE WRITE TO: ROBERT P. PERREAULT, CLERK, LSB CORPORATION, 30
MASSACHUSETTS AVENUE, NORTH ANDOVER, MASSACHUSETTS 01845.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DO
ATTEND THE ANNUAL MEETING AND DESIRE TO WITHDRAW YOUR PROXY AND VOTE IN PERSON,
YOU MAY DO SO.
LSB CORPORATION.
30 MASSACHUSETTS AVENUE
NORTH ANDOVER, MASSACHUSETTS 01845
(978) 725-7500
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 2002
This Proxy Statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the Board of Directors of LSB
Corporation (the "Company") for use at the Annual Meeting of Stockholders of the
Company to be held at the Andover Country Club, Canterbury Street, Andover,
Massachusetts at 10:00 a.m. on Tuesday, May 7, 2002 and any adjournments or
postponements thereof (the "Annual Meeting").
At the Annual Meeting, stockholders of the Company will be asked to
consider and vote upon the following matters:
1. To elect four Class C Directors, each for a three-year term to continue
until the Company's annual meeting of stockholders in the year 2005 and
until such Director's successor is duly elected and qualified.
2. To elect Robert P. Perreault as the Clerk of the Company.
3. To ratify the appointment of KPMG LLP as the Company's independent
auditors for the current fiscal year.
4. To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
This Proxy Statement and the accompanying form of proxy are first being
mailed to stockholders of the Company on or about March 28, 2002 in connection
with the solicitation of proxies for the Annual Meeting.
THE COMPANY
The Company is a one-bank holding company principally conducting business
through Lawrence Savings Bank (the "Bank"). On July 1, 2001, the Company and the
Bank completed a reorganization (the "Reorganization") in which the Bank became
a wholly-owned subsidiary of the Company, the Company adopted the Shareholder
Rights and Stock Option Plans of the Bank, and each issued and outstanding share
of common stock of the Bank (and accompanying preferred stock purchase rights
under the Rights Plan) was converted into and exchanged for one share of common
stock, par value $.10 per share, of the Company and accompanying preferred stock
purchase rights under the Rights Plan (the "Common Stock").
For purposes of this Proxy Statement, unless the context otherwise
requires, any reference to the Company shall be deemed to be a reference to the
Company and the Bank.
RECORD DATE; VOTING
The Board of Directors has fixed the close of business on March 8, 2002 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournments or postponements thereof (the
"Record Date"). Only holders of the Common Stock at the Record Date will be
entitled to notice of and to vote at the Annual Meeting or any adjournments or
postponements thereof. At the
Record Date, there were 4,382,243 shares of Common Stock outstanding and
entitled to vote at the Annual Meeting, and each such outstanding share is
entitled to one vote.
QUORUM AND STOCKHOLDER VOTE REQUIRED
The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares of Common Stock is necessary to constitute a quorum
for transaction of business at the Annual Meeting. The affirmative vote of the
holders of a plurality of Common Stock present or represented by proxy and
voting is required to (i) elect the four (4) nominees for Class C Directors and
(ii) elect Robert P. Perreault as Clerk of the Company. The approval of the
holders of a majority of Common Stock present or represented by proxy and voting
is required to ratify the appointment of KPMG LLP as the Company's independent
auditors.
Abstentions and "broker non-votes" will be counted as present for purposes
of determining the presence or absence of a quorum for the transaction of
business at the Annual Meeting. A "broker non-vote" is a proxy from a broker or
other nominee indicating that such person has not received instructions from the
beneficial owner or other person entitled to vote the shares on a particular
matter with respect to which the broker or other nominee does not have
discretionary voting power. Abstentions and broker non-votes will not be counted
for purposes of determining the number of votes cast for a proposal.
PROXIES
Stockholders of the Company are requested to complete, date, sign, and
promptly return the accompanying form of proxy in the enclosed envelope. Common
Stock represented by properly executed proxies received by the Company and not
revoked will be voted at the Annual Meeting in accordance with the instructions
contained therein. If instructions are not given therein, properly executed
proxies will be voted FOR the election of the four (4) nominees for Class C
Directors listed in the Proxy Statement, FOR the election of Mr. Perreault as
Clerk and FOR ratification of the appointment of KPMG LLP as the Company's
independent auditors for the current fiscal year.
Although it is anticipated that all the nominees for Director will be
available to serve as Directors if elected, should any one or more of them be
unable to serve, proxies may be voted for the election of a substitute nominee
or nominees. It is not anticipated that any matters other than those set forth
in the Proxy Statement will be presented at the Annual Meeting. If other matters
are presented, proxies will be voted in accordance with the discretion of the
proxy holders.
Any properly completed proxy may be revoked at any time before it is voted
by giving written notice of such revocation to the Clerk of the Company, or by
signing and duly delivering a proxy bearing a later date, or by attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not
in and of itself constitute revocation of a proxy.
The cost of soliciting proxies will be borne by the Company. Morrow & Co.
has been retained to assist in the solicitation process and will be compensated
in the estimated amount of $4,000.00. After the initial mailing of this Proxy
Statement, officers and regular employees of the Company may solicit proxies
personally, by telephone or by facsimile without additional compensation. The
Company intends to request banks, brokers and other institutions, nominees and
fiduciaries who hold Common Stock for beneficial owners to forward the proxy
materials to the beneficial owners and to obtain authorizations for the
execution of proxies, and will reimburse such institutions and persons for their
reasonable expenses.
2
The Company's Annual Report to Stockholders, including financial statements
for the fiscal year ended December 31, 2001, is being mailed to stockholders of
record of the Company concurrently with this Proxy Statement. The Annual Report,
however, is not part of the proxy soliciting material. ADDITIONAL COPIES OF THE
ANNUAL REPORT OF THE COMPANY ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (WITHOUT EXHIBITS), ARE
AVAILABLE UPON WRITTEN REQUEST, WITHOUT CHARGE, FROM THE COMPANY. SUCH REQUESTS
SHOULD BE DIRECTED TO: LSB CORPORATION, 30 MASSACHUSETTS AVENUE, NORTH ANDOVER,
MASSACHUSETTS 01845, ATTENTION: SHAREHOLDER RELATIONS.
3
PROPOSAL 1
ELECTION OF A CLASS OF DIRECTORS
The Board of Directors of the Company currently comprises ten members
divided into three classes, Classes A, B and C. Classes A and B consist of three
members each. Class C consists of four members. The Directors in each class
serve a term of three years, with the terms of the various classes expiring in
different years and when the Directors' successors are duly elected and
qualified.
At the Annual Meeting, four Class C Directors will be elected to serve
until the Annual Meeting of stockholders of the Company in the year 2005 and
until their successors are duly elected and qualified. The Board of Directors
has nominated Eugene A. Beliveau, Byron R. Cleveland, Jr., Robert F. Hatem and
Paul A. Miller as Class C Directors (each, a "Nominee", collectively, the
"Nominees"). Each of the Nominees is currently serving as a Director of the
Company. Unless authority to do so has been withheld or limited in a proxy, it
is the intention of the persons named as proxies to vote the shares to which the
proxy relates FOR the election of the Nominees to the Board of Directors.
The Board of Directors anticipates that each of the Nominees will stand for
election and serve, if elected, as a Director. However, if any person nominated
by the Board of Directors fails to stand for election or is unable to accept
election, the proxies will be voted for the election of such other person or
persons as the Board of Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES.
