LSBX Lsb Corp (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

 

Filed by the Registrant  þ

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

 

þ   Preliminary Proxy Statement

o    Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o   Definitive Proxy Statement

o   Definitive Additional Materials

o   Soliciting Material Pursuant to §240.14a-12

 

LSB Corporation

(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):

 

 

Common Stock, par value $.10 per share, of LSB Corporation

 

 

4,717,086 shares of LSB common stock, which consists of: (i) 4,506,686 shares of LSB common stock outstanding as of the date of this filing and (ii) 210,400 shares of LSB common stock issuable upon the exercise of options outstanding as of the date of this filing.

 

 

The filing fee was determined based upon the sum of (a) the product of 4,506,686 shares of common stock and the total cash merger consideration of $21.00 per share; and (b) the difference between (i) the product of $21.00 and the 210,400 shares of common stock subject to outstanding options; and (ii) the product of the weighted average exercise price per share of such stock options and the number of such options.

 

 

$95,877,978.80

 

 

$6,836.10

 

 

 

 

 

 

 

 

 

 

[ • ], 2010

Dear Stockholder:

 

On behalf of our board of directors, you are cordially invited to attend a special meeting of stockholders of LSB Corporation to be held at the Andover Country Club, located at 60 Canterbury Street, Andover, Massachusetts, on [ • ], at [ • ], local time.

 

At the special meeting, you will be asked to consider and vote upon a proposal to approve a merger agreement that LSB, River Bank, a wholly owned subsidiary of LSB, People’s United Financial, Inc. (“People’s United”), People’s United Bank, a wholly owned subsidiary of People’s United, and Bridgeport Merger Corporation, a wholly owned subsidiary of People’s United, have entered into. If the Merger is consummated, LSB Corporation will become a wholly-owned subsidiary of People’s United, and each outstanding share of our common stock will be converted into the right to receive $21.00 in cash, without interest. You should carefully read the merger agreement, a copy of which is attached as Annex A to the accompanying proxy statement.

 

Our board unanimously adopted the merger agreement and approved the merger and determined that the merger agreement and the merger were advisable and in the best interest of our stockholders, and accordingly recommends that our stockholders vote “FOR” approval of the merger agreement. In reaching its determination, our board considered a number of factors, including the opinion of our financial advisor, which is attached as Annex B to the accompanying proxy statement, and which you are urged to read in its entirety.

 

The accompanying proxy statement provides you with a detailed summary of the merger agreement and additional information about the parties involved and their interests.

 

The affirmative vote of the holders of not less than two thirds of the shares of our common stock outstanding and entitled to vote at the special meeting is necessary to approve the merger agreement. LSB directors and executive officers, who in the aggregate own approximately [ • ]% of LSB shares, have already agreed with People’s United to vote in favor of approval of the merger agreement.

 

Your vote is very important. Because approval of the merger agreement requires the affirmative vote of the holders of not less than two-thirds of the outstanding shares of our common stock entitled to vote, a failure to vote will have the same effect as a vote against approval of the merger agreement.

 

Please give all of this information your careful attention. Whether or not you plan to attend the special meeting in person, please complete, sign and date the enclosed proxy card and return it in the envelope provided as soon as possible or submit a proxy through the Internet or by telephone as described on the enclosed proxy card. This will not prevent you from voting your shares in person if you subsequently choose to attend the special meeting.

 

Thank you for your cooperation and your continued support of LSB Corporation.

 

Sincerely,

 

GERALD T. MULLIGAN

President and Chief Executive Officer

 

IMPORTANT

 

Your vote is important regardless of the number of shares you own. Please complete, sign, date and return your proxy card at your earliest convenience. No postage is required if mailed in the United States. You may also vote your shares through the Internet or by telephone.

 

Stockholders with questions or requiring assistance voting their shares may contact Morrow & Co., LLC, our proxy solicitor, at 470 West Ave., Stamford, CT 06920 or (203) 658-9400.

 

This proxy statement is dated [ • ], 2010, and was first mailed to stockholders of LSB Corporation on or about [ • ], 2010.

 

LSB CORPORATION
30 Massachusetts Avenue
North Andover, Massachusetts 01845
(978) 725-7500

 

Notice of Special Meeting of Stockholders of LSB Corporation
To Be Held on [ • ]

 

To the Stockholders of LSB Corporation:

 

NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the “Special Meeting”) of LSB Corporation, a Massachusetts corporation (“LSB”), will be held at [ • ], local time on [ • ],[ • ], 2010, at the Andover Country Club, located at 60 Canterbury Street, Andover, Massachusetts, for the following purposes:

 

1. To consider and vote upon a proposal to approve the agreement and plan of merger, dated as of July 15, 2010, by and among LSB, River Bank, a wholly owned subsidiary of LSB, People’s United Financial, Inc., a Delaware corporation (“People’s United”), People’s United Bank, a federally-chartered savings bank and wholly owned subsidiary of People’s United, and Bridgeport Merger Corporation, a wholly owned subsidiary of People’s United (the “Merger Agreement”); and

 

2. To consider and vote upon a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies in favor of the approval of the Merger Agreement.

 

Only holders of record of our common stock at the close of business on [ • ] are entitled to notice of, and to vote at, the Special Meeting and any adjournment of that meeting. The affirmative vote of the holders of not less than two thirds of the shares of LSB common stock outstanding and entitled to vote is required to approve the Merger Agreement. A form of proxy and a proxy statement containing more detailed information with respect to matters to be considered at the Special Meeting accompany and form a part of this notice.

 

If you fail to vote by proxy or in person, it will have the same effect as a vote against approval of the Merger Agreement. If you return a properly signed proxy card but do not indicate how you want to vote, your proxy will be counted as a vote “FOR” approval of the Merger Agreement.

 

The LSB board of directors unanimously recommends that stockholders vote “FOR” approval of the Merger Agreement.

 

We believe that appraisal rights under the Massachusetts Business Corporation Act should not be available to our stockholders with respect to the merger. The relevant provisions of the Massachusetts Business Corporation Act have not yet been the subject of judicial interpretation, however, and a court conceivably might disagree with our interpretation and decide that LSB stockholders may assert appraisal rights in connection with the merger. Any stockholder seeking to assert appraisal rights will be required to give written notice, before the stockholders vote on whether to approve the Merger Agreement, of the stockholder’s intent to demand payment pursuant to statutory appraisal rights, and to comply with the requirement to not vote to approve the Merger Agreement.

