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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 Rule 14a-11(c) or Rule 14a-12
LSB BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] 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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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NOTICE OF ANNUAL MEETING OF THE SHAREHOLDERS OF
LSB BANCSHARES, INC.
ONE LSB PLAZA
LEXINGTON, NORTH CAROLINA 27292
To the Shareholders of LSB Bancshares, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of LSB
Bancshares, Inc. ("Bancshares"), called under authority of Article 2, Section 2,
of the Bylaws of Bancshares, will be held at Bancshares' headquarters, located
at One LSB Plaza, 5th Floor, Lexington, North Carolina, 27292, on Wednesday,
April 18, 2001 at 10:00 a.m. Shareholders of record at the close of business on
March 5, 2001 are entitled to notice of and to vote at the meeting and any
adjournment thereof. Following the Annual Meeting, shareholders of record are
cordially invited to a luncheon at the J. Smith Young YMCA, located at 119 West
Third Avenue, Lexington, North Carolina 27292, at 12:30 p.m.
The purposes of the meeting are to consider and act upon the following
proposals:
o To elect four members of the Board of Directors;
o To ratify the appointment of Turlington and Company, L.L.P.,
to conduct the independent audit for 2001;
o To approve the amendment to the LSB Bancshares, Inc. 1996
Omnibus Stock Incentive Plan; and
o To consider such other business as may properly come before
the meeting.
We urge you to attend this meeting. It is extremely important that your
shares be represented regardless of the number you own. Please sign and return
your proxy to Bancshares in the enclosed envelope at your earliest convenience.
Unless you indicate to the contrary, your proxy will be cast FOR the nominees
for director named in the accompanying Proxy Statement, FOR the ratification of
the appointment of Turlington and Company, L.L.P. to conduct the independent
audit for 2001, and FOR the approval of the amendment (the "Amendment") to the
LSB Bancshares, Inc. 1996 Omnibus Stock Incentive Plan (as amended, the "1996
Stock Incentive Plan") each as described in more detail in the accompanying
Proxy Statement.
This 20th day of March, 2001.
Yours very truly,
Robert F. Lowe
Chairman, President and
Chief Executive Officer
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LSB BANCSHARES, INC.
ONE LSB PLAZA
LEXINGTON, NORTH CAROLINA 27292
PROXY STATEMENT
The accompanying proxy is solicited by and on behalf of the Board of
Directors of LSB Bancshares, Inc. ("Bancshares") for use at the Annual Meeting
of Shareholders to be held on Wednesday, April 18, 2001 at 10:00 a.m. at
Bancshares' headquarters, located at One LSB Plaza, 5th Floor, Lexington, North
Carolina, 27292, and at any adjournment thereof. Following the Annual Meeting,
shareholders of record are cordially invited to a luncheon at the J. Smith Young
YMCA, located at 119 West Third Avenue, Lexington, North Carolina 27292, at
12:30 p.m. The entire cost of this proxy solicitation will be borne by
Bancshares. In addition, personal solicitation may be conducted by directors,
officers and employees of Bancshares and its subsidiary, Lexington State Bank
(the "Bank"). This Proxy Statement and the accompanying proxy card were first
mailed to shareholders on or about March 20, 2001.
The shares of Bancshares common stock (the "Common Stock") represented
by the accompanying proxy card will be voted at the meeting if the proxy card is
properly signed, dated and received by Bancshares prior to the time of the
meeting. Where a choice is specified on the proxy card as to the vote on any
matter to come before the meeting, the proxy will be voted in accordance with
such specification. If no choice is specified, the proxy will be voted FOR the
nominees for director named herein, FOR the ratification of the appointment of
Turlington and Company, L.L.P. to conduct the independent audit for 2001 and FOR
the approval of the amendment (the "Amendment") to the LSB Bancshares, Inc. 1996
Omnibus Stock Incentive Plan (as amended, the "1996 Stock Incentive Plan"). Any
shareholder giving a proxy has the right to revoke it at any time before it is
voted by delivering a written revocation or an executed proxy bearing a later
date to the Secretary of Bancshares or by attending and voting in person at the
meeting. If a shareholder is a participant in the Shareholder Dividend
Reinvestment and Stock Purchase Plan, the proxy represents the number of shares
of Common Stock in the shareholder's dividend reinvestment account as well as
shares held of record directly by the shareholder.
VOTING PROCEDURES
Shareholders of record at the close of business on March 5, 2001 will
be entitled to vote at the Annual Meeting of Shareholders. At the close of
business on March 5, 2001, 8,432,824 shares of Common Stock were outstanding and
entitled to vote. There is no other class of voting stock outstanding. On all
matters at the meeting, shareholders are entitled to one vote for each share
held.
The laws of North Carolina, under which Bancshares is incorporated,
provide that, in connection with the election of directors, the persons
receiving a plurality of the votes cast will be elected as directors. The
proposal to ratify the appointment of Turlington and Company, L.L.P. to conduct
the independent audit of Bancshares for 2001 will be approved if the number of
votes cast "for" such proposal exceeds the number of votes cast "against" such
proposal.
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Approval of the Amendment requires the affirmative vote of the holders of a
majority of the shares of Common Stock present or represented by properly
executed and delivered proxies at the Annual Meeting. Shares held of record by a
broker or its nominee ("Broker Shares") and abstentions that are voted on any
matter will be counted for purposes of determining the existence of a quorum at
the Annual Meeting. Broker Shares that are not voted on any matter at the Annual
Meeting will not be included in determining whether a quorum is present at the
Annual Meeting. Abstentions and Broker Shares that are not voted on a particular
proposal will not be counted as votes for or against such proposals and will
have the same effect as negative votes.
PROPOSAL 1: ELECTION OF DIRECTORS
The Bylaws of Bancshares provide for a classified Board of Directors
consisting of not less than nine and not more than 24 directors, the number to
be determined by resolution of a majority of the Board of Directors or by
resolution of the shareholders at any meeting thereof. The Board of Directors
has set the number of directors at 14. The persons nominated by the Board of
Directors to serve as directors for a three-year term expiring at the 2004
Annual Meeting, as set forth below, were elected as directors at the 1998 Annual
Meeting.
The persons named as proxies in the accompanying proxy card intend to
vote in favor of the nominees named below. Such nominees have consented to serve
as directors of Bancshares if elected. If, at the time of the meeting, any of
such nominees are unable or unwilling to serve, the discretionary authority
provided in the accompanying proxy card will be exercised to vote for such other
person or persons for the office of director as may be nominated by the Board of
Directors. Proxies cannot be voted for a greater number of nominees than the
number named in this Proxy Statement.
Additional information about each of the nominees and the continuing
directors is provided below. The number of years of service on the Board of
Directors indicated in the following table includes service on the Board of
Directors of the Bank prior to the incorporation of Bancshares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR ELECTION AS A
DIRECTOR TO SERVE UNTIL THE 2004 ANNUAL MEETING
NOMINEES FOR ELECTION AS A DIRECTOR
TO SERVE UNTIL THE 2004 ANNUAL MEETING
DIRECTOR PRINCIPAL OCCUPATION
NAME AND AGE SINCE FOR PAST FIVE YEARS
------------ -------- --------------------
Michael S. Albert (46) 1995 President, CEO and Director of Billings
Freight Systems, Inc.; Treasurer of Cargo
Carriers, Inc.; Vice President of Metro
Motor Express, Inc.
Peggy B. Barnhardt (67) 1995 Retired since 1996; formerly Deputy
Superintendent, Davidson County Schools
Walter A. Hill, Sr. (61) 1983 President, Hill Oil Company, Inc.; Vice
President and Secretary, NorthCo, Inc.