4
INFORMATION REGARDING DIRECTORS
The following table sets forth, for each of the four (4) Nominees for
election as Class C Director at the Annual Meeting, the Nominee's name and, as
of February 28, 2002, the Nominee's age and the date from which the Nominee has
served as a Director or Trustee of the Bank prior to the Reorganization. Similar
information is provided for continuing Class B and Class A Directors (each, a
"Continuing Director", collectively, the "Continuing Directors") whose terms do
not expire until the annual meetings of the stockholders of the Company in 2004
and 2003, respectively, and until their successors are duly elected and
qualified. Each Nominee and Continuing Director has served as a director of the
Company since July 1, 2001, the effective date of the Reorganization (the
"Effective Date"). Prior to the Effective Date, each Nominee and Continuing
Director served as a Director of the Bank.
<Table>
<Caption>
TRUSTEE OR
DIRECTOR
NAMES OF NOMINEES AND CONTINUING DIRECTORS AGE SINCE
------------------------------------------ --- ----------
NOMINEES CLASS C (TERM EXPIRING 2005)
Eugene A. Beliveau.......................................... 71 1978
Byron R. Cleveland, Jr. .................................... 70 1968
Robert F. Hatem............................................. 66 1974
Paul A. Miller.............................................. 62 1989
CONTINUING DIRECTORS CLASS B (TERM EXPIRING 2004)
Malcolm W. Brawn............................................ 62 1991
Neil H. Cullen.............................................. 59 1991
Richard H. Harrington....................................... 65 1995
CONTINUING DIRECTORS CLASS A (TERM EXPIRING 2003)
Kathleen I. Boshar.......................................... 46 1991
Thomas J. Burke............................................. 61 1985
Marsha A. McDonough......................................... 57 1993
</Table>
PRINCIPAL OCCUPATION OF NOMINEES AND CONTINUING DIRECTORS
EUGENE A. BELIVEAU, practicing dentist in North Andover, Massachusetts.
KATHLEEN I. BOSHAR, Sales Manager, DeWolfe Companies, North Andover,
Massachusetts, a real estate brokerage company.
MALCOLM W. BRAWN, Executive Vice President and Secretary of The Andover
Companies, Andover, Massachusetts, a property and casualty insurance company.
THOMAS J. BURKE, Register of Deeds of Essex County, Massachusetts and
attorney.
BYRON R. CLEVELAND, JR., President of J.H. Horne & Sons, Lawrence,
Massachusetts, a manufacturer of paper mill machinery.
NEIL H. CULLEN, Chief Financial Officer of Phillips Academy, Andover,
Massachusetts, a private secondary school.
RICHARD HART HARRINGTON, CPA, Chairman, Gordon, Harrington & Osborn, P.C.,
certified public accountants, North Andover, Massachusetts.
ROBERT F. HATEM, Executive Assistant to the President, Northern Essex
Community College, Lawrence/Haverhill, Massachusetts.
5
MARSHA A. MCDONOUGH, Regional Education Officer, U.S. Department of State,
Office of Overseas Schools, Washington, D.C.
PAUL A. MILLER, President and Chief Executive Officer of the Company and
the Bank.
Each of the Nominees and Continuing Directors has held such position(s) for
five or more years with the exceptions of Robert F. Hatem, who has been in his
present position since January 1998, and previously was Manager,
Customer/Community Relations of Raytheon Corporation's Electronic System
Division, Bedford, Massachusetts, a defense contractor; Kathleen I. Boshar, who
has been in her present position since July 2000, and previously was Executive
Director, Residential Association of Realtors, Greater Boston Real Estate Board,
Boston, Massachusetts; and Marsha A. McDonough, who has been in her present
position since August, 2000 and previously was Associate Dean, Endicott College,
Beverly, Massachusetts.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The following sets forth certain information concerning the Board of
Directors of the Company. The Board of Directors of the Company held 12 meetings
in the fiscal year ended December 31, 2001. Each incumbent director, with the
exception of Neil H. Cullen who attend 58%, attended at least 75% of the
aggregate of the total number of meetings held by the Board and all committees
of the Board on which such Director served during the period of such Director's
service in 2001.
The Board of Directors of the Company has five standing committees: an
Executive Committee, a Nominating Committee, an Audit Committee, a Stock Option
Committee, a Community Affairs Committee and a Compensation Committee.
The members of the Executive Committee are Messrs. Burke (Chairman),
Beliveau, Brawn, and Miller (President & CEO) plus two additional Board members
on a rotating basis. The rotating members of the Executive Committee are drawn
from the six other directors not listed in the preceding sentence. Each such
rotating member serves as a member of the Executive Committee for a two-month
interval (four meetings) approximately twice a year. The Executive Committee is
vested with authority of the Board on most matters between meetings of the
Board.
The members of the Nominating Committee are Messrs. Burke (Chairman),
Beliveau and Brawn. Persons wishing to nominate persons to the Board of
Directors may make such nomination in writing and transmit it to the Nominating
Committee of the Board of Directors, who will consider such nomination in
accordance with the By-Laws of the Company. The Nominating Committee met 2 times
in 2001.
The members of the Audit Committee are Messrs. Beliveau (Chairman),
Cleveland, Hatem and Harrington. The Audit Committee reviews the scope of the
annual audit by the Company's independent auditors and internal auditors,
monitors the Company's internal financial and accounting controls and procedures
and recommends to the Board of Directors of the Company the appointment of
independent auditors. The Audit Committee held 4 meetings in 2001. The Audit
Committee and the full Board of Directors have adopted a written Audit Committee
charter which is attached to this Proxy Statement as Appendix A. Each member of
the Audit Committee is an independent director as defined in Rule 4200(a)(15) of
the Nasdaq Stock Market's Marketplace Rules.
The members of the Stock Option Committee are Messrs. Burke (Chairman),
Beliveau and Brawn. The Stock Option Committee administers the Company's stock
option plans. The Stock Option Committee met 4 times in 2001.
6
The members of the Community Affairs Committee are Messrs. Hatem (Chairman)
and Miller. The Community Affairs Committee reviews and approves requests for
money from non-profit organizations. The Community Affairs Committee held no
meetings in 2001.
The members of the Compensation Committee are Messrs. Burke (Chairman),
Beliveau and Brawn. The Committee prepares an annual appraisal of the
performance of the Chief Executive Officer of the Company and recommends the
annual compensation and benefits for the Chief Executive Officer to the
Company's Board of Directors for the approval of the Board. The Compensation
Committee met 5 times in 2001.
AUDIT COMMITTEE REPORT
The Audit Committee reviews the scope of the annual audit by the Company's
independent auditors and internal auditors, monitors the Company's internal
financial and accounting controls and procedures and recommends to the Board of
Directors the appointment of independent auditors. In fulfilling its
responsibilities, the Audit Committee:
- discussed and considered the independence of KPMG LLP, reviewing as
necessary all relationships and services which might bear on KPMG LLP's
independence as outside auditor;
- received written affirmation from KPMG LLP that it is in fact
independent;
- discussed the overall audit process, receiving and reviewing all reports
of KPMG LLP;
- involved KPMG LLP in the Audit Committee's review of the Company's
financial statements and related reports with management;
- provided to KPMG LLP full access to the Audit Committee and the full
Board of Directors to report on all appropriate matters; and
- discussed with KPMG LLP all matters required under auditing standards
generally accepted in the United States of America to be reviewed.
The Audit Committee met with selected members of management and KPMG LLP to
review financial statements (including quarterly reports), discussing such
matters as the quality of earnings; estimates, reserves and accruals; the
suitability of accounting principles; financial reporting decisions requiring a
high degree of judgment; and audit adjustments, whether or not recorded.