 

By Order of the Board of Directors

 

CYNTHIA J. MILNE

Secretary

 

North Andover, Massachusetts

[ • ]

 

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DO ATTEND THE SPECIAL MEETING AND DESIRE TO WITHDRAW YOUR PROXY VOTE AND VOTE IN PERSON, YOU MAY DO SO.

 

Please do not send your stock certificates at this time. If the merger is consummated, you will be sent instructions regarding the surrender of your stock certificates.

 

SUMMARY TERM SHEET

 

This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. To understand the Merger fully, you should carefully read this entire proxy statement, as well as the other documents to which we refer you, including the Merger Agreement attached to this proxy statement as Annex A. We have included page references in parentheses to direct you to a more complete summary of the topics presented in this summary. In addition, this proxy statement incorporates by reference important business and financial information about LSB Corporation. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 64 of this proxy statement.

 

Throughout this proxy statement, “LSB,” “the Company,” “we” and “our” refer to LSB Corporation; “People’s United” refers to People’s United Financial, Inc.; “People’s United Bank” refers to People’s United Bank, a wholly-owned subsidiary of People’s United; “Merger Sub” refers to Bridgeport Merger Corporation, a wholly-owned subsidiary of People’s United; and “River Bank” refers to River Bank, a wholly-owned subsidiary of LSB. Also, we refer to the proposed merger between LSB Corporation and Merger Sub as the “Merger”; and the agreement and plan of merger, dated as of July 15, 2010, by and among People’s United, People’s United Bank, Merger Sub, LSB and River Bank as the “Merger Agreement.”

 

Parties to the Merger (Page 18)

 

 

The Merger (Page 18)

 

We and River Bank signed a merger agreement with People’s United, People’s United Bank and Merger Sub on July 15, 2010. The Merger Agreement provides for the Merger of Merger Sub with and into LSB, with LSB being the surviving corporation. Following the Merger, LSB will cease to be a publicly traded company and will become a wholly-owned subsidiary of People’s United. The Merger Agreement is attached as Annex A to this proxy statement; please read it carefully.

Merger Consideration (Page 38)

 

At the effective time of the Merger, each outstanding share of LSB common stock will be converted automatically into the right to receive $21.00 in cash, without interest and less any applicable withholding taxes (the “Merger Consideration”). In addition to the Merger Consideration, People’s United has agreed to pay or cause to be paid, together with the Merger Consideration, any regular quarterly dividend declared but unpaid as of the closing date of the Merger, with respect to each share of our common stock issued and outstanding on the record date for such dividend, and an amount per share of our common stock equal to the product of $0.001 multiplied by the number of days from but not including the record date for the most recent regular quarterly dividend declared and paid prior to the closing date of the Merger through and including such closing date.

 

The Special Meeting (Page 14)

 

A special meeting of the holders of LSB common stock will be held at the Andover Country Club, located at 60 Canterbury Street, Andover, Massachusetts 01810 on [ • ],[ • ], 2010, at [ • ], local time (the “Special Meeting”). At the Special Meeting, you will be asked to consider and vote on a proposal to approve the Merger Agreement. We will also ask you to consider and vote on a proposal to adjourn, if necessary, the Special Meeting so that we can solicit additional proxies in favor of approval of the Merger Agreement.

 

Record Date and Voting Power (Page 15)

 

LSB has fixed the close of business on [ • ], 2010, as the record date for determining stockholders entitled to notice of and to vote at the Special Meeting. On the record date, we had [ • ] outstanding shares of common stock held by approximately [ • ] stockholders of record. We have no other class of voting securities outstanding.

 

Stockholders of record on the record date will be entitled to one vote per share of LSB common stock on any matter that may properly come before the Special Meeting and any adjournment or postponement of that meeting.

 

Quorum and Vote Required (Page 15)

 

Our charter and bylaws and Massachusetts law require:

 

 

Failure to vote by proxy, either by mail, through the Internet or by telephone, or in person, will have the same effect as a vote against approval of the Merger Agreement.

 

LSB directors and executive officers, who in the aggregate own approximately [ • ]% of LSB shares, without giving effect to currently exercisable options, have already agreed with People’s United to vote in favor of approval of the Merger Agreement.

 

Proxies and Voting (Page 16)

 

You may vote by proxy through the Internet, by telephone or by returning the enclosed proxy card. If you hold your shares through a broker or other nominee, you should follow the voter instruction form provided by your broker or nominee.

Shares of our common stock represented at the Special Meeting by properly executed proxies received prior to or at the Special Meeting, and not revoked, will be voted at the Special Meeting, and at any and all adjournments of that meeting, in accordance with the instructions on the proxies. If a proxy is duly executed and submitted without instructions, the shares of common stock represented by that proxy will be voted “FOR” approval of the Merger Agreement and, if necessary, “FOR” the approval of one or more adjournments of the Special Meeting to solicit additional proxies. Proxies are being solicited on behalf of our board. The cost of soliciting proxies will be borne by LSB.

 

Revocability of Proxy (Page 17)

 

A proxy may be revoked by the person who executed it at or before the Special Meeting. If you have not submitted a proxy through your broker or nominee, you may revoke your proxy by delivering to our Secretary a written notice of revocation bearing a later date than the proxy, duly completing, signing, dating and returning a subsequent proxy, properly casting a new vote through the Internet or by telephone at any time before the closure of the Internet or telephone voting facilities or attending the Special Meeting and voting in person.

 

Attendance at the Special Meeting will not, in and of itself, constitute revocation of a proxy. If your shares are held in “street name,” you should follow the instructions of your broker or nominee regarding revocation of proxies.

 

Recommendation of the Board of Directors; Reasons for the Merger (Page 26)

 

After an evaluation of a variety of business, financial and market factors and consultation with senior management and our legal and financial advisors, at a meeting on July 15, 2010, our board unanimously adopted the Merger Agreement and approved the Merger and determined that the Merger Agreement and the Merger were advisable and in the best interest of our stockholders. Our board unanimously recommends that our stockholders vote “FOR” approval of the Merger Agreement.