(construction development)
Robert B. Smith, Jr. (62) 1969 Attorney
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INCUMBENT DIRECTORS
SERVING UNTIL THE 2003 ANNUAL MEETING
DIRECTOR PRINCIPAL OCCUPATION
NAME AND AGE SINCE FOR PAST FIVE YEARS
------------ -------- --------------------
Sue H. Hunter (65) 1999 President and Co-owner of Thomasville
Emporium; Vice President of Side Street
Cafe; former Davidson County Commissioner
and Vice Chairperson
Robert F. Lowe (58) 1983 Chairman, President and CEO of Bancshares,
the Bank and Peoples Finance Company of
Lexington, Inc., a subsidiary of the Bank;
President and a director of LSB Investment
Services, Inc., a subsidiary of the Bank
Roberts E. Timberlake (64) 1979 Artist/Designer; Chairman, President and CEO
of Bob Timberlake, Inc.
Lloyd G. Walter, Jr. (66) 1997 Architect; sole proprietor d/b/a LGW
Consulting; former CEO and Principal of
Walter, Robbs, Callahan & Pierce Architects,
P.C.
Julius S. Young, Jr. (53) 1988 President, Jay Young Management, Inc.
INCUMBENT DIRECTORS
SERVING UNTIL THE 2002 ANNUAL MEETING
DIRECTOR PRINCIPAL OCCUPATION
NAME AND AGE SINCE FOR PAST FIVE YEARS
------------ -------- --------------------
Leonard H. Beck (65) 1995 President, Green Printing Company
Marvin D. Gentry (65) 1997 Retired; former President and CEO of The New
Fortis Corporation, a wholly-owned
subsidiary of K. Hovnanian Enterprises
Samuel R. Harris (59) 1990 Physician
David A. Smith (62) 1990 Owner, Red Acres Dairy Farm
Burr W. Sullivan (54) 1987 President, Dorsett Printing and Lithograph
Corporation
MANAGEMENT'S OWNERSHIP OF COMMON STOCK
The following table sets forth information concerning the beneficial
ownership of Common Stock by each director, nominee for director and each
executive officer named under the heading "Executive Compensation" herein, and
by all directors and executive officers as a group as of March 5, 2001.
Management is aware of no person who beneficially owns more than five percent of
the outstanding shares of Common Stock. According to rules promulgated by the
Securities and Exchange Commission (the "SEC"), a person is the "beneficial
owner" of securities if he or she has or shares the power to vote them or to
direct their investment, or has the right to acquire ownership of such
securities within 60 days through the exercise of an option, warrant, right of
conversion of a security or otherwise.
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Amount and Nature of Beneficial Ownership of Common Stock
Name of Beneficial Sole Voting And Shared Voting And %
Owner Investment Power Investment Power Total Of Total
- ------------------------------------------------------------------------------------------------
Michael S. Albert 8,606 (1) 5,794 14,400 *
Peggy B. Barnhardt 6,812 (2) --- 6,812 *
Leonard H. Beck 10,614 (3) --- 10,614 *
Marvin D. Gentry 12,973 (4) 11,266 24,239 *
Samuel R. Harris 11,102 (5) --- 11,102 *
Walter A. Hill, Sr. 21,129 (6) 9,113 30,242 *
Sue H. Hunter 3,020 (7) 460 3,480 *
Robert F. Lowe 142,254 (8) 39,839 182,093 2.0
David A. Smith 21,101 (9) --- 21,101 *
Robert B. Smith, Jr. 29,645 (10) --- 29,645 *
Burr W. Sullivan 13,065 (11) 3,939 17,004 *
Roberts E. Timberlake 17,860 (12) 18,692 (13) 36,552 *
Lloyd G. Walter, Jr. 11,512 (14) --- 11,512 *
Julius S. Young, Jr. 39,908 (15) --- 39,908 *
Monty J. Oliver 54,809 (16) 72 54,881 *
H. Franklin Sherron, Jr. 64,906 (17) 15,217 80,123 *
All directors and executive
officers as a group (16 469,316 104,392 573,708 6.8
persons)
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* An asterisk indicates less than one percent.
(1) Includes 2,976 shares held in trust for such director under the
Deferred Plan (as defined below) and 3,125 shares underlying options
exercisable within 60 days of the record date.
(2) Includes 1,725 shares held in trust for such director under the
Deferred Plan and 2,750 shares underlying options exercisable within 60
days of the record date.
(3) Includes 2,500 shares underlying options exercisable within 60 days of
the record date.
(4) Includes 1,896 shares held in trust for such director under the
Deferred Plan and 1,875 shares underlying options exercisable within 60
days of the record date.
(5) Includes 4,885 shares held in trust for such director under the
Deferred Plan and 3,125 shares underlying options exercisable within 60
days of the record date.
(6) Includes 6,337 shares held in trust for such director under the
Deferred Plan and 3,125 shares underlying options exercisable within 60
days of the record date.
(7) Includes 1,400 shares held in trust for such director under the
Deferred Plan and 1,250 shares underlying options exercisable within 60
days of the record date.
(8) Includes 5,404 shares held in trust for such director under the
Deferred Plan and 101,621 shares underlying options exercisable within
60 days of the record date.
(9) Includes 3,952 shares held in trust for such director under the
Deferred Plan and 3,125 shares underlying options exercisable within 60
days of the record date.
(10) Includes 6,337 shares held in trust for such director under the
Deferred Plan and 3,125 shares underlying options exercisable within 60
days of the record date.
(11) Includes 5,404 shares held in trust for such director under the
Deferred Plan and 3,125 shares underlying options exercisable within 60
days of the record date.
(12) Includes 5,404 shares held in trust for such director under the
Deferred Plan and 3,125 shares underlying options exercisable within 60
days of the record date.
(13) Includes: (a) 6,352 shares held by the Bank as trustee of certain
trusts for the benefit of Mr. Timberlake's wife, over which Mr.
Timberlake shares investment power but has no voting power and (b)
12,253 shares held in trusts for Mr. Timberlake's benefit, over which
Mr. Timberlake shares investment power with the Bank as trustee and
over which the Bank has exclusive voting power.
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(14) Includes 1,896 shares held in trust for such director under the
Deferred Plan and 1,875 shares underlying options exercisable within 60
days of the record date.
(15) Includes 5,824 shares held in trust for such director under the
Deferred Plan and 3,125 shares underlying options exercisable within 60
days of the record date.
(16) Includes 36,648 shares underlying options exercisable within 60 days of
the record date.
(17) Includes 42,998 shares underlying options exercisable within 60 days of
the record date.
CORPORATE GOVERNANCE
The Board of Directors of Bancshares has standing Executive, Stock
Option and Compensation, and Audit Committees. There are no other committees of
the Board of Directors of Bancshares. The entire Board of Directors of
Bancshares nominates persons to serve as directors.
The Executive Committee of Bancshares reviews various matters and
submits proposals or recommendations to Bancshares' Board of Directors. The
Executive Committee is empowered to act and does act for Bancshares' Board of
Directors on strategic matters. The Executive Committee was comprised of Messrs.
Robert F. Lowe, Michael S. Albert, David A. Smith, Robert B. Smith, Jr., Burr W.
Sullivan and Julius S. Young, Jr. The Executive Committee did not meet during
2000.
The Stock Option and Compensation Committee administers the 1986
Employee Incentive Stock Option Plan, the 1996 Omnibus Stock Incentive Plan and
the Management Incentive Plan (the "Incentive Plan") and the Old North State
Bank 1990 Incentive Stock Option Plan and the Piedmont Bancshares Corporation
Stock Option Plan, both of which were assumed by Bancshares in connection with
its acquisition of Old North State Bank. The Stock Option and Compensation
Committee selects employees for participation in such plans and determines the
timing, pricing and amount of stock options granted and the amount of incentive
compensation earned pursuant to the plans within the terms of the plans. The
Stock Option and Compensation Committee is also responsible for administering
the 1994 Director Stock Option Plan and the LSB Bancshares, Inc. Amended and
Restated Deferred Compensation Plan for Directors. The Stock Option and
Compensation Committee was comprised of Messrs. Michael S. Albert, Robert B.