The Audit Committee recommended to the Board of Directors, subject to
stockholder ratification, the selection of KPMG LLP as the Company's outside
auditor.
In addition, the Committee considered the quality and adequacy of the
Company's internal controls and the status of pending litigation, taxation
matters and such other areas of oversight of the Company's financial reporting
and audit process as the Audit Committee felt appropriate.
7
Based upon its work and the information received in the inquiries outlined
above, the Audit Committee recommended to the Company's Board of Directors that
the Company's audited financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2001 for filing with the
Securities and Exchange Commission.
Respectfully submitted,
Eugene A. Beliveau (Chairman)
Byron R. Cleveland, Jr.
Robert F. Hatem
Richard Hart Harrington
COMPENSATION OF DIRECTORS
The members of the Board of Directors of the Company who serve on the
Executive Committee, except for the Chairman of the Board of Directors and Mr.
Miller, currently receive an annual retainer of $15,865 plus a fee of $425 for
each Executive Committee and Board meeting plus a fee of $835 for each Committee
meeting attended (other than meetings of the Executive Committee, Compensation
Committee, Nominating Committee and Stock Option Committee). The Chairman of the
Board of Directors receives an annual retainer of $18,240 plus a fee of $480 for
each meeting attended, except conferences and training meetings outside of the
Company for which the fee is $835. Each Director of the Company other than
members of the Executive Committee receives an annual retainer of $9,200 plus a
fee of $425 for each Board or Committee meeting attended. Each Director receives
a fee of $835 for all conferences and training meetings attended outside the
Company. Mr. Miller does not receive any separate compensation for service as a
Director or as a member of any of the Committees of the Board of Directors.
8
EXECUTIVE OFFICERS
The following table sets forth, for each of the executive officers of the
Company, as of February 28, 2002, each such person's name, age and position or
office held with the Company as well as other biographical information. Each of
the listed executive officers is employed by the Bank under the terms and
conditions of certain employment agreements. The Bank has also entered into a
special termination agreement with Mr. Perreault. In connection with the
Reorganization, the Company assumed joint contractual responsibility as employer
under each of the these agreements. See "EXECUTIVE COMPENSATION -- Employment
Agreements; Special Termination Agreement" (page 11).
<Table>
<Caption>
NAME POSITION AGE
- ---- -------- ---
Paul A. Miller............................ Director, President and Chief Executive Officer of 62
the Company and the Bank
Jeffrey W. Leeds(1)....................... Executive Vice President and Chief Lending Officer of 62
the Bank, Assistant Treasurer of the Company
Robert P. Perreault(2).................... Executive Vice President and Clerk of the Company, 62
Executive Vice President -- Residential Mortgage
Lending and Clerk of the Bank
Timothy L. Felter(3)...................... Executive Vice President, Personal Banking and 41
Investment Officer of the Bank, Assistant Treasurer
of the Company
John E. Sharland(4)....................... Senior Vice President, Chief Financial Officer and 39
Treasurer of the Company and the Bank
Richard J. D'Ambrosio(5).................. Senior Vice President, Support Services Operations of 53
the Bank, Assistant Treasurer of the Company
</Table>
- ---------------
(1) Jeffrey W. Leeds, who joined the Bank in 1987, has been its Chief Lending
Officer since 1988. He was appointed Assistant Treasurer of the Company in
July 2001.
(2) Robert P. Perreault, who joined the Bank in 1959, has served as its Clerk
from 1978 to the present. From 1989 to January 1999, he served as Executive
Vice President and Treasurer. In January 1999, he was appointed Executive
Vice President, Residential Mortgage Lending. He was appointed Executive
Vice President and Clerk of the Company in March 2001.
(3) Timothy L. Felter, who joined the Bank in 1990, was appointed Senior Vice
President of the Bank in 1993, Senior Vice President, Department Manager of
Residential Lending in 1994, Investment Officer in 1995 and Executive Vice
President, Personal Banking, and Investment Officer in January 1999. He was
appointed Assistant Treasurer of the Company in July 2001.
(4) John E. Sharland, who joined the Bank in 1992, was appointed Vice President
and Chief Financial Officer in 1994, Senior Vice President in 1998 and
Senior Vice President, CFO and Treasurer in January 1999. He was appointed
Senior Vice President, CFO and Treasurer of the Company in March 2001.
(5) Richard J. D'Ambrosio, who joined the Bank in 1983, was elected Vice
President of Servicing 1986 and Senior Vice President of Support
Services/Operations in 1998. He was appointed Assistant Treasurer of the
Company in July 2001.
9
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended December 31,
2001, 2000 and 1999 certain information concerning the compensation paid or
accrued to the Chief Executive Officer of the Company and the other executive
officers of the Company whose total salary and bonus exceeded $100,000 during
the year ended December 31, 2001, for services rendered in all capacities to the
Company (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------- ----------------------------
SECURITIES
UNDERLYING
NAME AND YEAR ENDED OPTIONS/ ALL OTHER
PRINCIPAL POSITION DECEMBER 31, SALARY BONUS SARS(#) COMPENSATION($)
------------------ ------------ -------- ------- ---------- ---------------
Paul A. Miller............................. 2001 $345,294(1) $65,000 12,000 $144,414(2)(3)
President and 2000 $326,896(1) $62,000 0 $141,234(2)(3)
Chief Executive Officer 1999 $313,502(1) $59,000 12,000 $148,929(2)(3)
Jeffrey W. Leeds........................... 2001 $165,957 $17,000 9,000 $ 4,523(3)
Executive Vice President 2000 $156,183 $15,100 0 $ 4,503(3)
and Chief Lending Officer 1999 $147,062 $15,000 9,000 $ 4,862(3)
Robert P. Perreault........................ 2001 $124,216 $ 6,000 9,000 $ 3,542(3)
Executive Vice President 2000 $119,520 $ 6,000 0 $ 3,535(3)
Residential Lending and Clerk 1999 $114,785 $10,000 9,000 $ 3,744(3)
Timothy L. Felter.......................... 2001 $117,930 $17,000 9,000 $ 3,517(3)
Executive Vice President 2000 $108,476 $14,700 0 $ 3,240(3)
Personal Banking, Investment Officer 1999 $100,703 $14,000 9,000 $ 3,441(3)
</Table>
- ---------------
(1) Includes benefits paid on behalf of Mr. Miller and reported as wage
compensation to him.
(2) Represents amounts accrued to fund supplemental retirement plans for the
benefit of Mr. Miller pursuant to Supplemental Retirement Agreements with
Mr. Miller. See "EXECUTIVE COMPENSATION -- Employment Agreements; Special
Termination Agreement" (page 11).
(3) Includes matching contributions by the Bank to the Bank's 401(k) Retirement
Savings Plan for the Named Executive Officer.
The Bank provides an automobile for use by Mr. Miller and pays his
membership dues to certain organizations. The aggregate amount of such benefits
is less than 10% of Mr. Miller's cash compensation. With the exception of
certain insurance premiums paid by the Bank, no other benefits are made
available to executive officers that are not made available to all employees of
the Bank. See "EXECUTIVE COMPENSATION -- Benefits" (page 14). Employees of the
Bank, including the executive officers, are covered by the Bank's group health
insurance program, group life insurance program, long-term disability program
and business related travel accident insurance plan.
10
The following table sets forth information regarding stock options granted
during fiscal year 2001 to the Named Executive Officers. No stock appreciation
rights were granted during fiscal year 2001.
