10-K/A 1 fm10ka2002-1508.txt FORM 10-K/A NO. 1 CENTRAL BANCORP, INC. ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM 10-K/A NO. 1 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------- -------------- Commission File No. 0-25251 CENTRAL BANCORP, INC. ------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) MASSACHUSETTS 04-3447594 ------------------------------------------ ------------------ (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 399 HIGHLAND AVENUE, SOMERVILLE, MASSACHUSETTS 02144 -------------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (617) 628-4000 -------------- Securities registered under Section 12(b) of the Act: NONE ---- Securities registered under Section 12(g) of the Act: COMMON STOCK, PAR VALUE $1.00 PER SHARE --------------------------------------- (Title of Class) STOCK PURCHASE RIGHTS --------------------- (Title of Class) Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the registrant was approximately $25.5 million based on the closing sales price of the registrant's common stock as reported on the Nasdaq National Market SM on June 21, 2002 ($30.00 per share). Solely for purposes of this calculation, directors, executive officers and greater than 5% stockholders are treated as affiliates. As of June 21, 2002, there were issued and outstanding 1,632,789 shares of the registrant's common stock, par value $1.00 per share (of which 781,028 shares were deemed held by affiliates). ================================================================================ EXPLANATION FOR AMENDMENT: The Annual Report on Form 10-K of Central Bancorp, Inc. (the "Company") for the fiscal year ended March 31, 2002 (the "2002 Form 10-K") filed with the Securities and Exchange Commission (the "Commission") on June 28, 2002 is being amended hereby to include the items listed below: ITEM DESCRIPTION ---- ----------- Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions As originally filed, the Company's 2002 Form 10-K incorporated the information required by Items 10, 11, 12 and 13 of Form 10-K by reference to the Company's Definitive Proxy Statement for its 2002 Annual Meeting of Stockholders (the "Proxy Statement") as permitted by Instruction G.(3). Since the Proxy Statement is not expected to be filed with the Commission within 120 days of the close of the Company's fiscal year ended March 31, 2002 as required by Instruction G.(3), Items 10, 11, 12 and 13 in Part III of the 2002 Form 10-K are hereby amended by deleting the texts thereof in their entirety and substituting therefor the following: 2 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------------------------------ Set forth below is information about the directors and executive officers and significant employees of the Company. The Board of Directors is divided into three classes. Directors serve for three-year terms with one class of directors standing for election each year. Executive officers are elected annually by the Board of Directors. Each current director became a director of the Company upon its incorporation in 1998, except for John G. Quinn who was elected to the Board of Directors in 1999 and Nancy D. Neri, who was appointed to the Board of Directors in 1999. Unless indicated otherwise, the positions stated for each individual are positions held in the Company's principal subsidiary, Central Co-operative Bank (the "Bank"), and the positions stated are positions which are currently held.
YEAR FIRST ELECTED OR PRESENT POSITIONS WITH APPOINTED TERM TO NAME AGE THE COMPANY DIRECTOR OF BANK EXPIRE ---- --- --------------- ---------------- ------- Marat E. Santini 77 Director of the Company and the 1972 2002 Bank John F. Gilgun, Jr. 78 Director of the Company and the 1987 2002 Bank John G. Quinn 39 Director of the Company and the 1999 2002 Bank Joseph R. Doherty 78 Chairman, Director of the 1958 2003 Company and the Bank Terence D. Kenney 86 Director of the Company and the 1975 2003 Bank Nancy D. Neri 46 Director of the Company and the 1999 2003 Bank Gregory W. Boulos 45 Director of the Company and the 1998 2004 Bank John D. Doherty 44 President, Chief Executive 1983 2004 Officer and Director of the Company, the Bank, Central Securities Corporation ("Central Securities") and Central Preferred Capital Corporation ("Central Preferred") David W. Kearn 60 Senior Vice President - Lending -- -- and Retail Banking; Director of Central Securities and Central Preferred Michael K. Devlin 51 Senior Vice President, -- -- Treasurer/Chief Financial Officer of the Company and the Bank; Treasurer and Director of Central Securities Paul S. Feeley 55 Senior Vice President and -- -- Chief Information Officer; Treasurer and Director of Central Preferred William P. Morrissey 74 Senior Vice President - -- -- Corporate Affairs
3 MARAT E. SANTINI was the Office Manager of Santini, Inc., a general construction contractor located in Arlington, Massachusetts, until January 31, 1990. He is now retired and acts as a consultant to Santini, Inc. JOHN F. GILGUN, JR., is the sole owner of the John F. Gilgun Agency, a real estate agency located in Woburn, Massachusetts. He is a member of the Woburn Lodge of Elks and the American Legion. Mr. Gilgun is the former Mayor of the City of Woburn, Massachusetts. JOHN G. QUINN has been the President of Quinn Printing Company, Inc., a printing and graphics firm located in Newton, Massachusetts, since 1990. He is a member of Catholic Charities, the Genesis Fund, the Art Institute of Boston, the Treasurers Club of Boston, the Financial Executives Institute of Boston, Printing Industry of New England, Printing Industry of America and the Small Business Association of New England. Mr. Quinn is also active in Tenacity, a non-profit program for inner-city youth, and Coats for Kids. JOSEPH R. DOHERTY served as President of the Bank from 1958 until April 1986. From April 1986 until March 31, 1992, Mr. Doherty served as Chairman of the Board of Directors and Chief Executive Officer, responsible for guiding the overall operations of the Bank. As of March 31, 1992, Mr. Doherty retired as Chief Executive Officer of the Bank, although he remains Chairman of the Board. Mr. Doherty is the father of President and Chief