Smith, Jr., Burr W. Sullivan, Lloyd G. Walter, Jr. and Julius S. Young, Jr. The
committee met four times during 2000. Mr. Roberts E. Timberlake served on the
committee during 2000 until the Annual Meeting held April 19, 2000.
Bancshares' Audit Committee reviews and approves various audit
functions and is responsible for reviewing and considering the work of the
Bank's independent accountants and internal auditing department as well as
separate examinations of the Bank by the Federal Deposit Insurance Corporation
and the North Carolina Commissioner of Banks. Bancshares' Audit Committee was
comprised of Messrs. Michael S. Albert, Marvin D. Gentry, Walter A. Hill, Sr.,
Robert B. Smith, Jr., Burr W. Sullivan, and Julius S. Young, Jr. Bancshares'
Audit Committee met five times during 2000. The Board of Directors and the Audit
Committee have adopted a written charter for the Audit Committee, a copy of
which is attached to this proxy statement. The members of the Audit Committee
are "independent" as defined in the listing requirements for The Nasdaq Stock
Market, Inc.
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The Board of Directors of the Bank has a standing Executive Committee.
The Executive Committee of the Bank reviews various matters and submits
proposals and recommendations to the Bank's Board of Directors. The Executive
Committee is empowered to and does act for the Bank's Board of Directors on
strategic matters. The Bank's Executive Committee was comprised of Messrs.
Michael S. Albert, Robert F. Lowe, David A. Smith, Robert B. Smith, Jr., Burr W.
Sullivan and Julius S. Young, Jr. The Bank's Executive Committee met 20 times in
2000.
During 2000, the Board of Directors of Bancshares met 12 times and the
Board of Directors of the Bank met 13 times. All directors attended at least 75
percent of the aggregate of the total number of meetings of the Board of
Directors of Bancshares and the Bank (held during the period for which each
person was a director) and the total number of meetings held by all committees
of the Boards on which such directors served throughout 2000, with the exception
of Mr. Timberlake, who attended 69 percent and Mr. Young, who attended 73
percent of the aggregate of the total number of meetings held by all committees
of the Boards on which they served during 2000.
Shareholders entitled to vote in the election of directors may nominate
candidates for consideration by the Board of Directors of Bancshares. Pursuant
to the Bylaws of Bancshares, notice of nominations made by shareholders with
respect to the 2002 Annual Meeting must be received in writing by the Secretary
of Bancshares no earlier than January 6, 2002 and no later than January 31, 2002
and must set forth (i) the name, age, business address and, if known, residence
address of the nominee, (ii) the principal occupation or employment of the
nominee, (iii) the nominee's qualifications to serve as a director, (iv) the
number of shares of Common Stock beneficially owned by the nominee, (v) a
representation that the nominee has consented to his name being placed in
nomination, (vi) the name and record address of the shareholder making the
nomination, (vii) the number of shares of Common Stock owned of record and
beneficially by such shareholder, and (viii) any material interest of such
shareholder in the proposed nomination.
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EXECUTIVE COMPENSATION
The following table sets forth the total compensation awarded, paid to
or earned by the executive officers of Bancshares during each of the years ended
December 31, 2000, December 31, 1999 and December 31, 1998:
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
------------ Awards
Securities All Other
Name and Underlying Compensation
Principal Position Year Salary ($) Bonus ($) Options (#) (1) ($)(2)
------------------ ---- ---------- --------- --------------- ------------
Robert F. Lowe
President and CEO 2000 250,000 0 10,000 109,061
1999 225,000 85,012 10,000 88,774
1998 204,000 57,253 10,000 51,055
Monty J. Oliver
Secretary and Treasurer 2000 150,000 9,148 5,000 49,355
1999 140,000 32,298 5,000 45,034
1998 128,500 21,733 5,000 38,800
H. Franklin Sherron, Jr.
Vice President 2000 142,000 8,793 5,000 14,256
1999 130,000 49,006 5,000 10,941
1998 115,700 30,558 5,000 8,313
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(1) The information concerning options gives effect to the 25% stock split
in the form of a stock dividend paid on February 16, 1998
(2) Compensation set forth in this column represents the following (i)
amounts contributed by the Bank for the account of the executive
officers under the Lexington State Bank Employees Savings Plus Plan for
each of 2000, 1999 and 1998 as follows: Mr. Lowe, $5,100, $4,800 and
$4,800; Mr. Oliver, $5,093, $4,214 and $3,918; and Mr. Sherron, $5,250,
$4,493 and $4,447; and (ii) life insurance premiums paid by Bancshares
for each of 2000, 1999 and 1998 as follows: Mr. Lowe, $103,961,
$83,974, and $46,255; Mr. Oliver, $44,262, $40,820 and $34,882; and Mr.
Sherron, $9,006, $6,448 and $3,866.
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The following table sets forth certain information regarding the stock
options granted to the executive officers of Bancshares in 2000. Bancshares has
no outstanding stock appreciation rights ("SARs") and granted no SARs during
2000. In addition, in accordance with the rules of the SEC, the table sets forth
the hypothetical gains or "option spreads" that would exist for the respective
options based on assumed rates of annually compounded Common Stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term.
OPTION GRANTS IN LAST FISCAL YEAR(1)
Individual Grants
----------------- Potential Realizable
Value at Assumed Annual
Number of Percent of Rates of Stock Price
Securities Total Options Exercise Appreciation
Underlying Granted to or Base for Option Term
Options Employees in Price Expiration -----------------------
Name Granted Fiscal Year ($/Sh) Date(1) 5% ($) 10% ($)
---- ---------- ------------- -------- ----------- ------ -------
Robert F. Lowe 10,000 17.4 $15.06 05/09/10 94,730 240,065
Monty J. Oliver 5,000 8.7 $15.06 05/09/10 47,365 120,032
H. Franklin Sherron, Jr. 5,000 8.7 $15.06 05/09/10 47,365 120,032
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(1) Options become exercisable in installments of 20% on each anniversary date
following the date of grant, and thereafter may be exercised in whole or in
part at any time prior to the expiration date.
The following table sets forth certain information regarding stock
options exercised during 2000 by the executive officers of Bancshares, including
the aggregate value of gains on the date of exercise. In addition, this table
includes the number of shares of Common Stock subject to exercisable and
unexercisable stock options as of December 31, 2000. The table also sets forth
the values for "in-the-money" options based on the positive spread between the
exercise price of such stock options and the closing sale price of a share of
Bancshares Common Stock on the Nasdaq National Market on December 31, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Number of Value of
Securities Unexercised In-the-
Underlying Options Money Options
at FY-End (#) at FY-End ($)
Shares ------------------ -------------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
---- ------------ ------------ ---------------- -------------
Robert F. Lowe 0 0 101,621 / 31,500 104,566 / 0
Monty J. Oliver 3,850 18,121 36,648 / 15,750 26,590 / 0
H. Franklin Sherron, Jr. 0 0 42,998 / 15,750 41,825 / 0
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PENSION PLAN
The Bank's Employees' Pension Plan is a non-contributory plan that
covers all employees who work at least 1,000 hours annually, are at least 21
years old and have completed one year of service. The plan is a defined benefit
plan, providing for benefits equal to 0.8% of final average monthly
compensation, multiplied by years of credited service not to exceed 40 years,
plus 0.65% of final average monthly compensation in excess of the social
security compensation amount, multiplied by years of credited service not to
exceed 35 years. Final average compensation is the average of the five highest
consecutive calendar years of compensation paid during the ten calendar years
preceding retirement. The compensation covered by the plan consists of base
salary. A participant's accrued benefit is fully vested and non-forfeitable upon
reaching age 65. If a participant terminates employment for any reason other
than death, disability or retirement, the participant's accrued benefits will
vest after five years of service. Benefits can be paid in a lump sum only if the
distribution is $10,000 or less. Distributions over $10,000 must be paid in
monthly payments. Benefits are also provided for early retirement, deferred
retirement, disability retirement and death.
The following table shows estimated annual benefits payable upon
retirement at age 65 to participants under the plan.