 

Opinion of LSB’s Financial Advisor (Page 28)

 

Sandler O’Neill + Partners, L.P. (“Sandler O’Neill”) acted as financial advisor to LSB in connection with the proposed transaction and participated in certain of the negotiations leading to the execution of the Merger Agreement. Sandler O’Neill delivered an oral opinion to our board, which was subsequently confirmed in writing, that, as of July 15, 2010, the Merger Consideration was fair to the holders of LSB common stock from a financial point of view.

 

Sandler O’Neill provided its opinion for the information and assistance of our board in connection with its consideration of the Merger Agreement. It is not a recommendation as to how any holder of our common stock should vote with respect to the Merger Agreement. The full text of the written opinion of Sandler O’Neill, which outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion is attached as Annex B to this proxy statement. We encourage you to read this opinion carefully in its entirety for a description of the assumptions made, some of the matters considered and qualifications to and limitations of the review undertaken by Sandler O’Neill.

 

We have agreed to pay Sandler O’Neill a fee of approximately $1,109,000 plus expenses in connection with its services as financial advisor, a substantial portion of which is contingent upon the consummation of the Merger.

 

Appraisal Rights (Page 54)

 

We believe that appraisal rights should not be available to our stockholders with respect to the Merger. The relevant provisions of the Massachusetts Business Corporation Act have not yet been the subject of judicial interpretation, however, and a court conceivably might disagree with our interpretation and decide that LSB stockholders may assert appraisal rights in connection with the Merger.

Under Massachusetts law, appraisal rights are not available in respect of an all-cash merger such as this one unless a director, officer or controlling stockholder has a direct or indirect material financial interest in the Merger other than in his capacity as (i) a stockholder, (ii) a director, officer, employee or consultant if his financial interest is pursuant to a bona fide arrangement, or (iii) in any other capacity so long as the stockholder owns 5% or less of all voting shares of the corporation. We are not aware of any material financial interest of a type that would cause appraisal rights to be available. For this reason, we reserve the right to challenge any purported exercise of appraisal rights in respect of the Merger. If you want to consider asserting appraisal rights, you should obtain legal advice.

 

If you believe you are entitled to appraisal rights under Massachusetts law, in order to exercise these rights you must:

 

 

Because a submitted proxy not marked “against” or “abstain” will be voted “for” the approval of the Merger Agreement and “for” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies, the submission of a proxy card not marked “against” or “abstain” will result in the waiver of appraisal rights, to the extent such rights are available. If a broker, bank or other nominee holds your shares of LSB common stock and you want to attempt to assert appraisal rights, you must instruct your nominee to take the steps necessary to enable you to assert appraisal rights. If you or your nominee fails to follow all of the steps required by the statute, you will lose your right of appraisal (to the extent such right otherwise would be available). See “Appraisal Rights” beginning on page 54 for further information.

 

Exchange of Stock Certificates (Page 39)

 

As soon as reasonably practicable after the effective time of the Merger, but in no event later than five business days after the effective time of the Merger, the paying agent will mail to each of our stockholders a letter of transmittal and instructions specifying the procedures to be followed in surrendering your shares of our common stock in exchange for the Merger Consideration. You should not submit your stock certificates for exchange until you receive the letter of transmittal and instructions from the paying agent. You will receive the Merger Consideration promptly after surrendering your stock certificates along with the properly executed letter of transmittal and any other required documents.

 

Source of Funds (Page 53)

 

People’s United’s obligation to consummate the Merger is not subject to a financing condition. People’s United intends to finance the Merger through internal cash resources.

 

Conditions to the Merger (Page 45)

 

LSB and People’s United will not consummate the Merger unless a number of conditions are satisfied or waived, including:

 

 

 

Solicitation of Proposals from Other Parties (Page 46)

 

The Merger Agreement restricts our ability to solicit or engage in discussions or negotiations with a third party regarding a proposal to acquire a significant interest in LSB. However, if we receive a bona fide unsolicited written Acquisition Proposal (as defined in the Merger Agreement) from a third party that constitutes or is reasonably likely to lead to a proposal that is more favorable to our stockholders than the terms of the Merger Agreement, we may furnish nonpublic information to that third party and engage in negotiations regarding an Acquisition Proposal with that third party, subject to specified conditions in the Merger Agreement. In addition, unless our board determines in good faith, after consultation with legal counsel and financial advisors, that an Acquisition Proposal is a Superior Proposal (as defined in the Merger Agreement) and that it is required to take such action to comply with its fiduciary duties to our stockholders under applicable law, and we provide People’s United with notice of such determination and cooperate and negotiate in good faith with People’s United to adjust, modify or amend the terms and conditions of the Merger Agreement and the Merger, our board may not withdraw or modify its approval or recommendation of the Merger Agreement, approve or recommend another Acquisition Proposal to our stockholders, or cause LSB to enter into a letter of intent, definitive agreement or similar arrangement with respect to an Acquisition Proposal or that requires us to abandon, terminate or fail to consummate the Merger. In the event that LSB receives a Superior Proposal and withdraws or modifies its recommendation that LSB stockholders vote to approve the Merger, LSB nevertheless is required under the Merger Agreement to hold the Special Meeting and submit the Merger Agreement to the stockholders for approval.

 

Termination of the Merger Agreement (Page 49)

 

Either People’s United or LSB may terminate the Merger Agreement at or prior to the effective time of the Merger if any of the following occurs:

 

 

 

In addition, People’s United has the right to unilaterally terminate the Merger Agreement if:

 

 

 

LSB has the right to unilaterally terminate the Merger Agreement if:

 

 

Termination Fee; Expenses (Page 50)

 

The Merger Agreement requires us to pay People’s United a termination fee equal to $3.5 million if People’s United terminates the Merger Agreement under certain circumstances specified in the Merger Agreement, including as a result of LSB’s failure to recommend that LSB’s stockholders vote in favor of the Merger Agreement, approval or recommendation of an Acquisition Proposal, or material breach of the no solicitation provisions. In addition, we are required to pay People’s United the termination fee if LSB terminates the Merger Agreement in connection with a Superior Proposal. LSB will be required to pay 15% of the termination fee in certain circumstances, as discussed in the section entitled “Termination Fee; Expenses” beginning on page 50.

 

Interests of Certain Persons in the Merger (Page 34)

 

In considering the recommendations of our board with respect to the approval of the Merger Agreement, you should be aware that our directors and executive officers have interests in the Merger that may be in addition to, or different from, the interests of our stockholders. These interests may create potential conflicts of interest. Our board was aware of these interests, which include those summarized below, and considered them, among other matters, in adopting the Merger Agreement and approving the Merger.