Executive Officer, John D. Doherty. TERENCE D. KENNEY was Senior Vice President of the Bank from 1975 to September 1986. He recently retired as Chairman of the Board of Assessors of the City of Woburn, Massachusetts, a post he had held for 23 years. Mr. Kenney is a member of the Woburn Elks Lodge, the Woburn Knights of Columbus and Woburn Kiwanis Club. NANCY D. NERI is the President and Funeral Director for the George L. Doherty Funeral Service, Inc., a funeral home located in Somerville, Massachusetts. GREGORY W. BOULOS is a partner in CB Richard Ellis/The Boulos Company of Portland, Maine, which is Maine's largest commercial real estate brokerage and development firm, specializing in the sale and leasing of commercial/industrial properties and the brokerage of investment properties. Mr. Boulos is a past director of Junior Achievement, The Center for Dental Health, and The Portland Symphony Orchestra. He is also a past Chairman of both the Cumberland County Civic Center and Catholic Charities Maine Board of Directors. Mr. Boulos is a member of the Portland Chamber of Commerce, the Maine Commercial Association of Realtors, the National Association of Realtors, a Trustee of Mercy Hospital, and Director of Wayneflete School. JOHN D. DOHERTY is the President and Chief Executive Officer of the Company and the Bank. He was elected President of the Bank in April 1986. As President, Mr. Doherty is responsible for the day-to-day operations of the Bank and reports on the Bank's operations directly to the Board of Directors. Commencing April 1, 1992, Mr. Doherty also became the Chief Executive Officer of the Bank. Mr. Doherty also serves as the president and a director of the Bank's subsidiaries, Central Securities Corporation and Central Preferred Capital Corporation. He has been employed by the Bank in various capacities since 1981. Mr. Doherty holds an M.B.A. degree from Boston University and a B.A. in Business Administration from Babson College. Mr. Doherty is Chairman of the Co-operative Central Bank and a Trustee of the Co-operative Bank Employee Retirement Association. He is a member of the Somerville Kiwanis Club, a former director of the Somerville Chamber of Commerce, former Treasurer of the Woburn Development Corporation and a former member of the Somerville High School Scholarship Committee, the Woburn Kiwanis Club, and the Needham Business Association, a past president of the Economy Club of Cambridge and a former Lieutenant of the Hamilton Auxiliary Police. Mr. Doherty is the son of Chairman of the Board Joseph R. Doherty. DAVID W. KEARN joined the Bank in June 1993 as Senior Vice President - Retail Banking. From 1990 to 1993, Mr. Kearn was a Vice President of Loan Administration at Somerset Savings Bank, Somerville, Massachusetts and was Senior Vice President/Branch Administration at United States Trust Company from 1987 to 1990. He serves on the Board of Directors of the Somerville Boys Club. He also serves as a director of the Bank's subsidiaries, Central Securities Corporation and Central Preferred Capital Corporation. 4 MICHAEL K. DEVLIN joined the Bank in February 2002 as Senior Vice President, Treasurer and Chief Financial Officer. He also serves as a director and treasurer of the Bank's subsidiary, Central Securities Corporation. From 1997 until joining the Bank, Mr. Devlin, who is a Certified Public Accountant, was a Financial Consultant to the banking industry in Massachusetts. Between 1973 and 1997, he was a member of the accounting and business advisory practice of Arthur Andersen LLP, where he served as a partner for 11 years. PAUL S. FEELEY joined the Bank in July 1997 as Senior Vice President, Treasurer and Chief Financial Officer and became Senior Vice President and Chief Information Officer in February 2002. Mr. Feeley is a member of the Financial Managers Society of which he is a former local chapter President and National Director. He is also a member of the Massachusetts Society of CPAs and serves on its Financial Institutions Committee. From 1993 to 1997, Mr. Feeley was Senior Vice President and Treasurer of Bridgewater Credit Union. Prior to 1993, Mr. Feeley was Senior Vice President, Chief Financial Officer and Clerk of the Corporation at The Cooperative Bank of Concord, Acton, Massachusetts. Mr. Feeley also serves as a director and treasurer of Central Preferred Capital Corporation. WILLIAM P. MORRISSEY joined the Bank in November 1992 as Senior Vice President for Corporate Affairs representing the Bank in outside banking and business organizations. Mr. Morrissey is Chairman of the Board of the Federal Home Loan Bank of Boston. Prior to 1986, Mr. Morrissey served as Executive Vice President for Corporate Affairs at The Boston Five Cents Savings Bank, and as Deputy Commissioner of Banks for the Commonwealth of Massachusetts. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Under the Securities Exchange Act of 1934, the Company's officers and directors and all persons who own more than ten percent of the Common Stock ("Reporting Persons") are required to file reports detailing their ownership and changes of ownership in the Common Stock and to furnish the Company with copies of all such ownership reports that are filed. Based solely on the Company's review of the copies of such ownership reports which it has received in the past fiscal year or with respect to the past fiscal year, or written representations from such persons that no annual reports of changes in beneficial ownership were required, the Company believes during the fiscal year ended March 31, 2002 and the prior fiscal year all Reporting Persons have complied with these reporting requirements, except for John F. Gilgun, Jr. who was delinquent reporting one transaction. 5 ITEM 11. EXECUTIVE COMPENSATION -------------------------------- SUMMARY COMPENSATION TABLE. The following table sets forth cash and noncash compensation for each of the last three fiscal years awarded to or earned by the Chief Executive Officer and each other executive officer of the Company whose salary and bonus earned in fiscal year 2002 exceeded $100,000 for services rendered in all capacities to the Company and its subsidiaries (the "Named Executive Officers").