OPTIONS GRANTED IN LAST FISCAL YEAR
<Table>
<Caption>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED ALTERNATIVE TO
NUMBER OF TOTAL ANNUAL RATES OF STOCK (F) AND (G):
SECURITIES OPTIONS PRICE APPRECIATION FOR GRANT DATE
UNDERLYING GRANTED TO EXERCISE OPTION TERM VALUE
OPTIONS EMPLOYEES OF ----------------------- ---------------
GRANTED IN FISCAL BASE PRICE EXPIRATION GRANT DATE
NAME (#) YEAR ($/SH) DATE 5%($) 10%($) PRESENT VALUE $
(A) (B) (C) (D) (E) (F) (G) (H)
---- ---------- ---------- ---------- ---------- ---------- ---------- ---------------
Paul A. Miller.................... 12,000 7.27% $13.90 7/26/11 $104,904 $265,836 --
Jeffrey W. Leeds.................. 9,000 5.45% $13.90 7/26/11 $ 78,678 $199,377 --
Robert P. Perreault............... 9,000 5.45% $13.90 7/26/11 $ 78,678 $199,377 --
Timothy L. Felter................. 9,000 5.45% $13.90 7/26/11 $ 78,678 $195,377 --
</Table>
The following table sets forth certain information concerning stock options
exercised during the fiscal year ended December 31, 2001 and the number and
value of shares of Common Stock of the Company subject to options held by the
Named Executive Officers as of December 31, 2001:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<Table>
<Caption>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FISCAL AT FISCAL
ACQUIRED VALUE YEAR END (#) YEAR END($)
ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE ($) UNEXERCISABLE UNEXERCISABLE(1)
- ---- -------- -------- -------------- ----------------
Paul A. Miller........................... 0 0 136,500/15,000 $965,685/$10,695
Jeffrey W. Leeds......................... 0 0 36,750/11,250 $ 224,764/$8,021
Robert P. Perreault...................... 0 0 36,750/11,250 $ 232,298/$8,021
Timothy L. Felter........................ 0 0 31,430/11,250 $ 214,193/$8,021
</Table>
- ---------------
(1) Based on a closing price of $12.69 per share of the Company's Common Stock
on December 31, 2001, less the option exercise price.
EMPLOYMENT AGREEMENTS; SPECIAL TERMINATION AGREEMENT
The Company entered into employment agreements with Paul A. Miller and
Robert P. Perreault effective on April 21, 1989 and May 9, 1986, respectively,
each of which were amended effective December 23, 1992, and with Jeffrey W.
Leeds and Timothy L. Felter effective on February 24, 2000. Each of the
employment agreements requires the Company to pay the executive a "Base Salary,"
which may be increased but shall not be reduced during the term of the agreement
and provides for the executive's participation in the Company's employee benefit
plans and arrangements. In addition, the Company's agreement with Mr. Miller
provides the executive with the use of an automobile. Each of the agreements
prohibits the executive from disclosing or converting to the executive's own use
the Company's confidential information.
The agreements with Mr. Miller and Mr. Perreault each had an initial term
of three years. The agreements with Mr. Leeds and Mr. Felter have an initial
term of two years. Each of the agreements provides
11
that commencing on the second anniversary of the agreement and on each
anniversary date thereafter, in the absence of notice of non-extension, the term
of the agreement will automatically be extended for an additional one year
period.
Under the employment agreements, the Company may terminate the executive's
employment at any time, with or without "cause" as defined in the agreements. If
after notice and reasonable opportunity for the executive to respond, the
Company terminates the executive's employment for "cause," the Company has no
continuing obligations to the executive. If the Company terminates the
executive's employment without cause, the Company is obligated to continue
providing the executive compensation and benefits specified in the agreement for
the then remaining term of the agreement. The employment agreement with Mr.
Perreault prohibits the executive from competing with the Company and from
soliciting employees or customers of the Company during a period in which the
executive is receiving benefits from the Company under the agreement and for a
one-year period following the executive's resignation or a termination of the
executive's employment for cause.
Each of the employment agreements except for the employment agreement with
Mr. Perreault provides for payment of a lump sum to the executive equal to three
times the "base amount" of the executive's compensation in the event of a
termination of the executive's employment within two years following a "change
in control" of the Company as defined in the agreement, provided that the
Company may reduce this amount to the extent necessary to avoid tax under
Section 4999 of the Internal Revenue Code.
In addition to Mr. Miller's employment agreement, the Company has adopted
two supplemental executive retirement plans for Mr. Miller. The purpose of the
supplemental plans, when taken together with the Savings Banks Employees
Retirement Association plan described below, is to provide Mr. Miller with
annual retirement benefits equal to 70% of the average of his three highest
consecutive years gross compensation. The plans also provide certain termination
benefits under certain circumstances equal to Mr. Miller's earned and accrued
benefits to date, subject to a vesting schedule and other conditions.
The Company has also entered into a special termination agreement with Mr.
Perreault. As amended, the agreement provides that if there is a "Change in
Control" of the Company, which is generally defined to mean (i) the acquisition
by a person or group of persons of beneficial ownership of 15% or more of the
Common Stock during the term of the agreement which is not approved as provided
in the agreements, or (ii) a merger, contested election or other business
combination or sale which results in a change of a majority of the Board of
Directors of the Company, and if at any time during the three-year period
following the Change in Control, the Company were to terminate the contracting
officer's employment for any reason other than for "cause," or if the
contracting officer were to terminate his own employment following his demotion,
loss of title, office or significant authority, or a reduction in his annual
compensation, the officer would be entitled to receive certain severance
benefits specified in the agreement. In the case of such termination, the
officer would be entitled to receive a lump-sum payment in an amount equal to
three times his average annual compensation over the five previous years of his
employment with the Company.
12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report has been adopted by the Compensation Committee of the
Company.
Compensation Policy
The Company's executive compensation program is designed to provide
executives with annual salary and benefit plans which are competitive in the
industry and with long-term incentives in the form of stock options. The
Compensation Committee believes that in order to attract and retain talented
executives and to motivate them to achieve the goals of the Company,
compensation opportunities should be comparable to those offered to executives
with similar responsibility and position by peer companies. To assist the
Compensation Committee, various industry compensation surveys are made available
to the Committee.
The Chief Executive Officer makes executive salary adjustments annually and
from time-to-time awards bonuses. The adjustments and bonuses made by the Chief
Executive Officer reflect the overall performance of the Company, the
performance of each named executive officer and information for comparable
positions in other like institutions. Each executive salary adjustment and bonus
is reported to the Board of Directors.
The Company periodically grants stock options to some or all of its
executive officers as long-term incentives. All stock options granted are at the
market value of shares of Common Stock on the date of grant; therefore no
benefit accrues to the executives from the stock option unless the market value
of the Company's Common Stock increases and the options are exercised. These
grants motivate executives to enhance equity value of the Company which in turn
coincides with the interest of the stockholders. During fiscal year 2001, the
Company granted 12,000 stock options to Mr. Miller and 9,000 stock options to
each of Messrs. Perreault, Felter and Leeds, respectively.
Executives may also participate in the Bank's 401(k) Savings Plan and
Pension Plan.
Chief Executive Officer Compensation
The Bank's Chief Executive Officer's compensation is reviewed annually by
the Compensation Committee and is based upon his performance, the overall
performance of the Bank relative to budget objectives and information regarding
compensation for the Chief Executive Officer position at like institutions. The
Compensation Committee's recommendation for compensation adjustment and if
applicable a bonus is then acted upon by the Board.