 

Voting Agreements (Page 36)

 

In connection with the Merger Agreement, People’s United entered into voting agreements with our directors and executive officers, who are also LSB stockholders. Pursuant to the voting agreements, each stockholder has agreed, among other things to appear and cause all of his, her or its shares of LSB common stock to be counted as present for purposes of calculating a quorum, to vote in favor of approval of the Merger Agreement and any matter reasonably necessary for the consummation of the transactions contemplated by the Merger Agreement and to vote against any action or agreement that would reasonably be expected to result in a breach of the Merger Agreement or that would be inconsistent with the Merger Agreement or the actions contemplated by the Merger Agreement.

 

The following directors and executive officers entered into voting agreements with People’s United: John P. Bachini, Malcolm W. Brawn, Thomas J. Burke, Richard H. Harrington, Robert F. Hatem, Marsha A. McDonough, Kathleen Boshar Reynolds, Fred P. Shaheen, Gerald T. Mulligan, Michael J. Ecker, Teresa K. Flynn, Stephen B. Jones, Jacob Kojalo, and Diane L. Walker. As of the record date, there were [ • ] shares of our common stock subject to the voting agreements, which represented approximately [ • ]% of our outstanding common stock as of that date.

 

Treatment of Options and Restricted Stock (Page 38)

 

At the effective time of the Merger, each outstanding stock option, whether vested or unvested, to purchase shares of LSB common stock will be canceled and the holder of such stock option will receive an amount in cash equal to the number of shares of common stock underlying the stock option multiplied by the

excess, if any, of the Merger Consideration over the exercise price applicable to that stock option (which we sometimes refer to as the option consideration). In addition, if the effective time of the merger occurs before December 10, 2010, 6,750 shares of issued and outstanding LSB common stock granted in the fall of 2009 to Gerald T. Mulligan, Michael J. Ecker, and Stephen B. Jones under LSB’s 2006 Stock Option and Incentive Plan and that are subject to transfer restrictions prior to that date will be automatically released from such transfer restriction and converted into the right to receive $21.00 per share, less any applicable withholding taxes.

 

Effective Time of the Merger (Page 37)

 

We expect that the Merger will be completed as soon as practicable following the approval of the Merger Agreement by our stockholders at the Special Meeting and the satisfaction or waiver of all other conditions. The parties cannot be certain whether or when any of the conditions to the Merger will be satisfied, or waived where permissible. We currently expect to complete the Merger during the fourth quarter of 2010; however, because the Merger is subject to these conditions, we cannot predict the actual timing.

 

Litigation Related to the Merger (Page 53)

 

George Assad, Jr. and William S. Madden, both alleged LSB stockholders, each filed putative class action lawsuits on July 27, 2010 and August 10, 2010, respectively, allegedly on behalf of all LSB stockholders in the Massachusetts Superior Court, Essex County against LSB, River Bank, the LSB board of directors, People’s United, People’s United Bank and Merger Sub. The case filed by Mr. Assad is captioned George Assad, Jr. v. LSB Corporation et al., Civ. A. No. 2010-1616. The case filed by Mr. Madden is captioned William S. Madden v. LSB Corporation et al., Civ. A. No. 2010-1702. The complaints generally allege that the LSB board of directors breached its fiduciary duties by approving the Merger Agreement because, plaintiffs allege, the proposed merger would deny LSB stockholders the right to share proportionately in the value of LSB’s ongoing business and future growth, the Merger Consideration of $21.00 per share is inadequate, the Merger Agreement’s termination fee and no solicitation provisions discourage bids from other sources, and the transaction unfairly benefits the LSB board of directors and chief executive officer to the disadvantage of our stockholders. The complaints also allege that People’s United, People’s United Bank and Merger Sub aided and abetted our board’s breach of fiduciary duties. The planitiffs seek an order preliminarily and permanently enjoining the defendants from consummating or closing the merger; in the event that the merger is consummated, an order rescinding it and setting it aside or awarding rescissory damages; an accounting; and attorneys fees and costs. LSB believes that the allegations in the complaints are without merit and intends to vigorously defend both actions.

 

Federal Income Tax Consequences (Page 59)

 

If the Merger is consummated, the exchange of common stock by our stockholders for the Merger Consideration will be treated as a taxable transaction for federal income tax purposes under the Internal Revenue Code of 1986, as amended (which we sometimes refer to as the Internal Revenue Code), and may be taxable for state, local and foreign purposes as well. Because of the complexities of the tax laws, we advise you to consult your own personal tax advisors concerning the applicable federal, state, local, foreign and other tax consequences of the Merger.

 

Regulatory Approvals and Other Information (Page 61)

 

Completion of the transactions contemplated by the Merger Agreement is subject to various regulatory approvals, including approval from the Office of Thrift Supervision and various state regulatory authorities. Prior to the date of this proxy statement, People’s United and LSB have filed with regulatory authorities all of the required applications and notices necessary to complete the Merger. In addition, the completion of the Merger is subject to the expiration of certain waiting periods and other requirements that are described more fully in the section entitled “Regulatory Approvals and Other Information” beginning on page 57 of this proxy statement. Although we do not know of any reason why we would not be able to obtain the necessary regulatory approvals in a timely manner, we cannot be certain when or if we will receive them.

 

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

 

The following questions and answers are provided for your convenience, and briefly address some commonly asked questions about the LSB Special Meeting of stockholders and the proposed merger. These questions and answers may not address all questions that may be important to you as a stockholder. You should still carefully read this entire proxy statement, including each of the annexes.

 

The Special Meeting

 

 

The Merger

 

 

 

 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

 

This proxy statement contains forward-looking statements about our plans, objectives, expectations and intentions. Forward-looking statements are statements that contain predictions or projections of future events or performance, and often contain words such as “anticipates,” “can,” “estimates,” “believe,” “expects,” “projects,” “will,” “might,” or other words indicating a statement about the future. You should read statements that contain these words carefully. There can be no assurance that future developments affecting LSB will be those anticipated by LSB. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to:

 

 

 

other risks detailed in our current filings with the Securities and Exchange Commission, including our most recent filings on Forms 10-Q and 10-K. For details about obtaining these documents, see the section entitled “Where You Can Find More Information” beginning on page 64 of this proxy statement.