PENSION PLAN TABLE
ESTIMATED YEARS OF CREDITED SERVICE
ANNUAL BENEFIT PAYABLE ON RETIREMENT (1)
Five-Year Average
Salary at Retirement 15 Years 20 Years 25 Years 30 Years 35 Years
- -------------------- -------- -------- -------- -------- --------
225,000 33,553 44,737 55,921 67,106 78,290
200,000 33,553 44,737 55,921 67,106 78,290
175,000 33,553 44,737 55,921 67,106 78,290
150,000 29,203 38,937 48,671 58,406 68,140
125,000 23,765 31,687 39,609 47,531 55,452
100,000 18,328 24,437 30,546 36,656 42,765
75,000 12,890 17,187 21,484 25,781 30,077
50,000 7,453 9,937 12,421 14,906 17,390
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(1) Some of the amounts shown exceed the limits imposed by federal law for
qualified plans.
Benefits payable as shown in the table are computed on a straight-life
annuity basis. Such amounts are not subject to deduction for social security
benefits or other amounts received by participants. Years of credited service
for the persons named in the summary compensation table above are as follows:
Mr. Lowe (30); Mr. Oliver (22); and Mr. Sherron (10).
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The following graph and table compare, for the five-year period ended
December 31, 2000, the cumulative return to shareholders of Bancshares with the
Standard & Poor's 500 Stock Index and an index consisting of 500 major regional
banks, assuming investment of $100 at the beginning of the period and the
reinvestment of dividends.
[PERFORMANCE GRAPH]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
-------- -------- -------- -------- -------- --------
LSB Bancshares, Inc. $100.00 $126.44 $172.10 $162.77 $137.40 $101.57
S&P 500 Composite $100.00 $122.96 $163.98 $210.85 $255.21 $231.98
Major Regional Banks $100.00 $136.64 $205.46 $227.00 $194.77 $249.37
COMPENSATION OF DIRECTORS
Each member of the Board of Directors of Bancshares receives a fee of
$300 for each Board meeting attended, plus an annual retainer of $4,000. Each
non-management director receives a fee of $200 for each committee meeting of
Bancshares and the Bank that they attend. Bancshares also grants each
non-management director a five-year option to purchase 625 shares of Common
Stock. The exercise price of each option is the fair market value of the Common
Stock on the date of grant. The option is granted on the date of the annual
shareholders' meeting.
In addition, directors have an opportunity to participate in
Bancshares' Deferred Compensation Plan for Directors (the "Deferred Plan"),
under which a director may defer a designated amount of their annual
compensation until they retire, die while still a director, become permanently
disabled or otherwise discontinue service as a director. Each director's
interest in the Deferred Plan is nonassignable, although each director may name
a beneficiary to
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receive their deferred compensation in the event of the director's death. During
the last fiscal year, each director allocated 100% of their 2000 directors' fees
to the Deferred Plan.
The Deferred Plan requires that the quarterly retainer for services and
the monthly meeting fees be paid in shares of Common Stock of the Company at
their then current fair market value and that the fees paid for serving on
committees shall be paid currently to the directors in cash. Prior to the
beginning of each calendar year, the directors are entitled to elect to receive
currently the shares of Common Stock that they would earn in the coming year for
the quarterly retainer and the monthly meeting fees or to defer the receipt of
those shares for credit to their deferred account.
The Board believes that the Deferred Plan provides an opportunity to
strengthen the alignment of shareholders' and directors' interests. The Deferred
Plan also offers the Company a means to provide for the financial security of
its directors so that their services may be retained. The Board also believes
that receiving shares of the Company's Common Stock as compensation will be
recognized by shareholders as a commitment to maximize long-term shareholder
value. The Committee will study and evaluate on an ongoing basis the amount and
type of compensation paid to directors in order to maximize the alignment of the
long-term interests of Bancshares' shareholders with those of the directors.
THE STOCK OPTION AND COMPENSATION COMMITTEE REPORT
The following report of the Stock Option and Compensation Committee of
the Board of Directors of Bancshares provides information with respect to the
compensation paid to Bancshares' Chief Executive Officer, Robert F. Lowe, and to
its other executive officers, Messrs. Sherron and Oliver.
Bancshares' executive compensation program is administered by the Stock
Option and Compensation Committee (the "Committee") of the Board of Directors of
Bancshares. The Committee is comprised of the individuals listed at the end of
this report, each of whom is a non-employee director of Bancshares and the Bank.
Bancshares' compensation program for executive officers consists of the
following elements: annual salary; performance-based cash awards under the
Management Incentive Plan (the "Incentive Plan"); annual grants of options under
the 1996 Omnibus Stock Incentive Plan (the "1996 Plan"); annual matching
contributions under the Lexington State Bank Employees Savings Plus Plan (the
"Bank Savings Plan")'; and Employment Continuity Agreements. The Committee
grants stock options under the 1996 Plan to the executive officers. Under the
Incentive Plan, the Committee recommends to the Bank's Board of Directors the
related incentive compensation amounts for executive officers. The Committee
recommends to the Bank's Board of Directors the salary levels for executive
officers, and the Bank's Board of Directors determines matching contributions
under the Bank Savings Plan.
Bancshares' executive compensation program is designed to enable
Bancshares to attract, retain and reward executive officers. The Committee
intends to keep compensation levels competitive with a representative sample of
the Bank's peer groups. The Committee's strategy is to maintain a structure
within the executive compensation program which strengthens the link
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between executive compensation, Bancshares' performance, individual performances
of the executive officers and shareholder interests. In accordance with this
strategy, in February 1996, Bancshares' Board of Directors adopted the Incentive
Plan. Under the Incentive Plan, executive officers recommended by the Committee
and approved by the Bank's Board of Directors can earn incentive compensation if
Bancshares achieves the operating performance objectives approved by Bancshares'
Board of Directors, and the executive officers achieve individual performance
objectives. The Committee believes that the Incentive Plan motivates Bancshares
executive officers to achieve Bancshares' business goals and objectives.
The following sections of this Report describe the compensation program
for executive officers in effect in 2000.
BASE SALARY
Base salaries for executive officers are reviewed and approved by the
Bank's Board of Directors based upon recommendations by the Committee. The
Committee recommends salaries based upon a review of the range of salaries
earned by executive officers within a representative peer group, although there
is no predetermined point within such range at which the Committee targets
salaries. In determining base salaries, the Committee does not establish
performance thresholds or other measures that directly relate base salaries to
operating performance.
The base salary paid to Bancshares' Chief Executive Officer, Robert F.
Lowe, during 2000 reflects the base salary policies described above. Mr. Lowe's
2000 salary was at the midpoint of the range of salaries paid to the chief
executive offers of the Bank's peer group. The Committee believes that Mr.
Lowe's 2000 base salary, which is an 11.1% increase over his 1999 base salary,
is consistent with the salaries paid to executives of the Bank's peer group.
However, Mr. Lowe's 2000 total compensation, which includes his base salary plus
bonus and all other compensation, is a 9.9% decrease from his 1999 total
compensation.
The base salaries paid to Bancshares' other executive officers, Messrs.
Sherron and Oliver, are recommended by Mr. Lowe to the Committee. The 2000 base
salary paid to Mr. Sherron was at the 104th percentile of the range of salaries
paid to executive officers of the Bank's peer group and is based on years of
experience. Mr. Sherron's base salary during 2000 reflects a 9.2% increase over
his 1999 base salary. However, Mr. Sherron's 2000 total compensation, which is
his base salary plus bonus and all other compensation, is a 13.1% decrease from
his 1999 total compensation. During 2000, Mr. Oliver's base salary was at the
138th percentile of the range of salaries paid to executive officers of the
Bank's peer group and is based on years of experience. Mr. Oliver's base salary
during 2000 reflects a 7.1% increase over his 1999 base salary. However, Mr.
Oliver's 2000 total compensation, which is his base salary plus bonus and all
other compensation, is a 4.0% decrease from his 1999 total compensation.