LONG-TERM COMPENSATION ------------ AWARDS ANNUAL COMPENSATION ------------ ---------------------------------------- SECURITIES NAME AND FISCAL OTHER ANNUAL UNDERLYING ALL OTHER PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS COMPENSATION(3) ------------------ ---- ------ -------- --------------- ------- --------------- John D. Doherty 2002 $ 272,160 $ -- $ -- -- $ 31,842 President and Chief 2001 259,200 51,760 -- 12,573 32,401 Executive Officer 2000 244,915 45,000 -- 13,066 29,731 David W. Kearn 2002 133,505 -- -- -- 20,644 Senior Vice President/ 2001 127,148 20,343 -- 4,354 23,311 Lending and Retail Banking 2000 121,536 20,000 -- 4,524 21,929 Paul S. Feeley 2002 124,405 -- -- -- 12,874 Senior Vice President/ 2001 120,781 14,493 -- 2,757 15,299 Chief Information Officer 2000 114,942 10,000 -- 2,865 15,873 William P. Morrissey 2002 121,133 -- -- -- 19,359 Senior Vice President for 2001 115,365 13,843 -- 2,634 21,450 Corporate Affairs 2000 109,731 10,000 -- 2,736 19,316 ____________ (1) Reflects fiscal year for which bonus was earned. For fiscal 2002, no bonus was earned under the Bank's Management Incentive Plan. (2) Does not include perquisites which totaled less than ten percent of annual salary and bonus. (3) For fiscal year 2002, consists of $4,250, $2,625, $636 and $2,625, respectively, in Company contributions to the defined contribution retirement plan, $1,123, $1,207, $1,207 and $1,207, respectively, in paid life insurance premiums and the value of 1,195, 759, 498 and 701 shares, based on $22.15 per share (the last reported sale price of such shares on the effective date of the allocation, October 31, 2001), allocated to the ESOP accounts of Messrs. Doherty, Kearn, Feeley and Morrissey, respectively.
OPTION EXERCISES AND FISCAL YEAR-END VALUES. The following table sets forth information regarding option exercises during the last fiscal year and the values of options held by the Named Executive Officers at the end of fiscal year 2002.
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (2) ACQUIRED ON VALUE ---------------------------- ----------------------------- NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- -------- ----------- ----------- ------------- ----------- ------------- John D. Doherty 25,000 $116,010 25,639 -- $ 237,869 $ -- David W. Kearn -- -- 8,878 -- 82,369 -- Paul S. Feeley -- -- 5,622 -- 52,160 -- William P. Morrissey -- -- 5,370 -- 49,824 -- -------- (1) Based on the difference between the aggregate exercise price and aggregate market value of shares acquired as of the date of exercise. (2) Value is based on the difference between the aggregate market value of shares underlying the unexercised in-the-money options at March 31, 2002 ($27.75 per share based on the closing sale price reported on the Nasdaq National Market SM) and the aggregate exercise price of these options. Options are considered in-the-money if the value of the underlying securities exceeds the exercise price of the options.