Respectfully submitted,
Thomas J. Burke (Chairman)
Eugene A. Beliveau
Malcolm W. Brawn
The foregoing report is provided by the three named directors in their
capacity as members of the Compensation Committee of the Company during fiscal
year 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Beliveau, Brawn and Burke served on the Compensation Committee of
the Company during the fiscal year ended December 31, 2001. None of the members
of the Compensation Committee has ever served as an officer or employee of the
Company or the Bank. See also, "Indebtedness of Directors and Management and
Certain Transactions with Management and Others" (page 16).
13
No executive officer of the Company served (i) as a member of the
Compensation Committee of another entity, one of whose executive officers served
on the Compensation Committee of the Company, (ii) as a director of another
entity, one of whose executive officers served on the Compensation Committee of
the Company , or (iii) as a member of the Compensation Committee of another
entity, one of whose executive officers served as a director of the Company.
STOCK OPTION PLANS
On the Effective Date, the Company assumed the Bank's two stock option
plans, the Lawrence Savings Bank 1986 Stock Option Plan (the "1986 Stock Option
Plan") and the Lawrence Savings Bank 1997 Stock Option Plan (the "1997 Stock
Option Plan").
The 1986 Stock Option Plan was in effect until 1996, expiring by its own
terms in May, 1996. Notwithstanding the expiration of the 1986 Stock Option
Plan, outstanding options granted under the 1986 Stock Option Plan continue to
be exercisable in accordance with their terms. The 1997 Stock Option Plan was
adopted by the Bank's Board of Directors on December 18, 1997 and approved by
the Bank's stockholders on May 5, 1998. The Massachusetts Commissioner of Banks
approved the 1997 Stock Option Plan on June 22, 1998. Both "incentive stock
options" and "nonqualified stock options" may be granted pursuant to the 1997
Stock Option Plan. The 1997 Stock Option Plan also permits the inclusion of
stock appreciation rights in any option granted.
The 1986 and 1997 Stock Option Plans are administered by the Stock Option
Committee of the Company, which is comprised of non-employee Directors of the
Company. The Stock Option Committee currently consists of Messrs. Beliveau,
Brawn and Burke.
As of February 28, 2002 stock options for the purchase of an aggregate of
596,030 shares of Common Stock at an average purchase price per share of $8.65
were outstanding under the 1986 and 1997 Stock Option Plans. Of these options,
392,530 were exercisable on that date. There were 314,500 stock options
outstanding under the 1997 Stock Option Plan included in the 596,030 outstanding
options. In 2001, options were exercised to purchase 6,500 shares of Common
Stock under the 1986 Stock Option Plan and 8,250 shares of Common Stock under
the 1997 Stock Option Plan.
BENEFITS
Insurance and Other Benefits. The Company provides full-time officers and
employees with hospitalization, major medical, life, dental, travel accident,
and long-term disability insurance under group plans which are available
generally and on the same basis to all full-time employees; provided, however,
that with respect to the hospitalization and major medical insurance plan,
full-time employees hired on or after September 1, 1984, other than Messrs.
Miller and Leeds, are required to pay 25% of each month's premiums. The travel
accident insurance plan is also made available to part-time employees. The
Company also sponsors a 401(k) Savings Plan which allows participants to defer a
percentage of their before-tax compensation from the Company as a contribution
under this plan. Participants have several investment options, including a fund
which invests solely in Common Stock of the Company. All full-time and certain
part-time employees are eligible to participate in this plan. The Company made
matching contributions of 50% of the officer and employee contribution during
2001 for all employees who participate in the 401(k) plan up to 3% of each such
employee's salary or the maximum amount allowed under the governing tax
regulations.
Pension Plan. The Company provides a retirement plan for all eligible
employees through Savings Banks Employees Retirement Association ("SBERA"), an
unincorporated association of savings banks operating within Massachusetts and
other organizations providing services to or for savings banks. SBERA's sole
purpose is to enable participating employers to provide pensions and other
benefits for their employees.
14
At October 31, 2001, the latest date for which information is available,
the present value of accumulated benefits under the retirement plan was fully
funded by the market values of related available assets.
The following table illustrates annual pension benefits for retirement at
age 65 under the most advantageous plan provisions available for various levels
of compensation and years of service. The figures in this table are based upon
the assumption that the plan continues in its present form and upon certain
other assumptions regarding compensation trends and social security.
ANNUAL PENSION BENEFIT*
BASED ON YEARS OF SERVICE(1)(2)
<Table>
<Caption>
AVERAGE 10 15 20 25 OR
COMPENSATION(3) YEARS YEARS YEARS MORE YEARS
- --------------- ------- ------- ------- ----------
$ 20,000 .................................... $ 2,500 $ 3,750 $ 5,000 $ 6,250
$ 40,000 .................................... $ 5,167 $ 7,751 $10,334 $12,918
$ 60,000 .................................... $ 8,867 $13,301 $17,734 $22,168
$ 80,000 .................................... $12,567 $18,851 $25,134 $31,418
$100,000 .................................... $16,267 $24,401 $32,534 $40,668
$120,000 .................................... $19,967 $29,951 $39,934 $49,918
$125,000 .................................... $20,892 $31,338 $41,784 $52,230
$140,000 .................................... $23,667 $35,501 $47,334 $59,168
$150,000 .................................... $25,517 $38,276 $51,034 $63,793
$170,000 **.................................. $29,217 $43,826 $58,434 $73,043
</Table>
- ---------------
* Based on age 65 retirement in 2001 (Plan Year 11/1/00 -- 10/31/01)
** Federal law does not permit defined benefit pension plans to recognize
compensation in excess of $170,000 for plan year 2001.
(1) The annual pension benefit is computed on the basis of a straight life
annuity.
(2) The Company provides additional retirement benefits to Mr. Miller through
two supplemental retirement plans. See "Employment Agreements; Special
Termination Agreement."
(3) Average compensation for purposes of this table is based on the average of
the highest three consecutive years preceding retirement.
The estimated retirement benefits under the plan at normal retirement date
computed on the basis of their present salary levels and years of service at
such date for Mr. Miller, Mr. Perreault, Mr. Leeds and Mr. Felter are $45,948
and 16 years, $53,082 and 46 years and $51,691 and 18 years, and $50,853 and 36
years, respectively.
15
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock (or the
Bank's Common Stock in the periods prior to the Reorganization), based on the
market price of the Company's (or the Bank's) Common Stock and assuming
reinvestment of dividends, with the total return of companies within the
Standard & Poor's 500 Stock Index and the Advest New England Thrift Index. The
calculation of total cumulative return assumes a $100 investment in the
Company's Common Stock, the S&P 500 and the Advest New England Thrift Index on
December 31, 1996.