Furthermore, the Committee believes that the base salaries paid to Messrs.
Sherron and Oliver give fair consideration to their individual contributions and
are competitive with the Bank's peer group.
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INCENTIVE COMPENSATION
Incentive compensation awards for executive officers of Bancshares
granted under the Incentive Plan are recommended by the Committee and approved
by Bancshares' Board of Directors based on each executive officer's achievement
of his individual performance objectives. These objectives are tied to
measurements of corporate objectives, such as return on average equity, return
on average assets, asset growth, deposit growth, efficiency ratio and
delinquency and charge off percentages, and, in some instances, other objectives
that are specific to the executive officer's job function. The criteria for
determining the maximum cash incentive award under the Incentive Plan is based
on net income and reflects the Committee's commitment to maintaining a strong
incentive compensation plan that is directly related to maximizing long-term
shareholder value.
For performance during 2000, Bancshares awarded cash incentive
compensation under the Incentive Plan totaling $239,261.45 to 47 officers, which
amount includes an aggregate of $17,941.78 paid to Bancshares' executive
officers, Mr. Oliver ($9,148.29) and Mr. Sherron ($8,793.49). Although entitled
to an incentive compensation award under the 2000 Incentive Plan in the amount
of $15,254.58 based on Bancshares' financial performance during 2000, Mr. Lowe
chose to decline the award because he believed it was important to continue to
more fully align his compensation with the financial performance of Bancshares.
In 2000, other participants in the Incentive Plan were key employees who, in the
judgment of the Committee, made a substantial contribution to the success of
Bancshares and its subsidiaries and who the Committee believes should
participate in that success and be motivated to contribute to future successes.
The incentive compensation award granted to Mr. Sherron was based solely upon
Bancshares' performance as measured by the corporate objectives set forth above
and represents a payment of 16.39% of his 2000 maximum cash incentive award
under the Incentive Plan. The incentive compensation award granted Mr. Oliver
represents a payment of 25.87% of his 2000 maximum cash incentive award under
the Incentive Plan, and was based on similar corporate objectives and his
management of the annual budget process, investor and analyst relations and
compliance with regulations promulgated by the SEC and The Nasdaq Stock Market,
Inc. In addition to the corporate objectives set forth above, Mr. Oliver met all
other performance objectives established for him in 2000 which were specific to
his job function.
STOCK OPTIONS
The Committee awards stock options to executive officers as a long-term
incentive to align the executives' interests with those of other shareholders
and to encourage significant stock ownership. Under the 1996 Plan, the Committee
grants to selected key employees options to purchase Bancshares' Common Stock at
a price equal to the fair market value of Bancshares' Common Stock on the date
of grant. Employees under the 1996 Plan are those key employees who, in the
judgment of the Committee, are in a position to materially affect the overall
success of Bancshares and its subsidiaries by reason of the nature and extent of
their duties.
In 2000, pursuant to the 1996 Plan, the Committee granted options for
57,500 shares of Bancshares' Common Stock to employees of Bancshares and the
Bank, including options for 10,000 shares granted to Mr. Lowe and 5,000 shares
granted to each of Messrs. Oliver and
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Sherron. The Committee has not adopted any objective criteria that relates the
level of options granted to the executive officers to performance of Bancshares
or the individuals. In approving the grant to Mr. Lowe, the Committee considered
numerous factors, including Bancshares' operating performance, Mr. Lowe's prior
contributions and potential to contribute in the future and practices within the
Bank's peer group with respect to granting options, although none of these
factors was individually determinative.
The stock options granted under the 1996 Plan become exercisable in
twenty percent (20%) installments on each of the first five anniversaries of the
date of the grant. The option recipients, including Mr. Lowe, will receive value
from these grants only to the extent that the price of Bancshares' Common Stock
exceeds the grant price.
MATCHING CONTRIBUTIONS
The Bank Savings Plan is a voluntary defined contribution benefit plan
designed to provide additional incentive and retirement security for eligible
employees of the Bank. All Bank employees over the age of 21 are eligible to
participate in the Bank Savings Plan. The executive officers of Bancshares
participate in the Bank Savings Plan on the same basis as all other eligible
employees of the Bank. Under the Bank Savings Plan, each eligible employee of
the Bank may elect to contribute on a pre-tax basis to the Bank Savings Plan 2%
to 15% of their compensation, subject to certain limitations that may lower the
maximum contributions of more highly compensated participants.
At the beginning of each year, the Bank determines the amount of its
matching contributions to be made during the year. In 2000, the Bank's matching
contributions totaled $190,216.97, including $5,100.00 contributed to Mr. Lowe,
$5,093.94 contributed to Mr. Oliver and $5,250.00 contributed to Mr. Sherron.
EMPLOYMENT CONTINUITY AGREEMENTS
The Company has entered into Employment Continuity Agreements (the
"Agreements") with Messrs. Lowe, Oliver and Sherron, together with seven other
key management employees. The Board believes that Bancshares, as a publicly held
corporation, is subject to the possibility of a change in control and that such
possibility may generate uncertainty on the part of the executive officers and
other key management employees, which could result in their departure from
Bancshares or their distraction from their operating responsibilities. Both the
Committee and Bancshares' Board of Directors recognize that outstanding and
committed management is essential to advancing the best interests of Bancshares
and its shareholders. The Board of Directors believes that the Agreements will
give Bancshares' executive officers and key management employees certain
employment security, by reason of which the Board of Directors will secure their
continued services in the performance of both regular duties and any extra
duties required of them during periods of uncertainty. Mr. Lowe's Agreement has
a two-year rolling term and the other Agreements have a one-year rolling term.
Additionally, each Agreement provides for severance benefits in the event of a
change of control. Under these provisions, each of Mr. Lowe, Mr. Sherron and Mr.
Oliver would be entitled to an amount equal to three times his then current
salary payable in thirty-six monthly installments. The remaining
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seven other key management employees would be entitled to an amount equal to
their current annual salary payable in twelve monthly installments.
This report is submitted by the Stock Option and Compensation Committee
of the Board of Directors of Bancshares.
STOCK OPTION AND COMPENSATION COMMITTEE:
Robert B. Smith, Jr., Chairman
Michael S. Albert
Burr W. Sullivan
Lloyd G. Walter, Jr.
Julius S. Young, Jr.
AUDIT COMMITTEE REPORT
The Audit Committee reviews the Company's financial reporting process
on behalf of the Board of Directors. Management has the primary responsibility
for the financial statements and the reporting process. The Company's
independent auditors are responsible for expressing an opinion on the conformity
of our audited financial statements to accounting principles generally accepted
in the United States.
The Audit Committee has reviewed and discussed with management and the
independent auditors the audited financial statements. The Audit Committee has
discussed with the independent auditors the matters required to be discussed by
the Statement on Auditing Standards No. 61 (Communication with Audit
Committees). In addition, the Audit Committee has received from the independent
auditors the written disclosures required by Independence Standards Board No. 1,
Independence Discussions with Audit Committees, and discussed with them their
independence from the Company and its management. The Audit Committee has
considered whether the provision of the services described under the caption
"All Other Fees" appearing below in this proxy statement is compatible with
maintaining the principal accountant's independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the audited financial statements be included in the Company's Annual Report
on SEC Form 10-K for the year ended December 31, 2000 for filing with the
Securities and Exchange Commission.
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This report is submitted by the Audit Committee.
AUDIT COMMITTEE:
Burr W. Sullivan, Chairman
Michael S. Albert
Marvin D. Gentry
Walter A. Hill, Sr.
Robert B. Smith, Jr.
Julius S. Young, Jr.
AUDIT FEES
The aggregate fees billed for professional services rendered for the
audit of the Bank's annual financial statements and quarterly review for the
year ended December 31, 2000 was $47,288. There were no financial information
systems design and implementation fees for year ended December 31, 2000.