6 EMPLOYMENT, CONSULTING AND SEVERANCE AGREEMENTS. The Bank has entered into an employment agreement (the "Employment Agreement") with John D. Doherty, President. The Employment Agreement provides for a term of five years and an automatic annual extension of the term of employment for an additional one-year period beyond the then-effective expiration date unless either the Bank or Mr. John D. Doherty gives written notice that the Employment Agreement will not be extended further. The current base annual salary of John D. Doherty is $272,160. The Employment Agreement also provides for annual salary review by the Board of Directors, as well as inclusion of Mr. John D. Doherty in any discretionary bonus plans, customary fringe benefits, vacation and sick leave and disability payments of the Bank. The Employment Agreement is terminated upon death and is terminable by the Bank for "just cause" as defined in the Employment Agreement. If the Bank terminates Mr. John D. Doherty without just cause, he is entitled to a continuation of his salary for the remaining term of the Employment Agreement. Mr. John D. Doherty may terminate the Employment Agreement upon 90 days notice to the Bank. The Employment Agreement provides that in the event of his involuntary termination of employment in connection with, or within three years after, any change in control of the Bank or the Company, Mr. John D. Doherty will be paid within 10 days of such termination an amount equal to the difference between (i) 2.99 times his "base amount," as defined in Section 280G(b)(3) of the Internal Revenue Code, and (ii) the sum of any other parachute payments, as defined under Section 280G(b)(2) of the Internal Revenue Code, that Mr. John D. Doherty receives on account of the change in control. The term "change in control" is defined as the acquisition, by any person or entity, of the ownership, holding or power to vote more than 25% of the Company's or the Bank's voting stock, the control of the election of a majority of the Company's or the Bank's directors, or the exercise of a controlling influence over the management or policies of the Company or the Bank. In addition, under the Employment Agreement, a change in control occurs when, during any consecutive two-year period, directors of the Company or the Bank at the beginning of such period cease to constitute a majority of the Board of Directors of the Company or the Bank, unless the election of replacement directors was approved by a two-thirds vote of the initial directors then in office. The Employment Agreement also provides for a similar lump sum payment to be made in the event of Mr. John D. Doherty's voluntary termination of employment within three years following a change in control, upon the occurrence, or within 90 days thereafter, of certain specified events following a change in control, which have not been consented to in writing by Mr. John D. Doherty, including (i) the requirement that he perform his principal executive functions more than 35 miles away from his primary office, (ii) a reduction in his base compensation as in effect prior to the change in control, (iii) the failure of the Bank to provide Mr. John D. Doherty with compensation and benefits substantially similar to those provided to him at the time of the change in control under any employee benefit plans in which he becomes a participant, (iv) the assignment to Mr. John D. Doherty of material duties and responsibilities other than those normally associated with his position with the Bank, and (v) a material reduction in his authority and responsibility. In the event that a dispute arises between Mr. John D. Doherty and the Bank, as to the terms or interpretation of the Employment Agreement, Mr. John D. Doherty will be reimbursed for all reasonable expenses arising from such dispute. Payments made under these "change in control" provisions are in lieu of any rights to which Mr. John D. Doherty would be entitled in the event his employment was terminated without just cause. If the change in control provisions had been triggered as of March 31, 2002, Mr. John D. Doherty would have received up to approximately $850,000. In connection with Joseph R. Doherty's retirement as Chief Executive Officer of the Bank effective March 31, 1992, the Bank and Joseph R. Doherty entered into a Consulting Agreement whereby the Bank retained Mr. Doherty as a consultant to the Bank and its Board of Directors and as Chairman of the Board. Pursuant to the Consulting Agreement, Mr. Doherty receives $100,000 annually in addition to use of an office and secretary, reimbursement for certain business-related dues and expenses, group health and life insurance benefits for him and his dependents and use of an automobile. The Consulting Agreement currently provides for a term of one year and is subject to automatic annual extensions for additional one-year periods, unless written notice from the Bank or Mr. Doherty directs otherwise. Mr. Doherty's Consulting Agreement may be terminated by the Board of Directors at any time for "just cause," as defined in the Consulting Agreement. In addition, the Board may terminate Mr. Doherty at any time for reasons other than "just cause," however, under such circumstances Mr. Doherty shall be entitled to the salary and benefits payable under the Consulting Agreement until its expiration. Mr. Doherty may terminate the Consulting Agreement upon giving the Board of Directors 60 days prior written notice. During fiscal 2002, Mr. Doherty waived the receipt of all compensation and the use of the automobile under this Consulting Agreement due to health reasons. He did receive directors fees of $10,050 for Board meetings attended during fiscal 2002 and health and life insurance benefits in the amount of $3,437 and $1,146, respectively. 