 

The factors referred to above include many, but not all, of the factors that could impact our ability to achieve the results described in any forward-looking statement. You should not place undue reliance on forward-looking statements. We cannot guarantee that the Merger will be consummated or our future results, performance or achievements. The statements made in this proxy statement represent our views as of the date of this proxy statement, and it should not be assumed that the statements made herein remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons actual results could differ materially from those anticipated in forward-looking statements, except as required by law.

 

THE SPECIAL MEETING

 

We are furnishing this proxy statement to you, as a stockholder of LSB Corporation as part of the solicitation of proxies by our board for use at the Special Meeting of stockholders.

 

Date, Time and Place of the Special Meeting

 

The Special Meeting will be held at the Andover Country Club, located at 60 Canterbury Street, Andover, Massachusetts 01810, on [ • ], at [ • ], local time.

 

Purpose of the Special Meeting

 

At the Special Meeting, you will be asked to consider and vote on the following proposals:

 

 

Recommendation of Our Board

 

Our board has unanimously determined that the Merger Agreement and the Merger are advisable and in the best interest of our stockholders, and has adopted the Merger Agreement and approved the Merger. Our board unanimously recommends that our stockholders vote “FOR” approval of the Merger Agreement.

 

Even though a quorum may be present at the Special Meeting, it is possible that we may not have received sufficient votes to approve the Merger Agreement by the time of the Special Meeting. To allow the proxies that have been received by us at the time of the Special Meeting to be voted for one or more adjournments of the Special Meeting for purposes of soliciting additional proxies to obtain the requisite stockholder vote, we are submitting a proposal to approve one or more adjournments to you for consideration. Our board recommends that you vote “FOR” the adjournment proposal so that proxies may be used for that purpose only, should it become necessary. Properly executed proxies will be voted “FOR” the adjournment proposal, unless otherwise indicated on the proxies. If the Special Meeting is adjourned for 30 days or less, we are not required to give notice of the time and place of the adjourned meeting (other than by announcement at the Special Meeting) unless our board fixes a new record date for the Special Meeting.

 

Record Date and Voting Power

 

LSB has fixed the close of business on [ • ] as the record date for the determination of stockholders entitled to notice of, and to vote at, the Special Meeting. At the close of business on the record date, [ • ] shares of LSB common stock were outstanding and entitled to receive notice of, and vote at, the Special Meeting. On the record date, our shares were held of record by approximately [ • ] stockholders. Common stock is our only outstanding class of stock. Stockholders of record on the record date will be entitled to one vote per share of LSB common stock on any matter that properly comes before the Special Meeting and any adjournment or postponement of that meeting.

 

Quorum

 

Our charter and bylaws and Massachusetts law require the presence, in person or by duly executed proxy, of the holders of a majority of the voting power of shares of LSB common stock outstanding and entitled to vote at the Special Meeting to constitute a quorum. Withheld votes, abstentions and broker non-votes are counted as present for the purpose of determining whether a quorum is present. If a quorum is not present and if the adjournment proposal has the necessary majority, we expect to adjourn the Special Meeting to solicit additional proxies and intend to vote any proxies we have received at the time of the Special Meeting in favor of an adjournment.

 

Vote Required

 

The affirmative vote of holders of not less than two-thirds of the shares of LSB common stock outstanding and entitled to vote at the Special Meeting is required in order to approve the Merger Agreement.

 

The proposal to approve one or more adjournments of the Special Meeting requires the affirmative vote of holders of a majority of the shares of LSB common stock voting on the proposal.

 

Abstentions and Broker Non-Votes

 

For purposes only of determining the presence or absence of a quorum for the transaction of business at the Special Meeting, we intend to count abstentions and broker “non-votes” as present at the Special Meeting. Abstentions and broker “non-votes” are not, however, counted as favorable votes and, therefore, have the same effect as a vote against approval of the Merger Agreement. If you fail to vote or abstain from voting, it will have the effect of a vote against the proposal to approve the Merger Agreement. Broker “non-votes” are shares held by brokers or nominees as to which (1) voting instructions have not been received from the beneficial owners or the persons entitled to vote those shares, and (2) the broker or nominee does not have discretionary voting power. The proposal to approve the Merger Agreement is not an item on which brokerage firms may vote in their discretion on behalf of their clients. Accordingly, we urge you to return the enclosed

proxy card marked to indicate your vote, to vote your shares through the Internet or by telephone or to give your broker proper instructions.

 

To approve the adjournment proposal, a majority of the outstanding shares of our common stock present or represented at the Special Meeting and voting on such adjournment must vote in favor of the proposal. Broker “non-votes” and abstentions will have no effect on the outcome of this proposal.

 

Proxies and Voting

 

Stockholders may vote their shares by attending the Special Meeting and voting their shares in person or by completing, signing and dating the enclosed proxy card and promptly returning it to us as soon as possible. If you prefer, you can vote by telephone or via the Internet by following the relevant instructions described on the enclosed proxy card or voting instruction form received from any broker, bank or other nominee that may hold shares of LSB common stock on your behalf. If you sign and send in your proxy card and do not mark it to show how you want to vote, or if you submit a proxy by telephone or via the Internet without providing instructions, we will count your proxy as a vote in favor of the approval of the Merger Agreement and in favor of any proposal to adjourn the Special Meeting to solicit additional proxies.

 

Stockholders who have questions or requests for assistance in completing and submitting proxy cards should contact Morrow & Co., LLC, our proxy solicitor, at 470 West Ave., Stamford, CT 06920 or (203) 658-9400.

 

Stockholders who hold their shares of LSB common stock in “street name,” meaning in the name of a bank, broker or other person who is the record holder, must either direct the record holder of their shares of LSB common stock how to vote their shares or obtain a proxy from the record holder to vote their shares at the Special Meeting.

 

Participants in the LSB Employee Stock Ownership Plan (the “ESOP”) will receive a voting instruction form that reflects the shares that may be voted under the ESOP. Under the terms of the ESOP, all shares held by the ESOP are voted by the ESOP trustees, but each participant in the ESOP may direct the trustees on how to vote the shares of common stock allocated to his or her account. Unallocated shares and allocated shares for which no timely voting instructions are received will be voted by the ESOP trustees in the same proportion as the shares for which the trustees have received timely voting instructions, provided that in the absence of any voting directions as to allocated stock, the board of directors of River Bank will direct the ESOP trustees as to the voting of all shares of stock in the ESOP. The deadline for returning the ESOP voting instruction form to the ESOP trustee is [ • ].