(GRAPH)
<Table>
<Caption>
ADVEST NEW ENGLAND
DATE THRIFT INDEX S&P 500 LSBX INDEX
---- ------------------ ------- ----------
12/31/96 100.00 100.00 100.00
03/31/97 105.20 107.77 121.54
06/30/97 125.25 110.16 138.46
09/30/97 154.69 128.78 155.38
12/31/97 172.61 137.82 201.54
03/31/98 155.69 141.19 210.77
06/30/98 145.02 160.30 191.54
09/30/98 113.26 164.97 147.69
12/31/98 116.21 147.97 157.70
03/31/99 105.85 178.85 118.46
06/30/99 111.66 187.16 115.38
09/30/99 102.65 199.72 96.15
12/31/99 102.92 186.63 93.85
03/31/00 98.13 213.77 86.15
06/30/00 109.31 218.04 86.15
09/30/00 128.91 211.64 107.69
12/31/00 138.17 209.01 129.23
03/31/01 147.35 192.09 136.92
06/30/01 168.09 168.82 160.49
09/30/01 172.23 178.15 125.42
12/31/01 185.93 151.45 156.18
</Table>
INDEBTEDNESS OF DIRECTORS AND MANAGEMENT AND CERTAIN TRANSACTIONS WITH
MANAGEMENT AND OTHERS
Certain of the Directors and officers of the Company are at present, as in
the past, customers of the Company and from time-to-time have entered into
transactions with the Company in the ordinary course of business. In addition,
certain Directors of the Company are at present, as in the past, directors,
officers or stockholders of corporations or members of partnerships that are
customers of the Bank, and have transactions with the Company in the ordinary
course of business. Such transactions with Directors and officers of the
Company, and with such corporations and partnerships, are made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons not affiliated with the
Company, and do not involve more than normal risk of collectability, or present
other features unfavorable to the Company. As a matter of policy, the Company
also makes certain loans to other employees.
16
In addition, from time-to-time, the Company obtains services from one or
more of its Directors. However, at no time during the past year did payments to
any Director for such services aggregate $60,000 or more.
Extensions of credit to officers of the Company are restricted by Company
policy and Massachusetts statute to an amount of not more than $20,000, whether
secured or unsecured, and not more than $75,000 for educational purposes, except
that a loan not exceeding $275,000 may be made to officers secured by a mortgage
on their primary residence. All extensions of credit and loans to officers must
be approved by the Executive Committee of the Board of Directors of the Company,
and all extensions of credit and loans to executive officers must also be
approved by the Bank's Board of Directors.
In addition, the Company is subject to the provisions of Regulation "O" of
the Board of Governors of the Federal Reserve System, which: (i) requires the
Company's executive officers, directors and control persons to report to the
Company's Board of Directors any indebtedness to the Company, (ii) establishes
requirements and restrictions as to the terms, size of and approvals necessary
for extensions of credit by the Company to its executive officers, directors,
and control persons, and (iii) requires any such loans to be made at the same
rates and on the same terms and conditions as comparable loans to unaffiliated
persons.
The Company's subsidiary, Lawrence Savings Bank (the "Bank"), has an
arrangement (the "Participation Arrangement") whereby it may purchase up to a
$10,000,000 participation interest in loans owned and serviced by entities
affiliated with Mr. William P. DeLuca, Jr., a direct and indirect beneficial
owner of 9.92% of the outstanding common stock of the Company. Through the
Participation Arrangement, the Bank makes auto loans and provides automobile
floor plan financing to various used car dealerships throughout the United
States. At December 31, 2001, the outstanding balance under the Participation
Arrangement is $6,587,000, or 2.6% of the gross loans of the Bank. The loans
made in connection with the Participation Arrangement are on commercially
reasonable terms and conditions and do not involve more than normal risk of
collectibility or present other features unfavorable to the Bank.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of February 28,
2002, regarding the beneficial ownership of Common Stock by: (i) each Director
and Nominee for Director of the Company, including Mr. Miller; (ii) each of the
other Named Executive Officers during the last fiscal year, (iii) all Directors,
Nominees for Director and executive officers as a group; and (iv) each person
who, to the knowledge of the Company, beneficially owned more than 5% of the
Common Stock at the Record Date. Except as otherwise noted, the persons named in
the table below have sole voting and investment power with respect to all shares
shown as beneficially owned.
<Table>
<Caption>
AMOUNT
AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2) OF CLASS(3)
------------------------ --------------- -----------
Directors and Principal Officers
Eugene A. Beliveau........................................ 6,725(4) *
Kathleen I. Boshar........................................ 3,950 *
Byron R. Cleveland, Jr. .................................. 4,350 *
Robert F. Hatem........................................... 7,525 *
Paul A. Miller............................................ 155,148** 3.54%
Thomas J. Burke........................................... 9,600 *
Marsha A. McDonough....................................... 3,550 *
Malcolm W. Brawn.......................................... 20,250(5) *
Neil H. Cullen............................................ 5,250 *
</Table>
17
<Table>
<Caption>
AMOUNT
AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2) OF CLASS(3)
------------------------ --------------- -----------
Richard Hart Harrington................................... 3,505 *
Jeffrey W. Leeds.......................................... 59,070 1.34%
Robert P. Perreault....................................... 44,443(6) 1.01%
Timothy L. Felter......................................... 43,875** 1.00%
All Directors and Principal Officers as a Group (15
persons)................................................ 410,179(6)** 9.36%
5% Stockholders
First Manhattan Co........................................ 326,400(7) 7.44%
William P. Deluca Jr. and Lease and Rental Management
Corp.................................................... 434,800(8) 9.92%
David L. Babson & Company, Inc. .......................... 426,000(9) 9.72%
</Table>
- ---------------
* Less than one percent
** Includes shares held in the Company's 401(k) Plan. The estimated shares so
held with respect to each such participant are: Paul A. Miller, 14,149
shares, Timothy L. Felter, 8,145 shares; John E. Sharland, 4,437 shares; and
all Directors and Principal Officers as a Group (15 persons), 26,731 shares,
respectively.
(1) In accordance with the applicable rules of the SEC, a person is deemed to be
the beneficial owner of shares of the Common Stock of the Company if he or
she has or shares voting power or investment power with respect to such
shares or has the right to acquire beneficial ownership of such shares at
any time within 60 days. As used herein, "voting power" means the power to
vote or direct the voting of shares, and "investment power" means the power
to dispose or direct the disposition of shares. Unless otherwise indicated,
each person named has sole voting and sole investment power with respect to
all shares indicated.
(2) Including shares of the Company's Common Stock which Directors and principal
officers of the Company have the right to acquire within 60 days of February
28, 2002 pursuant to options granted under the 1986 and 1997 Stock Option
Plans of the Company. The following persons have exercisable options to
purchase the number of shares indicated: Mr. Miller, 136,500 shares; Mr.
Leeds, 36,750 shares; Mr. Perreault, 31,750 shares; Mr. Felter, 31,230
shares; Mr. D'Ambrosio, 23,250 shares; Mr. Sharland, 22,124 shares; Mr.
Burke, 8,250 shares; Messrs. Beliveau and Hatem, 4,250 shares each; Messrs.
Cleveland and Harrington, 3,250 shares each; Ms. McDonough, 2,850 shares;
Ms. Boshar and Messrs. Brawn and Cullen, 2,250 shares each; and all
Directors and principal officers as a group, 307,580 shares.
(3) Computed on the basis of 4,382,243 outstanding shares as of February 28,
2002 plus 307,580 shares subject to options exercisable within 60 days of
February 28, 2002 held by the named individual or group.
(4) Includes 700 shares owned by a household member, as to which Dr. Beliveau
disclaims beneficial ownership.
(5) Includes 1,000 shares owned by his spouse, as to which Mr. Brawn disclaims
beneficial ownership.
(6) The stated number of shares owned by principal officers and Directors of the
Company includes 77,868 shares currently issued and outstanding and 307,580
shares subject to stock options exercisable within 60 days of February 28,
2002.
(7) Based solely on Amendment No. 3 to Form 13G filed with the Securities and
Exchange Commission on or about February 15, 2002, First Manhattan Co.
reports beneficial ownership of 326,400 shares of Common Stock. First
Manhattan Co. reports sole voting and dispositive power with respect to
270,400 shares, shared voting power with respect to 23,500 shares and shared
dispositive power with respect to 56,000 shares. First Manhattan Co.'s
address is 437 Manhattan Avenue, New York, NY 10022.