7 The Bank has entered into severance agreements (the "Severance Agreements") with David W. Kearn, Senior Vice President/Lending & Retail Banking, Michael K. Devlin, Senior Vice President, Treasurer, and Chief Financial Officer, Paul S. Feeley, Senior Vice President/Chief Information Officer and William P. Morrissey, Senior Vice President for Corporate Affairs. The Severance Agreements each provide for a term of three years and an automatic annual extension of the term of employment for an additional one-year period beyond the then-effective expiration date, unless either the Bank or Messrs. Kearn, Devlin, Feeley or Morrissey gives written notice that the Severance Agreement will not be extended further. The Severance Agreements provide that in the event of their involuntary termination of employment in connection with, or within one year after, any change in control of the Company or the Bank, Messrs. Kearn, Devlin, Feeley and Morrissey will be paid within 10 days of such termination an amount equal to two times their annual base salary at the rate just prior to the change in control provided, however, the amount received shall in no event exceed the difference between (i) 2.99 times their "base amount," as defined in Section 280G(b)(3) of the Internal Revenue Code, and (ii) the sum of any other parachute payments, as defined under Section 280G(b)(2) of the Internal Revenue Code, that they receive on account of the change in control. "Control" generally refers to the acquisition, by any person or entity, of the ownership, holding, or power to vote more than 25% of the Company's or the Bank's voting stock, the control of the election of a majority of the Company's or the Bank's directors, or the exercise of a controlling influence over the management or policies of the Company or the Bank. In addition, a change in control occurs when, during any consecutive two-year period, directors of the Company or the Bank at the beginning of such period cease to constitute a majority of the Board of Directors of the Company or the Bank, unless the election of replacement directors was approved by a two-thirds vote of the initial directors then in office. The Severance Agreements also provide for a similar lump sum payment in the event of Messrs. Kearn's, Devlin's, Feeley's or Morrissey's voluntary termination of employment within one year following a change in control, upon the occurrence, or within 90 days thereafter, of certain specified events following a change in control, which have not been consented to in writing by Messrs. Kearn, Devlin, Feeley or Morrissey, including (i) the requirement that they perform their principal executive functions more than 35 miles away from their primary office, (ii) a reduction in the their base compensation as in effect prior to the change in control, (iii) the failure of the Company or the Bank to provide them with compensation and benefits substantially similar to those provided to them at the time of the change in control under any employee benefit plans in which they become a participant, (iv) the assignment to them of material duties and responsibilities other than those normally associated with their position with the Bank, and (v) a material reduction in their authority and responsibility. In the event that a dispute arises between Messrs. Kearn, Devlin, Feeley or Morrissey and the Bank, as to the terms or interpretation of the Severance Agreements, they will be reimbursed for all reasonable expenses arising from such dispute. If the change in control provisions had been triggered as of March 31, 2002, Messrs. Kearn, Devlin, Feeley and Morrissey would have received up to approximately $267,000, $295,000, $249,000 and $242,000, respectively. PENSION PLAN. The following table illustrates the maximum estimated annual benefits payable upon retirement pursuant to the Bank's defined benefit pension plan based upon the pension plan formula for specified final average earnings and specified years of service. FINAL YEARS OF SERVICE AVERAGE -------------------------------------------------------------------------------------------- EARNINGS 10 15 20 25 30 35 -------- -------- -------- ------- ------- ------- ------- $ 25,000 $ 2,500 $ 3,750 $ 5,000 $ 6,250 $ 7,500 $ 8,750 50,000 5,528 8,292 11,056 13,820 16,583 19,347 100,000 13,028 19,542 26,056 32,570 39,083 45,597 150,000 20,528 30,792 41,056 51,320 61,583 71,847 175,000 24,278 36,417 48,556 60,695 72,833 84,972 200,000 25,028 37,542 50,056 62,570 75,083 87,597 250,000 25,028 37,542 50,056 62,570 75,083 87,597 300,000 25,028 37,542 50,056 62,570 75,083 87,597
Benefits are hypothetical amounts only. Currently, the maximum annual benefit payable under the pension plan is $160,000. Final average earnings in excess of $228,973 are not covered under the pension plan for pre-1994 accruals, and final average earnings in excess of $180,000 are not covered under the pension plan for post-1993 accruals. "Final average earnings," which are based upon a participant's highest three consecutive years of compensation, consist of compensation that would appear under the "Salary" and "Bonus" columns of the Summary Compensation Table. Benefits under the pension plan become 100% vested over a six-year period, with 20% of 8 such benefits vesting upon the completion of each of the second through sixth years of credited service under the pension plan. As of March 31, 2002, Messrs. Doherty, Kearn, Feeley and Morrissey had approximately 20, eight, four and nine years, respectively, of credited service under the pension plan. Benefits set forth in the preceding table are computed as a single life annuity and are not subject to any deduction for Social Security or other offset amounts. DIRECTOR COMPENSATION Directors of the Company are each paid a fee of $450 per Board meeting attended. The Chairmen of the Finance Committee and the Security (or loan review) Committee each are paid a fee of $660 for each meeting of the respective committee which they attend in their capacities as chairman. Members of both the Finance and Security Committees each receive a fee of $350 per meeting attended. The President does not receive any director's or committee fees. Director Terence D. Kenney receives an additional $567 per month as a consulting fee for services rendered in connection with the Bank's Woburn branches. Chairman Doherty receives $800 per meeting as a Director and a member of the Security Committee. The Company has established a Deferred Compensation Plan for Non-Employee Directors pursuant to which directors who are not employees of the Company or the Bank are eligible to defer all or a portion of their director fees. Deferred fees are credited to an account in a grantor trust and invested in shares of the Common Stock. Shares allocated to a director's account are to be paid out in equal annual installments over a three-year period beginning six months after the director ceases to be a director. Shares held in the Deferred Compensation Plan for Non-Employee Directors are voted by the trustees in accordance with the direction of the Board of Directors. During the year ended March 31, 2002, 1,100 and 403 shares were credited to the accounts of Directors Boulos and Neri, respectively, who were the only directors participating in the Deferred Compensation Plan for Non-Employee Directors. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION GENERAL. The function of administering the Company's executive compensation policies is currently performed by the Finance Committee of the Board of Directors, which is composed entirely of outside directors. The Committee is responsible for developing and making recommendations to the Board concerning compensation paid to the Chief Executive Officer and each of the other executive officers and for overseeing all aspects of the Company's executive compensation program, including employee and executive benefit plans. Because the Company does not have any executive officers who are not also executive officers of the Bank, this discussion refers to the executive officers of the Bank, rather than the Company. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. The Committee has sought to design and implement an executive compensation program that will achieve the following goals: o attract and retain qualified executives through competitive base salaries and benefits; o motivate executive management to achieve short-term corporate performance goals through cash incentives; and o align the interests of senior management with those of stockholders and promote the long-term performance of the Bank through equity incentives. To achieve these goals, the Committee has incorporated the following elements into the Bank's executive compensation program: BASE SALARIES AND BENEFITS. Working with outside consultants, the Committee has developed a competitive salary and benefit structure for the Bank's executive officers. Based on surveys of compensation practices at similarly sized institutions in the northeastern United States, the Committee has established recommended salary ranges for each position level. The salary structure has been developed so that the midpoint for each salary range approximates the competitive market midpoint for the range. Salaries are reviewed and adjusted within the range annually based on competitive considerations. The Committee seeks to maintain the competitiveness of its salary structure by reviewing a comprehensive analysis of market compensation practices at least every two years. 9 MANAGEMENT INCENTIVE PROGRAM. During the 2002 fiscal year, the Bank adopted a management incentive program which provides cash incentives payments to eligible members of management provided that certain corporate performance criteria are met. Under the Incentive Plan, eligible officers may receive bonuses equal to a specified percentage of their salary provided that various corporate performance goals have been satisfied. Performance goals for fiscal 2002 focused on Bank profitability. The Incentive Plan provides for increased incentives if corporate performance goals are exceeded. STOCK OPTIONS. To better align the interests of management with those stockholders and to promote long-term performance, the Committee has determined that specified senior officers should be compensated through grants of stock options based on their contribution to the achievement of corporate performance goals and individual merit. For each fiscal year, the Committee reserves a specified number of options for grant to eligible executive officers with one half of such options reserved for contribution grants and half for merit grants. All options are granted with an exercise price equal to the fair market value of the Common Stock on the date of grant and a term of ten years. Option grants, however, are discretionary with the Committee and no options were granted during fiscal 2002. COMPENSATION OF CHIEF EXECUTIVE OFFICER. For fiscal year 2002, the Committee determined to increase the Chief Executive Officer's base salary by approximately 5% after considering a variety of factors, including the salary ranges previously established, the relative positions of the Chief Executive Officer and other executive officers within those ranges and an analysis of salaries being paid by Northeast commercial banks and savings institutions in the asset range of $250 million to $500 million. Based on the Bank's performance relative to the targets established under the Management Incentive Plan, the Chief Executive Officer did not receive a cash bonus. MEMBERS OF THE FINANCE COMMITTEE (which serves as the Compensation Committee) GREGORY W. BOULOS TERENCE D. KENNEY NANCY D. NERI JOHN G. QUINN COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The Company and Bank had no "interlocking" relationships existing on or after January 1, 1997 in which (i) any executive officer of the Bank served as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the Finance Committee of the Bank, (ii) any executive officer of the Bank served as a director of another entity, one of whose executive officers served on the Finance Committee of the Bank, or (iii) any executive officer of the Bank served as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a member of the Bank's Board of Directors. No member of the Finance Committee of the Board of Directors of the Company or the Bank was (a) an officer or employee of the Company or the Bank or any of its subsidiaries during the fiscal year ended March 31, 2002, (b) (other than Director Kenney) a former officer of the Company or the Bank or any of its subsidiaries, or (c) an insider (i.e., director, officer, director or officer nominee, greater than 5% stockholder, or immediate family member of the foregoing) of the Company or the Bank and directly or indirectly engaged in transactions with the Bank or any subsidiary involving more than the $60,000 during the fiscal year ended March 31, 2002. 10 STOCK PRICE PERFORMANCE GRAPH The graph and table which follow show the cumulative total return on the Common Stock of the Bank and the Company from March 31, 1997 through March 31, 2002 compared with the cumulative total return of (i) an index of Nasdaq commercial banks and (ii) the S&P 500 Index (the "S&P 500"). Cumulative total return on the stock or the index equals the total increase in value since March 31, 1997, assuming reinvestment of all dividends paid on the stock or the index, respectively. The graph and table were prepared assuming that $100 was invested at the closing price on March 31, 1997 in the Common Stock of the Bank and in each index. The stockholder returns shown on the performance graph are not necessarily indicative of the future performance of the Common Stock or of any particular index. Up to January 8, 1999, information is for the Common Stock of Central Co-operative Bank. After January 8, 1999, information is for the Common Stock of Central Bancorp, Inc. CUMULATIVE TOTAL SHAREHOLDER RETURN COMPARED WITH PEFORMANCE OF SELECTED INDICES [Line graph appears here depicting the cumulative total shareholder return of $100 invested in the Common Stock as compared to $100 invested in the Nasdaq Bank Index and the S&P 500 Index. Line graph begins at March 31, 1997 and plots the cumulative return at March 31, 1998, 1999, 2000, 2001 and 2002. The plot points are provided below.]