 

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that if a household participates in the householding program, it will receive an envelope containing one set of proxy materials and a separate proxy card for each stockholder account in the household. Please vote all proxy cards enclosed in such a package. LSB will promptly deliver a separate copy of the proxy statement or proxy card to you if you contact it at the following address or telephone number: Cynthia J. Milne, Secretary, LSB Corporation, 30 Massachusetts Avenue, North Andover, Massachusetts 01845; telephone 978-725-7553. If you want to receive separate copies of proxy statements in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker, or other nominee record holder, or you may contact LSB at the address or telephone number above.

 

Participation in householding will not affect or apply to any of your other stockholder mailings such as dividend checks, Forms 1099, or account statements. Householding saves money by reducing printing and postage costs and it is environmentally friendly. It also creates less paper for participating stockholders to manage. If you are a beneficial holder, you can request information about householding from your broker, bank or other nominee.

Revocability of Proxies

 

If you have not submitted a proxy through your broker or other nominee, you may revoke your proxy at any time before it is voted at the Special Meeting by:

 

 

Attendance at the Special Meeting will not, in and of itself, constitute revocation of a proxy.

 

If your shares are held in “street name,” you should follow the voter instruction form provided by your broker or other nominee regarding revocation of proxies. If the holder of record of your shares is your broker, bank or other nominee and you wish to vote at the Special Meeting, you must bring a legal proxy from your broker, bank or other nominee authorizing you to vote those shares.

 

You should send any notice of revocation of your proxy card to:

 

LSB Corporation
30 Massachusetts Avenue
North Andover, MA 01845
Attention: Cynthia Milne, Secretary

 

Solicitation of Proxies and Expenses

 

In addition to solicitation by mail, our directors, officers and employees may solicit proxies by telephone, other electronic means or in person. These people will not receive any additional compensation for their services, but we will reimburse them for their out-of-pocket expenses. We will reimburse banks, brokers, nominees, custodians and fiduciaries for their reasonable expenses in forwarding copies of this proxy statement to the beneficial owners of shares of LSB common stock and in obtaining voting instructions from those owners. We will pay all expenses of filing, printing and mailing this proxy statement.

 

We have retained Morrow & Co., LLC, 470 West Ave., Stamford, CT 06920 to assist in the solicitation of proxies by mail, telephone or other electronic means, or in person, for a fee of approximately $9,000 plus reasonable out-of-pocket expenses relating to the solicitation. All costs of soliciting proxies will be borne by LSB.

 

Other Business

 

We are not currently aware of any business to be acted upon at the Special Meeting other than the matters discussed in this proxy statement. Under our bylaws, business transacted at the Special Meeting is limited to matters set forth in the notice of Special Meeting, which is provided at the beginning of this proxy statement, unless otherwise provided by law. If other matters do properly come before the Special Meeting, or at any adjournment of the Special Meeting, we intend that shares of LSB common stock represented by properly submitted proxies will be voted by and at the discretion of the persons named as proxies on the proxy card. The grant of a proxy will confer discretionary authority on the persons named as proxies on the proxy card to vote in accordance with their best judgment on other matters that are properly presented at the Special Meeting

 

THE MERGER

 

(Proposal 1)

 

This discussion of the Merger is qualified by reference to the Merger Agreement, which is attached to this proxy statement as Annex A. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.

 

General

 

The Merger Agreement provides for the Merger of Merger Sub with and into LSB. LSB will be the surviving corporation in the Merger and will continue its existence under the laws of the Commonwealth of Massachusetts as a wholly-owned subsidiary of People’s United. Simultaneously with the Merger, River Bank will merge with and into People’s United Bank, which is a wholly-owned subsidiary of People’s United, and People’s United Bank will be the surviving entity (the “Bank Merger”). As a result of the Merger, LSB will cease to exist as a separate company and its common stock will no longer be listed on the NASDAQ Global Market. The Merger will be consummated when the articles of merger have been filed with the Secretary of the Commonwealth of Massachusetts in accordance with the Massachusetts Business Corporation Act (the “MBCA”), which is expected to occur as soon as practicable after the Special Meeting and the satisfaction or waiver of all other conditions to closing, unless LSB and People’s United agree to specify a later effective time in the articles of merger.

 

As of the effective time of the Merger, holders of shares of LSB common stock will have no further ownership interest in the surviving corporation. Instead, each holder of LSB common stock outstanding immediately prior to the effective time of the Merger will be entitled to receive $21.00 in cash per share, without interest and less any applicable withholding taxes. At the effective time of the Merger, each outstanding option, whether vested or unvested, to purchase shares of LSB common stock will be canceled and the holder of such stock option will receive an amount in cash equal to the number of shares of common stock underlying the stock option multiplied by the excess, if any, of the Merger Consideration over the exercise price applicable to that stock option.

 

Parties to the Merger

 

LSB Corporation.

 

LSB Corporation is a Massachusetts corporation that is a one bank holding company and is subject to regulation, supervision and periodic examination by the Board of Governors of the Federal Reserve System and the Massachusetts Division of Banks. LSB, which was organized in 2001, has its principal executive office at 30 Massachusetts Avenue, North Andover, Massachusetts, 01845. LSB’s phone number is (978) 725-7500. Our common stock is publicly traded, and we are registered as an issuer of publicly-traded equity securities with the Securities and Exchange Commission. Our common stock is quoted on the NASDAQ Global Market under the symbol “LSBX.”

 

LSB Corporation is a one-bank holding company principally conducting business through River Bank. River Bank offers a range of commercial and consumer loan and deposit products. We do not engage in any business activity at the holding company level.

 

For more information on the business of LSB Corporation and our subsidiaries, please refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2009. Please refer to the section entitled “Where You Can Find More Information” beginning on page 64 of this proxy statement in order to find out where you can obtain copies of our Annual Report as well as other documents that we file with the Securities and Exchange Commission.

 

River Bank

 

River Bank, LSB’s sole banking subsidiary, is a Massachusetts-chartered stock savings bank that was founded in 1868 as Lawrence Savings Bank. River Bank converted from mutual to stock form on May 9,

1986, and changed its name to River Bank on June 26, 2006. River Bank is subject to supervision, regulation, and periodic examination by the Federal Deposit Insurance Corporation and the Massachusetts Division of Banks. River Bank has its principal executive office at 30 Massachusetts Avenue, North Andover, Massachusetts, 01845, and its phone number is (978) 725-7500. River Bank has 5 full-service banking offices in Massachusetts in Andover, Lawrence, Methuen (2) and North Andover and 2 full-service banking offices in New Hampshire in Derry and Salem.