ALL OTHER FEES
The aggregate fees billed by the principal accountant for services
rendered to the Bank for the year ended December 31, 2000, which included review
and procedures relating to the Bank's FDICIA internal control examination,
pension plan audit, Savings Plus Plan audit, Trust Department procedures, Human
Resources procedures, Federal Home Loan Bank procedures and advisory services
was $110,069.
SECTION 16 REPORTING DELINQUENCIES
Section 16(a) of the Securities Exchange Act of 1934 requires the
executive officers and directors of Bancshares and persons who beneficially own
more than ten percent of the outstanding shares of Common Stock to file with the
SEC reports disclosing their initial ownership of Common Stock, as well as
subsequent reports disclosing changes in such ownership. To Bancshares'
knowledge, based solely on a review of copies of such reports furnished to
Bancshares and written representations that no other reports were required
during the year ended December 31, 2000, the executive officers and directors of
Bancshares complied with all Section 16(a) filing requirements.
CERTAIN TRANSACTIONS
Certain directors and officers of Bancshares and companies with which
directors or officers are associated are customers of the Bank and as such may
from time to time borrow from the Bank within prescribed limitations. Any such
loans and commitments are made in the ordinary course of business, on terms no
more favorable, including interest rates and collateral, than those prevailing
at the time for comparable transactions with other persons, and do not involve
more than the normal risk of collectability or present other unfavorable
features. The
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indebtedness of all directors and officers as a group represents 7.9% of
Bancshares' shareholders' equity.
PROPOSAL 2: INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of Bancshares has appointed the firm of
Turlington and Company, L.L.P., for the purpose of auditing the financial
statements of Bancshares and its subsidiaries for the fiscal year ended December
31, 2001, and shareholders are being asked to ratify this appointment.
Turlington and Company, L.L.P., has been employed in this capacity by Bancshares
since 1982. Fees charged by this firm are furnished at rates and upon terms that
are customarily charged by other independent auditing firms. A representative of
the firm will be present at the Annual Meeting and will have an opportunity to
make a statement if he desires to do so and to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF TURLINGTON AND COMPANY, L.L.P. AS INDEPENDENT
ACCOUNTANTS AND AUDITORS.
PROPOSAL 3: AMENDMENT TO THE 1996 OMNIBUS STOCK INCENTIVE PLAN
The Board of Directors of Bancshares proposes that the shareholders
approve the Amendment. The Amendment was adopted by Bancshares' Board of
Directors on February 13, 2001 subject to the approval of Bancshares'
shareholders.
The purposes of the 1996 Stock Incentive Plan as amended are (i) to
assist Bancshares in recruiting and retaining officers and key employees with
ability and initiative, (ii) to provide greater incentive for officers and key
employees and (iii) to associate the interests of officers and key employees
with those of Bancshares and its shareholders through opportunities for
increased stock ownership.
The principal features of the 1996 Stock Incentive Plan are summarized
below. This summary is subject in all respects to the terms of the 1996 Stock
Incentive Plan. Bancshares will provide promptly, upon request and without
charge, a copy of the full text of the 1996 Stock Incentive Plan to each person
to whom this proxy statement is delivered. Requests should be directed to: Monty
J. Oliver, Secretary, LSB Bancshares, Inc., One LSB Plaza, Lexington, North
Carolina 27292.
SUMMARY
The Stock Option and Compensation Committee will administer the 1996
Stock Incentive Plan. The Stock Option and Compensation Committee may delegate
its authority to one or more officers of Bancshares. However, the Stock Option
and Compensation Committee may not delegate its authority with respect to
employees who are subject to Section 16 of the Securities Exchange Act of 1934,
as amended. As used in this summary, the term "Administrator" means the Stock
Option and Compensation Committee and any delegate, as appropriate.
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Each employee of Bancshares or a related entity is eligible to
participate in the 1996 Stock Incentive Plan. The Administrator will select the
employees who will participate in the 1996 Stock Incentive Plan
("Participants"). The Administrator may, from time to time, grant stock options,
stock appreciation rights ("SARs") or shares of Stock Awards to Participants. No
person may participate in the 1996 Stock Incentive Plan while he is a member of
the Stock Option and Compensation Committee.
Options granted under the 1996 Stock Incentive Plan may be incentive
stock options ("ISOs") or nonqualified stock options. A stock option entitles
the Participant to purchase Common Stock from Bancshares at the option price.
The option price will be fixed by the Administrator at the time the option is
granted, but the price cannot be less than the fair market value of Common Stock
on the date of the grant in the case of an ISO, or less than 85% of the fair
market value of a Common Stock on the date of the grant in the case of a
nonqualified stock option. The option price may be paid in cash or, with the
Administrator's consent, with Common Stock or a combination of cash and Common
Stock, or in installments. The expiration date of options will be determined by
the Administrator at the time of grant; the maximum period for options that are
ISOs is 10 years. The Administrator may provide that an option that is not an
ISO may be transferred to members of a Participant's family.
SARs generally entitle the Participant to receive the excess of the
fair market value of Common Stock on the date of exercise over the initial value
of the SAR. The initial value of the SAR is the fair market value of a Common
Stock on the date of grant. The 1996 Stock Incentive Plan provides that the
Administrator may prescribe that the Participant will realize appreciation on a
different basis than described in the preceding sentences. For example, the
Administrator may limit or increase the amount of appreciation that may be
realized upon the exercise of an SAR. The Administrator may provide that SARs
may be transferred in accordance with Section 16 of the Securities Exchange Act
of 1934, as amended.
SARs may be granted in relation to option grants ("Corresponding SARs")
or independently of option grants. The difference between these two types of
SARs is that to exercise a Corresponding SAR, the Participant must surrender
unexercised that portion of the stock option to which the Corresponding SAR
relates.
Participants may also be awarded shares of Common Stock pursuant to
Stock Awards. The Administrator, in its discretion, may prescribe that a
Participant's rights in a Stock Award is both nontransferable and forfeitable
unless and until certain conditions are satisfied. These conditions may include,
for example, a requirement that the Participant continue employment with
Bancshares for a specified period or that Bancshares or the Participant achieve
stated objectives.
Prior to the approval of the Amendment, a maximum of 250,000 shares of
Common Stock could be issued upon the exercise of options and SARs and the grant
of Stock Awards and, as an additional limitation, a maximum of 125,000 shares of
Common Stock could be issued upon the grant of Stock Awards. The Company has
granted options on 187,556 shares of Common Stock and no SARs or Stock Awards
under the 1996 Stock Incentive Plan from its adoption to the present. The
Amendment increases the maximum number of shares of Common
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Stock that may be issued upon the exercise of options and SARs and the grant of
Stock Awards to 1,000,000 shares (an increase of 750,000 shares) and increases
the maximum number of shares of Common Stock that may be issued upon the grant
of Stock Awards to 250,000 shares (an increase of 125,000 shares). The total
number of shares of Common Stock available for issuance in the future under the
1996 Stock Incentive Plan, as amended, is 812,444 shares. These limitations will
be adjusted, as the Administrator determines is appropriate, in the event of a
change in the number of outstanding shares of capital stock by reason of a stock
dividend, stock split, combination, reclassification, recapitalization or other
similar event. The terms of outstanding awards also may be adjusted by the
Administrator to reflect such changes.
No option or SAR may be granted and no Stock Awards may be awarded
under the 1996 Stock Incentive Plan after January 8, 2006. The Board of
Directors of Bancshares may, without further action by shareholders, terminate
or suspend the 1996 Stock Incentive Plan in whole or in part. The Board of
Directors also may amend the 1996 Stock Incentive Plan, except that without
shareholder approval no such amendment may increase the number of shares of
Common Stock that may be issued under the 1996 Stock Incentive Plan or change
the class of individuals who may be selected to participate in the 1996 Stock
Incentive Plan.
Neither the number of individuals who will be selected to participate
in the 1996 Stock Incentive Plan nor the type or size of awards that will be
approved by the Administrator after approval of the Amendment can presently be
determined.