3/31/97 3/31/98 3/31/99 3/31/00 3/31/01 3/31/02 ------- ------- ------- ------- ------- ------- Central Bancorp, Inc. 100.0 197.4 107.8 97.5 120.8 189.6 S&P 500 100.0 148.3 176.1 208.3 163.0 163.6 NASDAQ Bank Index 100.0 160.8 131.1 120.5 143.5 176.1
11 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND -------------------------------------------------------------------------------- RELATED STOCKHOLDER MATTERS --------------------------- (a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth, as of March 31, 2002, certain information as to those persons who were the beneficial owners of more than five percent (5%) of the Company's outstanding shares of Common Stock.
PERCENT OF SHARES NAME AND ADDRESS AMOUNT AND NATURE OF COMMON STOCK OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OUTSTANDING (2) ------------------- ------------------------ ----------------- Central Co-operative Bank Employee Stock Ownership Plan Trust 399 Highland Avenue Somerville, Massachusetts 02144 150,636 (3) 9.23% Jeffrey L. Gendell Tontine Financial Partners, L.P. Tontine Management, L.L.C. 200 Park Avenue, Suite 3910 New York, New York 10166 161,400 (4) 9.88% Dimensional Fund Advisors, Inc. 1299 Ocean Avenue, 11th Floor Santa Monica, California 90401 102,400 6.27% John D. Doherty Joseph R. Doherty Joseph R. Doherty Family Limited Partnership, L.P. 399 Highland Avenue Somerville, Massachusetts 02144 202,205 (5) 12.19% Financial Edge Fund, L.P. Financial Edge - Strategic Fund, L.P. Goodbody/PL Capital, L.P. PL Capital, LLC Goodbody/PL Capital LLC John Wm. Palmer Richard J. Lashley Garrett Goodbody 20 East Jefferson Avenue, Suite 22 Naperville, Illinois 60540 Richard Fates 95 Rock Maple Avenue Hamilton, Massachusetts 01982 155,368 (6) 9.52% _______________ (1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to be the beneficial owner, for purposes of this table, of any shares of the Common Stock as to which he or she has sole or shared voting or investment power, or has a right to acquire beneficial ownership at any time within 60 days of March 31, 2002. As used herein, "voting power" is the power to vote or direct the voting of shares and "investment power" is the power to dispose or direct the disposition of shares. Unless otherwise indicated, the listed persons have direct ownership and sole voting and dispositive power. (2) For purposes of calculating percentage ownership, the number of shares of Common Stock outstanding includes any shares which the beneficial owner has the right to acquire within 60 days of March 31, 2002. (3) Of the shares beneficially owned by the Central Co-operative Bank Employee Stock Ownership Plan Trust ("ESOP"), 125,973 shares have been allocated to participating employees over which shares Directors Boulos and Kenney, as co-trustees of the ESOP (the "ESOP Trustees"), may be deemed to have shared voting and sole investment power, and 24,663 shares have not been allocated, as to which shares the ESOP Trustees generally would vote in the same proportion as voting directions received from voting ESOP participants. (4) According to their statement on Schedule 13G as amended January 22, 2002, each of the reporting persons shares voting and dispositve power over the listed shares. (5) Includes 25,639 shares of Common Stock which John D. Doherty has the right to acquire pursuant to stock options exercisable within 60 days of March 31, 2002 and 12,661 shares allocated to his account in the ESOP. Each of John D. Doherty, Joseph R. Doherty and the Joseph R. Doherty Family Limited Partnership, L.P. disclaims beneficial ownership of any shares held by the other. (6) According to Amendment No. 6 to their Schedule 13D, filed June 12, 2002, includes 113,900 and 23,200 shares owned by Financial Edge Fund, L.P. and Financial Edge-Strategic Fund, L.P., respectively, whose general partner is PL Capital, LLC of which Messrs. 12 Palmer and Lashley are the managing members, 12,168 shares held by Goodbody/PL Capital, L.P. whose general partner is Goodbody/PL Capital, LLC of which Messrs. Palmer, Lashley and Goodbody are the managing members and 600, 5,000 and 500 shares beneficially owned by Messrs. Lashley, Goodbody and Fates, respectively, in their individual capacities.
(b) SECURITY OWNERSHIP OF MANAGEMENT The following table provides information as of March 31, 2002 concerning ownership of the Company's Common Stock (which constitutes its only class of equity securities) each of its directors, the Named Executive Officers and all executive officers and directors as a group. Each person listed has sole voting and investment power with respect to the shares listed across from his name except as noted otherwise.