18
(8) Based solely on a Form 13G filed with the Federal Deposit Insurance
Corporation (the "FDIC") on or about February 9, 2001, Lease and Rental
Management Corp. reports beneficial ownership of 415,400 shares of Common
Stock of the Bank (which shares represent the same number and percentage of
shares of Company Common Stock pursuant to the Reorganization). Based solely
on a Form 13G filed with the Federal Deposit Insurance Corporation on or
about February 9, 2001, Mr. William P. DeLuca Jr. reports beneficial
ownership of 434,800 shares of Common Stock of the Bank (which shares
represent the same number and percentage of shares of Company Common Stock
pursuant to the Reorganization), with sole voting and dispositive power with
respect to 10,500 shares and shared voting and dispositive power with
respect to 424,300 shares. Both Mr. DeLuca and Lease and Rental Management
Corp. have an address of 45 Haverhill Street, Andover, Massachusetts 01810.
(9) Based solely on Amendment No. 2 to a Form 13G filed with the Securities and
Exchange Commission on or about March 4, 2002, David L. Babson & Company,
Inc. reports beneficial ownership of 426,000 shares of Common Stock of the
Company with sole voting and dispositive power with respect to all such
shares. David L. Babson Company, Inc.'s address is One Memorial Drive,
Cambridge, Massachusetts 02142-1300.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to regulations of the SEC and Section 16(a) of the Securities
Exchange Act of 1934, as amended, the Company's officers and Directors and
persons who own more than ten percent of a registered class of the Company's
equity securities must file reports of ownership and changes in ownership with
the SEC and the Nasdaq Stock Market. Officers, Directors and
greater-than-ten-percent stockholders are required to furnish the Company with
copies of all ownership reports they file. Prior to the Reorganization, the
Bank's officers, Directors and 10% stockholders were required to file comparable
reports with the FDIC. Based solely on its review of the copies of such reports
received by the Company with respect to its fiscal year 2001, or written
representations from certain reporting persons, the Company believes that during
2001 all Section 16(a) filing requirements applicable to its officers,
Directors, and greater-than-ten-percent stockholders were satisfied except as
described herein. David L. Babson Company, Inc. did not file a Form 3 upon
becoming a ten percent stockholder of the Company.
PROPOSAL 2
PROPOSAL FOR ELECTION OF CLERK
At the Annual Meeting, the Clerk of the Company will be elected to serve
until the 2003 Annual Meeting and until his successor is duly elected and
qualified. The Board of Directors has nominated Robert P. Perreault for the
position of Clerk. Mr. Perreault is currently serving as Clerk of the Company
and has served in that capacity since the formation of the Company in March
2001. He is also Clerk of the Bank and has served as such since 1978. For
further biographical and employment information regarding Mr. Perreault, see
"EXECUTIVE OFFICERS" (page 9) and "EXECUTIVE COMPENSATION" (page 10). Unless
authority to do so has been withheld or limited in a proxy, it is the intention
of the persons named as proxies to vote the shares to which the proxy relates
FOR the election of Robert Perreault as Clerk of the Company.
The Board of Directors anticipates that Mr. Perreault will stand for
election and serve, if elected, as Clerk. However, if Mr. Perreault fails to
stand for election or is unable to serve as Clerk, the Board of Directors may
fill the vacancy in the office of Clerk until the next meeting of the
stockholders of the Company.
19
PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed KPMG LLP as independent
auditors for the Company for the current fiscal year. KPMG LLP has served as the
Company's independent auditors since the date of the Reorganization. KPMG LLP
has served as the Bank's independent auditors since 1980. KPMG LLP has no direct
or indirect financial interest in the Company, nor has it had any connection
with the Company in the capacity of promoter, underwriter, voting trustee,
director, officer or employee.
The professional services provided by KPMG LLP include the audit of the
annual consolidated financial statements of the Company, review of filings with
various state and federal regulatory agencies, general accounting services and
preparation of income tax returns. A representative of KPMG LLP will be present
at the Annual Meeting to answer appropriate questions that may be raised orally
and to make a statement if he or she desires to do so.
AUDIT FEES
The aggregate audit fees paid to KPMG LLP for fiscal year 2001 were
$90,000. This sum includes the cost incurred by the Company in connection with
KPMG LLP's audit of the year end financial statements as well as the reviews of
the financial statements of Company included in the Company's Forms 10-Q for
fiscal year 2001.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION
For fiscal year 2001, there were no fees billed by KPMG LLP relating to the
design, implementation, operation or management of the Bank's financial
information systems.
ALL OTHER FEES
The aggregate amount of all other fees billed by KPMG LLP for services
rendered to the Company during fiscal year 2001 is $102,150. This sum includes
fees for tax return preparation and tax advisory services for consulting
services provided to the Bank and the Company in connection with the
Reorganization and fees associated with the testing of the Bank's computer
network security system.
The Audit Committee of the Board of Directors of the Company has determined
that the payment to KPMG LLP of these tax return preparation and advisory fees
is compatible with maintaining KPMG LLP's independence as the Company's
principal accountants.
Unless authority to do so has been withheld or limited in a proxy, it is
the intention of the persons named as proxies to vote the shares to which the
proxy relates FOR the ratification of KPMG LLP as independent auditors for the
current fiscal year.
STOCKHOLDER PROPOSALS AT 2002 ANNUAL MEETING
Under the rules of the Securities and Exchange Commission, if any
stockholder intends to present a proposal at the Annual Meeting of stockholders
and desires that it be considered for inclusion in the Company's proxy statement
and form of proxy for such meeting, it must be received by the Company not less
than 120 calendar days before the anniversary of the mailing date of the
Company's proxy statement for the prior year. Accordingly, if any stockholder
intends to present a proposal at the year 2003 Annual Meeting and wishes it to
be considered in the Company's proxy statement and form of proxy, such proposal
must be received by the Company on or before November 28, 2002. In addition, the
Company's By-Laws provide that
20
any director nominations and new business submitted by a stockholder must be
filed with the Clerk of the Company no fewer than 60 days, but no more than 90
days, prior to the date of the one-year anniversary of the previous Annual
Meeting, and that no other nominations or proposals by stockholders shall be
acted upon at the Annual Meeting. Certain exceptions under the By-Laws apply to
annual meetings of stockholders at which newly created seats of the Board of
Directors are to be filled. Any such proposal should be mailed to: Clerk, LSB
Corporation, 30 Massachusetts Avenue, North Andover, Massachusetts 01845.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no matters to be brought before the Annual Meeting other than
those specifically listed in the Notice of Annual Meeting of Stockholders.
However, if further business is properly presented, the persons named as proxies
in the accompanying proxy will vote such proxy in their discretion in accordance
with their best judgment.
21
APPENDIX A
LSB CORPORATION
AUDIT COMMITTEE CHARTER
I. AUDIT COMMITTEE
There shall be a Committee of the Board of Directors to be known as the
Audit Committee. The Audit Committee shall be composed of at least three
Directors who are independent of the Management of the Company and are free of
any relationship that, in the opinion of the Board of Directors, would interfere
with their exercise of independent judgment as a Committee Member. Each Audit
Committee member must be able to read and understand fundamental financial
statements. At least one Committee Member must have past employment experience
in finance or accounting, requisite professional certification in accounting, or
other comparable experience or background, including a current or past position
as a chief executive or financial officer or other senior officer with financial
oversight responsibilities. Audit Committee members are encouraged to enhance
their familiarity with finance and accounting by participating in educational
programs conducted by the Company or outside programs.