FEDERAL INCOME TAX CONSEQUENCES
No taxable income is recognized by a Participant at the time an option
is granted. If the option is an ISO, no income will be recognized upon the
Participant's exercise of the option although a Participant in some cases may
have an alternative minimum tax liability by reason of the exercise. Income is
recognized by a Participant when he disposes of shares acquired under an ISO.
The exercise of a nonqualified stock option generally is a taxable event that
requires the Participant to recognize, as ordinary income, the difference
between the fair market value of the Common Stock received upon such exercise
and the option price.
No income is recognized by a Participant upon the grant of an SAR. The
exercise of an SAR generally is a taxable event. The Participant generally must
recognize income equal to any cash that is paid by Bancshares, plus the fair
market value of Common Stock that is received from Bancshares, in settlement of
an SAR.
Income is recognized on account of an award of Stock Awards when the
shares first become transferable or are no longer subject to a substantial risk
of forfeiture. At that time, the Participant recognizes income equal to the fair
market value of the Stock Awards.
A Participant's employer (either Bancshares or an affiliate) will be
entitled to claim a federal income tax deduction on account of the exercise of a
nonqualified option or SAR or the vesting of a Stock Awards award. The amount of
the deduction is equal to the ordinary income recognized by the Participant. The
employer generally will not be entitled to a federal income tax deduction on
account of the grant or the exercise of an ISO. The employer may claim a federal
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income tax deduction on account of certain dispositions of Common Stock received
upon the exercise of an ISO.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT
TO THE 1996 OMNIBUS STOCK INCENTIVE PLAN.
SHAREHOLDER PROPOSALS
Any shareholder proposal to be included in the proxy materials relating
to the 2002 Annual Meeting must be received by the Secretary of Bancshares, One
LSB Plaza, Lexington, North Carolina 27292, by November 20, 2001.
In addition to any other applicable requirements, for business to be
properly brought before the 2002 Annual Meeting by a shareholder, even if the
proposal is not to be included in Bancshares' proxy statement, pursuant to
Bancshares' Bylaws, the shareholder must give notice in writing to the Secretary
of Bancshares not later than January 18, 2002. As to each matter, the notice
must contain (i) a brief description of the business desired to be brought
before the Annual Meeting and the reasons for addressing it at the Annual
Meeting, (ii) the name and record address of the shareholder proposing such
business, (iii) the number of shares of Common Stock owned of record and
beneficially by such shareholder, and (iv) any material interest of the
shareholder in such business.
OTHER MATTERS
The Board of Directors of Bancshares knows of no other matters intended
to be presented for consideration at the meeting. If, however, any other matters
properly come before the meeting, it is the intention of the persons named in
the accompanying proxy to vote on such matters in accordance with their best
judgment.
Robert F. Lowe, President
March 20, 2001
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Attachment I
CHARTER OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS OF LSB BANCSHARES, INC.
I. ORGANIZATION
There shall be constituted a standing committee of the Board of
Directors (the "Board") of LSB Bancshares, Inc. (the "Corporation") to be known
as the audit committee (the "Audit Committee"). The Audit Committee shall be
wholly composed of directors of the Corporation who are "independent" and
"qualified" within the meaning of the Rules of The Nasdaq Stock Market, Inc.
(the "Independent Directors").
II. STATEMENT OF POLICY
The Audit Committee shall assist the Board in fulfilling its
responsibility to the Corporation's shareholders relating to corporate
accounting and reporting practices of the Corporation, and to the quality and
integrity of the financial statements of the Corporation.
III. PURPOSE, OBJECTIVES AND DUTIES
The primary purpose of the Audit Committee shall be to assist the Board
in fulfilling its oversight responsibilities by reviewing and overseeing: the
financial reports and other financial information provided by the Corporation to
any governmental body or the public; the Corporation's systems of internal
controls regarding finance and accounting that management and the Board have
established; and the Corporation's auditing, accounting and financial reporting
processes generally.
The Audit Committee's primary objectives include providing an
independent, direct and open avenue of communication among the Corporation's
independent accountants, management, internal auditing department and the Board;
serving as an independent and objective party to review the Corporation's
financial reporting processes and internal control systems; overseeing with
management the reliability and integrity of the Corporation's accounting
policies and financial reporting and disclosure practices; reviewing and
considering the work of the Corporation's independent accountants and internal
auditing department; and reviewing the adequacy of the internal audit
department's staffing and qualifications of its personnel and reviewing whether
available technology is being used to maximize the efficiency and effectiveness
of the internal audit function.
Further, the Audit Committee's primary duties and responsibilities
shall specifically include:
o Discussing and reviewing with the Corporation's independent
accountants their ultimate accountability to the Board and the
Audit Committee;
o Sharing with the Board the ultimate authority and responsibility
to select, evaluate and, where appropriate, replace the
independent accounts (or to nominate the
24
Attachment I - Cont.
independent accounts to be proposed for shareholder approval
in any proxy statement);
o Ensuring that the Corporation's independent accountants submit on
at least an annual basis to the Audit Committee a formal written
statement delineating all relationships between the independent
accountants and the Corporation, consistent with Independence
Standards Board Standard 1 shall include:
oo disclosing to the Audit Committee of the Corporation, in
writing, all relationships between the independent accountant
and its related entities and the Corporation and its related
entities that in the independent accountant's professional
judgment may reasonably be thought to bear on independence,
oo confirming in the letter that, in its professional judgment,
it is independent of the Corporation within the meaning of the
Securities Act of 1993, as amended, and
oo discussing the independent accountant's independence with the
Audit Committee; and
o Engaging actively in a dialogue with the Corporation's independent
accountants with respect to any disclosed relationships or
services that may impact the objectivity and independence of the
independent accountants and recommend that the Board take
appropriate action in response to the independent accountants'
report to satisfy itself of the independent accountants'
independence.
o Overseeing the work of the internal Audit Department, including,
approving, in advance, the schedule of internal audits.
o Discussing with the internal Audit Department head any matters of
concern to the Audit Committee.
IV. COMPOSITION AND SELECTION
4.1 The Audit Committee shall be comprised of three or more directors
as determined by the Board, each of whom shall be an Independent Director in
accordance with Article I. All members of the Audit Committee shall have a
requisite working familiarity with basic finance and accounting practices in
compliance with the Rules of The Nasdaq Stock Market, Inc. Furthermore, at least
one member of the Audit Committee shall have accounting or related financial
management expertise in compliance with the Rules of The Nasdaq Stock Market,
Inc.
4.2 The members of the Audit Committee shall annually be elected by the
Board and shall serve for one year or until their successors are duly elected
and qualified. Unless a Chairman is elected by the full Board, the members of
the Audit Committee may designate a Chairman by majority vote of the full Audit
Committee membership.
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25
Attachment I - Cont.
4.3 The duties and responsibilities of a member of the Audit Committee
contained herein shall be in addition to those duties otherwise required for a
member of the Board.
4.4 The Board shall be responsible for ensuring that members of the
Audit Committee are "qualified" and "independent."
V. MEETINGS
The Audit Committee shall meet at least 4 times annually, or more
frequently as circumstances dictate and shall report to the Board following each
meeting of the Audit Committee at the next regularly scheduled meeting of the
Board or sooner, as circumstances may dictate. As part of its primary duty and
responsibility to foster independent, direct and open communications pursuant to
Section III hereinabove, the Audit Committee shall meet at least annually with
the Corporation's management, the members of the Corporation's internal auditing
department and the Corporation's independent accountants in separate executive
sessions to discuss any matters that the Audit Committee or each of these groups
believes should be discussed privately. In addition, the Chairman of the Audit
Committee shall meet in person or by telephone with the Corporation's
independent accountants and the Corporation's chief financial officer quarterly
to review the Corporation's financial statements, consistent with Section VI
below.