 

River Bank has three wholly-owned subsidiaries. Shawsheen Security Corporation and Shawsheen Security Corporation II engage exclusively in buying, selling and holding securities for their own accounts. Spruce Wood Realty Trust holds real estate used in the ordinary course of River Bank’s business.

 

River Bank offers various financial products to the general public. These products include loans for residential real estate, commercial real estate, construction, consumer and commercial businesses. River Bank offers various deposit accounts including savings, checking, money market, certificates of deposit and individual retirement accounts. River Bank invests a portion of its funds in federal funds and investment securities.

 

People’s United Financial, Inc.

 

People’s United Financial, Inc., a Delaware corporation, is a savings and loan holding company formed for the purpose of effectuating the conversion of People’s Bank and People’s Mutual Holdings from a mutual holding company structure to a stock holding company structure. The common stock of People’s United is publicly traded and it is registered as an issuer of publicly-traded equity securities with the Securities and Exchange Commission. People’s United’s common stock is quoted on the NASDAQ Global Select Market under the symbol “PBCT.”

 

People’s United is regulated by the Office of Thrift Supervision (the “OTS”) and subject to OTS examination, supervision and reporting requirements. In addition, the OTS has enforcement authority over People’s United and People’s United Bank.

 

The principal business of People’s United is to provide, through People’s United Bank and its subsidiaries, commercial, retail and small business banking, and wealth management services to individual, corporate and municipal customers. Traditional banking activities are conducted primarily within New England and include extending secured and unsecured commercial and consumer loans, originating mortgage loans secured by residential and commercial properties, and accepting consumer, commercial and municipal deposits. In addition to traditional banking activities, People’s United Bank provides specialized financial services tailored to specific markets including: personal, institutional and employee benefit trust; cash management; and municipal banking and finance. Through its non-banking subsidiaries, People’s United Bank offers: brokerage, financial advisory services, investment management services and life insurance through People’s Securities, Inc.; equipment financing through People’s Capital and Leasing Corp. and Financial Federal Credit Inc.; and other insurance services through R.C. Knox and Company, Inc. and Chittenden Insurance Group, LLC.

 

The principal executive office of People’s United is 850 Main Street, Bridgeport, Connecticut, 06604 and its phone number is (203) 338-7171.

 

People’s United Bank

 

People’s United Bank, a federally-chartered stock savings bank and wholly-owned subsidiary of People’s United, has its principal executive offices at 850 Main Street, Bridgeport, Connecticut, 06604 and its phone number is (203) 338-7171. People’s United Bank operates more than 300 branches in Connecticut, Maine, Massachusetts, New Hampshire, Vermont and in Westchester County, New York. In addition to traditional banking activities, People’s United Bank provides specialized financial services tailored to specific markets including: personal, institutional and employee benefit trust; cash management; and municipal banking and finance.

People’s United Bank’s deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation, and it is subject to regulation, examination and supervision by the OTS as its chartering agency.

 

Bridgeport Merger Corporation

 

Merger Sub, a Massachusetts corporation, is a wholly-owned subsidiary of People’s United. Merger Sub was formed solely for the purpose of effecting the Merger. Merger Sub has not engaged in any business other than activities incidental to its organization and in connection with the transactions contemplated by the Merger Agreement. Merger Sub’s principal executive offices are located at 850 Main Street, Bridgeport, Connecticut, 06604 and its phone number is (203) 338-7171.

 

Background of the Merger

 

The same individuals serve on the Boards of Directors of LSB and River Bank, and meetings of those boards typically are held jointly. In this background section, the phrase “the LSB board” refers jointly to the Boards of Directors of LSB and River Bank, and the term “director” refers to a member of the Boards of Directors of LSB and River Bank, unless the context otherwise requires.

 

The LSB board’s decision to approve the Merger Agreement with People’s United represented the culmination of a process that began earlier this year with LSB’s most recent assessment of its strategic plan, the capital resources necessary to support that plan, and the challenges that LSB could expect to face in raising additional capital. That assessment led the LSB board to conclude, for the reasons described below, that it was an advantageous time for LSB to explore a business combination with a larger banking company.

 

Since January 2006, when Gerald T. Mulligan was elected President and Chief Executive Officer of LSB, our strategic plan has focused on increasing our loan portfolio generally and commercial loans in particular and relying to a significant degree on additional core deposits to fund that loan growth. Our total loans, deposits and borrowed funds increased from December 31, 2005 to December 31, 2009 as follows:

 

 

The favorable growth in loans and deposits did have the effect, however, of reducing our capital ratios. For example, River Bank’s Tier 1 leverage ratio declined from 10.82% at December 31, 2005 to 6.85% at December 31, 2009 primarily as a result of our growth.

 

From time to time since December 31, 2005 the LSB board has assessed, with LSB’s senior management, whether our capital resources were adequate to continue to support our strategic plan. One such assessment occurred in the fall of 2008, after LSB recognized a non-cash charge of $10.1 million on account of an other-than-temporary impairment of preferred securities issued by the Federal National Mortgage Association (“FNMA” or “Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”). The other-than-temporary impairment of the FNMA and FHLMC preferred stock materially reduced the regulatory capital levels of LSB and River Bank, though both remained “well-capitalized” for regulatory purposes.

We took various steps to ameliorate the impact of the reduction in our tangible common equity and regulatory capital ratios. The more significant of those steps were participating in the Capital Purchase Program that the Treasury established under TARP and later obtaining a subordinated loan to River Bank. In December 2008, LSB raised $15.0 million of Tier 1 capital through the sale of preferred stock and common stock warrants to the Treasury under the Capital Purchase Program.