BENEFICIAL OWNERSHIP (1) ------------------------------------------------ NUMBER PERCENTAGE OF NAME OF SHARES SHARES OUTSTANDING(2) ---- --------- --------------------- Marat E. Santini 2,363 0.14% John F. Gilgun, Jr. 1,575 0.09% John G. Quinn 1,200 0.07% Joseph R. Doherty 60,675 3.72% Terence D. Kenney1, 541 (3) 0.09% Nancy D. Neri 200 (4) 0.01% Gregory W. Boulos 5,500 (3)(4) 0.34% John D. Doherty 141,530 (5) 8.53% David W. Kearn 14,706 (6) 0.90% Paul S. Feeley 7,610 (7) 0.46% William P. Morrissey 11,162 (8) 0.68% All directors and executive officers as a group (12 persons) 249,565 (9) 14.87% ----------- (1) For definition of beneficial ownership, see footnote 1 to the table in Item 12(a) of this Annual Report on Form 10-K. (2) In calculating percentage ownership for a given individual or group of individuals, the number of shares of the Common Stock outstanding includes unissued shares subject to options exercisable within 60 days of March 31, 2002 held by that individual or group. (3) Does not include 150,636 shares held by the ESOP, over which shares the ESOP Trustees, Directors Boulos and Kenney, may be deemed to have shared or sole voting and/or investment power. (4) Excludes shares credited to their accounts in the Deferred Compensation Plan for Non-Employee Directors. (5) Includes 25,639 shares of Common Stock which he has the right to acquire pursuant to stock options exercisable within 60 days of March 31, 2002 and 12,661 shares allocated to his account in the ESOP. (6) Includes 5,828 shares allocated to his account in the ESOP and 8,878 shares which he has the right to acquire pursuant to options exercisable within 60 days of March 31, 2002. (7) Includes 1,988 shares allocated to his account in the ESOP and 5,622 shares which he has the right to acquire pursuant to options exercisable within 60 days of March 31, 2002. (8) Includes 5,792 shares allocated to his account in the ESOP and 5,370 shares which he has the right to acquire pursuant to options exercisable within 60 days of March 31, 2002. (9) Includes 45,509 shares of Common Stock which may be acquired pursuant to stock options exercisable within 60 days of March 31, 2002, 26,269 shares allocated to the ESOP accounts of directors and executive officers and 1,503 shares held by the trust for the Deferred Compensation Plan for Non-Employee Directors which are voted as directed by the Board of Directors. Does not include unallocated shares held by the ESOP, over which shares the ESOP Trustees may be deemed to have shared or sole voting and/or investment power.
(c) CHANGES IN CONTROL The Company is not aware of any arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change of control of the Company. (D) EQUITY COMPENSATION PLANS The Company has adopted the 1999 Stock Option and Incentive Plan pursuant to which equity may be awarded to participants. This plan has been approved by stockholders. 13 The following table sets forth certain information with respect to the Company's Equity Compensation Plans:
NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE NUMBER OF SECURITIES TO BE ISSUED WEIGHTED-AVERAGE EXERCISE UNDER EQUITY COMPENSATION UPON EXERCISE OF OUTSTANDING PRICE OF OUTSTANDING PLANS (EXCLUDING SECURITIES PLAN CATEGORY OPTIONS, WARRANTS AND RIGHTS OPTIONS, WARRANTS AND RIGHTS REFLECTED IN COLUMN (A)) ------------- --------------------------------- ---------------------------- ------------------------------ Equity compensation plans approved by security holders 59,613 $ 18.448 33,299 Equity compensation plans not approved by security holders 0 0 0 Total (1) ---------- (1) The 1999 Stock Option and Incentive Plan provides for a proportionate adjustment to the number of shares reserved thereunder in the event of a stock split, stock dividend reclassification, recapitalization or similar event.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -------------------------------------------------------- The Bank engages in transactions with affiliates of the Bank on the same terms and other conditions as those offered to unaffiliated parties. Loans by the Bank made to Directors, officers and employees are made in the ordinary course of business, on substantially the same terms, including interest rates, collateral and repayment terms as those prevailing at the time for comparable transactions with other persons, and do not involve more than the normal risk of collectibility or present other unfavorable features. Massachusetts law provides that co-operative banks are limited in the amount of money they may lend an officer of the Bank. These limits are $275,000 for a mortgage on a primary residence, $75,000 loans for educational purposes and $20,000 for all other types of loans in total. This restriction does not apply to non-officer employees of the Bank or to its outside Directors. Any loans existing prior to the implementation of this restriction are grandfathered. The same loans available to the public are available to Directors, officers and employees. In August 2001, the Company agreed to lend the ESOP sufficient funds to acquire up to an additional 5% of the outstanding Common Stock. The ESOP's trustees are Directors Boulos and Kenney. As of March 31, 2002, the Company had lent the ESOP an aggregate of $199,000 which was the highest amount of indebtedness outstanding since the beginning of the 2002 fiscal year. The ESOP loan bears interest at the prime rate. In addition, the ESOP was indebted to the Bank in the amount of $107,000 on a loan originally made in 1997. From time to time, the Bank retains Santini, Inc., a firm controlled by members of Director Santini's immediate family, to perform various general contracting services. During fiscal 2002, the Bank paid Santini, Inc. a total of $145,420 for such services. 14 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CENTRAL BANCORP, INC. Date: July 24, 2002 By:/s/ Michael K. Devlin ---------------------------------------------- Michael K. Devlin Senior Vice President, Treasurer, Chief Financial Officer and Duly Authorized Representative