VI. RESPONSIBILITIES AND DUTIES
To fulfill its primary objectives, responsibilities and duties
hereunder, the Audit Committee shall undertake the following:
6.1 DOCUMENTS/REPORTS REVIEW
a) Review and update this Charter periodically, and at least annually.
b) Review the Corporation's annual financial statements and related notes
thereto and any reports or other financial information submitted to any
governmental body or the public, including any certification, report,
analysis, opinion, or review rendered by the independent accountants.
c) Review on a quarterly basis, a summary report prepared by the internal
Audit Department concerning internal audits in process and the grades
assigned to completed audits.
d) Approve, in advance, the schedule of work for the internal Audit
Department and conduct periodic updates on adherence to schedule.
e) Review filings made with the SEC and other published documents
containing the Corporation's financial statements and consider whether
the information contained in such documents is consistent with the
information contained in the Corporation's financial statements.
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Attachment I - Cont.
f) Include in the Corporation's proxy or information statements relating
to annual meetings of shareholders at which directors are to be elected
(or special meetings or written consents in lieu of such meetings), a
report of the Audit Committee that complies with the SEC's regulations
for such reports.
g) Review, or cause the Chairman of the Committee to review, with the
financial management of the Corporation and the Corporation's
independent accountants each Quarterly Report on Form 10-Q (or any
successor report thereto under the rules and regulations of the U.S.
Securities and Exchange Commission) (the "SEC") and all financial
statements and related notes contained therein prior to their filing.
6.2 INDEPENDENT ACCOUNTANTS
a) Recommend to the Board the selection of the Corporation's independent
accountants; consider the independence and effectiveness of such
independent accountants, and approve the fees and other compensation to
be paid to such independent accountants and the range and cost of audit
and non-audit services performed by the independent accountants. On an
annual basis, the Audit Committee shall review and discuss with the
independent accountants all significant relationships the independent
accountants have with the Corporation, in order to determine such
independent accountants' independence.
b) Review the performance of the Corporation's independent accountants and
make recommendations to the Board regarding any appointment or
termination of such independent accountants when circumstances warrant.
c) Periodically consult with the Corporation's independent accountants,
out of the presence of the Corporation's management, about the
Corporation's internal controls and the fullness and accuracy of the
Corporation's financial statements.
6.3 FINANCIAL REPORTING PROCESS
a) In consultation with the Corporation's independent accountants and the
Corporation's internal auditors, review the integrity of the
Corporation's financial reporting processes, both internal and
external; confer with the independent accountants and internal auditors
concerning the scope of their examinations of the books and records of
the Corporation and its subsidiaries; review and approve the
independent accountants' annual engagement letter; review and approve
the Corporation's annual audit plans and budgets; direct the special
attention of the auditors to specific matters or areas deemed by the
Audit Committee or the auditors to be of special significance; and
authorize the auditors to perform such supplemental reviews or audits
as the Audit Committee may deem desirable.
b) Consider the Corporation's independent accountants' judgments about the
quality and appropriateness of the Corporation's accounting principles,
standards and practices as applied in its financial reporting.
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Attachment I - Cont.
c) Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles, standards and
practices as suggested by the Corporation's independent accounts,
management, or internal auditing department.
d) Consider, in consultation with the Corporation's independent
accountants and the internal auditors, the audit scope and plan of the
internal auditors and the independent accountants.
6.4 PROCESS IMPROVEMENT
a) Establish separate systems of reporting to the Audit Committee by the
Corporation's management, the independent accountants and the internal
auditors regarding any significant judgments made in management's
preparation of the financial statements and the view of each as to the
appropriateness of such judgments.
b) Following completion of the Corporation's annual audit, review
separately with the Corporation's management, the independent
accountants and the internal auditing department any significant
difficulties encountered during the course of the audit, including (i)
any restrictions on the scope of work or access to required
information, and (ii) the nature and extent of any significant changes
in accounting principles or the application therein.
c) Review any significant disagreement among the Corporation's management
and its independent accountants or the internal auditing department in
connection with the preparation of the Corporation's financial
statements.
d) Review with the Corporation's independent accountants, the internal
auditing department and management the extent to which changes or
improvements in financial or accounting practices and standards, as
approved by the Audit Committee, have been implemented, with such
review to be conducted at an appropriate time subsequent to
implementation of any changes or improvements thereto, as decided by
the Audit Committee in its discretion.
e) Review the appointment, replacement, reassignment, or dismissal of the
members of the Corporation's internal auditing department.
f) Inquire of the Corporation's management, the internal auditors, and the
independent accountants about significant risks or exposures and assess
the steps that management has taken to minimize such risks to the
Corporation.
g) Review with the Corporation's internal auditors and the independent
accountants the coordination of their audit efforts to assure
completeness of coverage, reduction of redundant efforts and effective
use of audit resources.
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Attachment I - Cont.
VII. CONSISTENCY WITH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS
AMENDED, OR BYLAWS
To the extent that any provision or section of this Charter may be
inconsistent with any article, provision or section of the Amended and Restated
Certificate of Incorporation, as amended, or the Amended and Restated Bylaws of
the Corporation, the Amended and Restated Certificate of Incorporation, as
amended, or the Amended and Restated Bylaws, as appropriate, shall fully
control.
VIII. CERTIFICATION
This Charter of the Audit Committee was duly approved and adopted by
the Board of the Corporation on the 9th day of May, 2000.
/s/ Monty J. Oliver
----------------------------------
Monty J. Oliver
Secretary
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[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
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LSB BANCSHARES, INC.
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Mark box at right if an address change has been noted on the [ ]
reverse side of this card.
CONTROL NUMBER:
RECORD DATE SHARES:
-----------------------------
Please be sure to sign and date this Proxy. Date
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- ----------Shareholder sign above-----------------Co-owner sign above-----------
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The Board of Directors recommends a vote "FOR ALL NOMINEES".
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1. Election of Directors. For All With- For All
Nominees hold Except
(1) Michael S. Albert (3) Walter A. Hill, Sr. [ ] [ ] [ ]
(2) Peggy B. Barnhardt (4) Robert B. Smith, Jr.
Instruction: To withhold authority to vote for any individual nominee, mark
the "For All Except" box and strike a line through the name(s) of the
nominee(s) in the list provided above. Your shares will be voted for the
remaining nominee(s).
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The Board of Directors recommends a vote "FOR" Proposal 2.
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For Against Abstain
2. Proposal to ratify the appointment of Turlington [ ] [ ] [ ]
and Company, L.L.P., Certified Public Accountants,
for the year ending December 31, 2001.
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The Board of Directors recommends a vote "FOR" Proposal 3.
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For Against Abstain
3. To approve an amendment to the LSB Bancshares, Inc. [ ] [ ] [ ]
1996 Omnibus Stock Incentive Plan.
4. In their discretion, the proxies are authorized to vote upon such other
business and matters as may properly come before the meeting or at any
adjournment(s) thereof.
DETACH CARD DETACH CARD
30
LSB BANCSHARES, INC.
ONE LSB PLAZA, LEXINGTON, NORTH CAROLINA 27292
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Burr W. Sullivan and Robert F. Lowe, and each of
them, as proxies (and if the undersigned is a proxy, as substitute proxies),
with power of substitution, and hereby authorizes each of them to represent and
to vote, as designated on the reverse, all the shares of LSB BANCSHARES, INC.
held of record by the undersigned at the close of business on March 5, 2001 at
the Annual Meeting of Shareholders to be held on April 18, 2001 at 10:00 a.m.,
at the headquarters of LSB Bancshares, Inc., and at any adjournments thereof.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted for all nominees for Director, for Proposal 2 and for Proposal 3.
If the shareholder is a participant in the Dividend Reinvestment and Stock
Purchase Plan, the proxy card represents the number of shares in the dividend
reinvestment account as well as shares owned of record directly by the
shareholder.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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Please sign exactly as your name(s) appear(s) on the reverse. When shares are
held by joint owners, both should sign. When signing as an executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in the partnership name by an
authorized person.
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HAS YOUR ADDRESS CHANGED?
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