The Audit Committee shall serve as the Audit Committee for both LSB
Corporation and Lawrence Savings Bank. Wherever reference is made herein to the
term "Company", such term includes, as applicable, both LSB Corporation and
Lawrence Savings Bank.
INDEPENDENCE
A Director will not be considered "Independent" if, among other things, the
Director has:
- Been employed by the Company or any of its affiliates in the current or
past three years.
- Accepted compensation (other than compensation for board services,
retirement plan benefits, or non-discretionary compensation) from the
Company or its affiliates in excess of $60,000 during the previous fiscal
year.
- An immediate family member who is, or in the past three years has been,
employed by the Company or any of its affiliates as an executive officer.
- Been a partner, controlling shareholder or executive officer of any
for-profit business to which the Company or any of its affiliates made,
or from which the Company or any of its affiliates received, in any of
the past three years, payments (other than those arising solely from
investments in the Company's securities) exceeding the greater of five
percent (5%) of the Company's or the business's consolidated gross
revenues for that year, or $200,000.
- Been employed as an executive of another entity for which any of the
Company's executives serve on the compensation committee or similar body.
II. STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Company's Directors in
fulfilling their responsibilities to the Company's shareholders and the
investment community relating to the Company's accounting and reporting
practices, and the quality and integrity of the financial reports of the
Company. In so doing, it shall be the responsibility of the Audit Committee to
maintain free and open means of communications with the Board of Directors, the
Independent Auditors, the Internal Auditors, and the financial management of the
Company. The Independent Auditors shall be ultimately accountable to the Board
of Directors. The Board of Directors, with the assistance of the Audit
Committee, shall retain the ultimate authority and responsibility to
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select, evaluate and, when warranted, replace the Independent Auditors, or to
recommend such selection or replacement for approval at any meeting of
stockholders. While the Audit Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Bank's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. These are responsibilities of Management and the Independent
Auditors.
III. MEETINGS
The Audit Committee shall meet at least four times annually, or more
frequently as circumstances warrant. The Audit Committee shall meet at least
annually in separate executive sessions with Management, the Independent
Auditors and the Internal Auditors to discuss any matters that the Audit
Committee or any of such groups believe should be discussed privately.
IV. AUDIT COMMITTEE RESPONSIBILITIES AND POWERS
The responsibilities of the Audit Committee shall include the following and
any additional responsibilities, not inconsistent herewith, that may be assigned
to such Committee by the Board of Directors:
GENERALLY
1. Review and update this Charter at least annually and as circumstances
warrant. Ascertain that the Audit Committee Charter is reported in the Company's
proxy statement at least once every three years.
2. Report periodically to the Board of Directors.
3. Review and recommend to the Board of Directors the selection of
Independent Auditors to audit the financial statements of the Company and its
subsidiaries.
4. Meet with the Independent Auditors and Management in advance to review
the proposed scope of the audit for the current year and the audit procedures to
be used, and, at the conclusion of the audit, review audit findings, including
comments or recommendations, of the Independent Auditors.
5. Review with Management and the Independent Auditors the scope of the
services required by the audit, the Company's significant accounting policies,
and audit conclusions regarding the Company's significant accounting estimates.
6. Inquire as to the Independent Auditors' judgments regarding the quality
and appropriateness of the Company's accounting principles and policies as
applied in its financial statements.
7. Consider and approve, if appropriate, major changes in the Company's
auditing and accounting principles, policies and practices as suggested by the
Independent Auditors, Management or the Internal Auditors.
8. Oversee the Internal Audit function of the Company including its
independence and authority, its reporting obligations, the proposed audit plan
for the current year, and the coordination of such plans with the Independent
Auditors.
9. Consult with the Independent and Internal Auditors regarding the
integrity of the Company's financial reporting processes (internal and external)
and review with the Independent Auditors and Management the assessments of the
Independent and Internal Auditors of the adequacy of the Company's internal
controls and the resolution of identified weaknesses and reportable conditions
in internal controls, including the prevention or detection of management
overrides or compromises of internal control systems.
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10. Review and approve reports of the Audit Committee required to be
included in the Company's proxy statement for the annual meeting of
shareholders.
11. On an annual basis, receive from the Independent Auditors a formal
written statement identifying all relationships between the Independent Auditor
and the Company conforming to the requirements of Independence Standards Board
Standard 1, as hereafter modified or supplemented.
12. Actively engage in a dialogue with the Independent Auditors as to any
disclosed relationships or services that may impact its independence and take,
or recommend that the Board of Directors take, appropriate actions to oversee
and preserve the independence of the Independent Auditors.
13. Evaluate the performance of the Independent Auditors and recommend to
the Board of Directors a change in or discharge of the Independent Auditors when
circumstances warrant.
14. Discuss with Management decisions regarding the selection or
termination of the Independent Auditors and any significant disagreements
between the Independent Auditors and Management.
15. Review with Management and the Independent Auditors and legal counsel
as appropriate the Company's compliance with applicable laws and regulations.
"WHEN NECESSARY" ACTIVITIES
1. Review and recommend the appointment, replacement, reassignment, or
dismissal of the Internal Auditors.
2. Review and approve requests for any management consulting engagement to
be performed by the Company's Independent Auditors and be advised of any other
study or engagement undertaken by the Independent Auditors at the request of
management that is beyond the scope of the audit engagement letter.
3. Review periodically with legal counsel litigation, regulatory and other
legal matters that may have a material impact on the Company's financial
statements, regulatory status or good standing, or compliance policies and
practices.
4. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities. The Committee shall be empowered to
retain independent legal counsel and other professionals to assist in the
conduct of any such investigation.
V. RESPONSIBILITIES OF INDEPENDENT AUDITORS
1. Each year the Independent Auditors shall present to the Audit Committee
for its approval the audit plan and the estimated fees for performing the annual
audit and quarterly reviews of the Company's interim financial reports in the
form of an engagement letter.
2. The Independent Auditors shall meet with the Audit Committee to review
the audit plan and results of their annual audit and to discuss any concerns of
the Independent Auditors, including any items cited in the Management Letter
with respect to the Company's internal controls.
3. The Independent Auditors shall discuss with the Audit Committee the
matters required by Generally Accepted Auditing Standards (GAAS).
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VI. INTERNAL AUDITORS
The objective of the Company's internal audit function is to determine that
the Company has established effective internal controls and compliance with
managerial policies, laws, regulations and generally accepted accounting
principles.
1. Internal audit responsibilities shall be fulfilled by either an employee
or employees of the Company or an outside firm that provides internal audit
services. On an annual basis, senior management and the Audit Committee shall
evaluate the internal audit function and determine whether the internal audit
function should be performed by Company employees or by an outside firm which
provides internal audit services.
2. The internal auditors shall use follow-up procedures to ensure that
exceptions noted during regulatory examinations, independent and internal audits
are addressed in a satisfactory and timely manner.
3. The President and the Audit Committee shall have authority to approve
special internal audit investigations which have not been included as part of
the current Audit Plan.
VII. UPDATE RESPONSIBILITY
The Chief Financial Officer of the Company shall be responsible for
ensuring that this Audit Committee Charter is modified as appropriate to reflect
any updates, alterations or enhancements that may be approved or adopted by the
Audit Committee and the Board of Directors.
VIII. LEGAL REFERENCES
1. Rule 4350(d) of National Association of Securities Dealers, Inc.
2. FDIC Regulations, 12 CFR 363.2(b) and Appendix A to Part 363
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