 

Subsequently, in October 2009, LSB decided to repay the capital obtained through the Capital Purchase Program and arranged for River Bank to borrow $6.0 million on a subordinated basis. The entire amount of the subordinated loan will continue to be included as part of River Bank’s Tier 2 capital for regulatory purposes until October 2011, when the amortization of the subordinated debt commences for regulatory purposes and we must deduct $1.2 million annually from the subordinated debt portion of our Tier 2 capital. With the increase in our regulatory capital resulting from net earnings since December 2008 and the proceeds of the subordinated loan obtained in October 2009, we opted to redeem from the Treasury in November 2009 all of the preferred stock, and then decided to repurchase in December 2009 all of the related warrants. As a result of the redemption of the preferred stock and the repurchase of the warrants, we are no longer subject to restrictions regarding dividends, stock repurchases or executive compensation imposed under our agreements with the Treasury or under the Treasury regulations applicable to TARP recipients generally.

 

In the first half of 2010, our senior management began a process of again reassessing the adequacy of our capital resources to continue to support our strategic plan. In connection with that process, senior management developed a set of internal financial projections covering the period from July 1, 2010 through December 31, 2013. These projections sometimes are referred to in this proxy statement as the “Management Projections.” (Key line items from the Management Projections are included elsewhere in this proxy statement. See “— Financial Projections.”) During the course of developing the Management Projections and reassessing the adequacy of our capital resources, and after consultation with Sandler O’Neill + Partners, L.P., our financial advisor, Mr. Mulligan and Diane L. Walker, our Executive Vice President, Treasurer and Chief Financial Officer, concluded that for LSB to have sufficient capital to support continued growth in commercial loans, core deposits and net earnings, we would likely need to raise additional Tier 1 capital by the end of 2011. They also concluded that the most likely method of LSB raising Tier 1 capital would be through the issuance of additional shares of common stock and that any such issuance occurring before the end of 2011 would probably reduce the per share market price of our common stock.

 

Also during the second quarter of 2010, Sandler O’Neill advised Mr. Mulligan and Ms. Walker that investors and others were expecting the economic prospects for larger banking companies in New England to improve in 2010 and that consequently one or more of those companies could be expected to have a significant interest in pursuing a business combination with a company such as LSB. On a related note, Sandler O’Neill observed that the People’s United acquisition from the FDIC of $233 million of deposit liabilities and certain assets of Butler Bank in April 2010 would likely increase the interest that People’s United otherwise would have had in considering a business combination with LSB. Butler Bank was headquartered in Lowell, Massachusetts, and had three branches in northeast Massachusetts, including one in Andover, Massachusetts. LSB and Sandler O’Neill were aware that People’s United had publicly stated that the Butler transaction provided an excellent opportunity for People’s United to expand into attractive, high-density markets in Greater Boston. In late April, Sandler O’Neill spoke generally with John P. Barnes, then the interim President and Chief Executive Officer of People’s United, regarding LSB and other possible acquisition opportunities. On April 28, 2010, Sandler O’Neill sent Mr. Barnes an overview of LSB based upon publicly available data. Sandler O’Neill had a follow-up meeting on May 26 with Mr. Barnes, Paul D. Burner, a Senior Executive Vice President and Chief Financial Officer of People’s United, and Jared Shaw, a Senior Vice President and the officer principally responsible for evaluating and negotiating acquisitions being considered by People’s United. At that meeting, they discussed generally the possibility of People’s United acquiring LSB, among other topics.

 

At a June 9, 2010 meeting, the LSB board, together with Sandler O’Neill, reviewed LSB’s strategic plan, including the Management Projections, the adequacy of our capital resources to support that plan, scenarios in which we might raise additional Tier 1 capital, and the probable dilutive impact on LSB stockholders of issuing additional shares of LSB common stock. Sandler O’Neill also delivered a presentation regarding the

current economic and regulatory environment for the U.S. banking industry; a recent historical overview of the trading market for community bank stocks; a discussion of the three strategic alternatives available to the LSB board — namely, continuing to pursue growth in commercial loans and core deposits, acquiring branches or other banks, or entering into a business combination with a larger banking company; an overview of the current mergers and acquisitions market for community banks both in New England and nationwide; the range of implied valuations of LSB based upon recent transactions; the range of values that could be expected if LSB remained independent and continued to pursue its strategic plan; the present values of the range of future returns that the LSB board could reasonably expect LSB stockholders to receive under alternative strategies; and the potential interest that People’s United and other banking companies in New England might have in pursuing a business combination with LSB.

 

The LSB board concurred with the view of Mr. Mulligan that in order for LSB to have sufficient capital to support continued growth in commercial loans, core deposits and net earnings, we would most likely need to raise Tier 1 capital by the end of 2011 through the issuance of additional shares of common stock and that any such issuance would probably reduce the per share market price of our common stock. The LSB board then reached a consensus that it was an advantageous time to pursue a business combination with a larger banking company, especially in light of the challenges inherent in seeking to continue to grow our commercial loans and core deposits, the uncertainty regarding the potential for higher capital requirements and an increase in the cost of regulatory compliance if the Dodd-Frank bill then under consideration in the Senate was enacted and the uncertainty regarding the federal capital gains tax rate after December 31, 2010. The LSB board also noted that People’s United’s expressed interest following the Butler acquisition in pursuing further acquisitions would likely facilitate LSB’s ability to successfully solicit business combination proposals. At the conclusion of that meeting, the LSB board authorized management to retain Sandler O’Neill to act as LSB’s exclusive financial advisor in connection with a possible business combination or other strategic transaction and to direct Sandler O’Neill to solicit indications of interest from other banking companies in New England regarding a possible business combination with LSB.

 

Later in June, Sandler O’Neill contacted eight banking companies which had a substantial presence in New England and which Sandler O’Neill had reason to expect might be interested in exploring a business combination with LSB . Six of these companies expressed preliminary interest in considering a business combination with LSB, entered into confidentiality agreements, and received a confidential information memorandum prepared by LSB with Sandler O’Neill’s assistance. The memorandum contained the Management Projections among other information. In addition, through Sandler O’Neill, LSB responded to requests for additional information from the prospective bidders and offered to make its senior management available to meet with them. During a telephone conversation between representatives of Sandler O’Neill and Mr. Barnes, Mr. Barnes expressed People’s United’s strong preference to enter into exclusive negotiations with LSB. On June 23, 2010, Mr. Barnes, Mr. Burner and Jeffrey Tengel, a People’s United Executive Vice President responsible for commercial lending, met with Mr. Mulligan, Ms. Walker, Michael J. Ecker, an LSB Executive Vice President and our Chief Lending Officer, and Sandler O’Neill to discuss generally a possible business combination between LSB and People’s United. At that meeting, the People’s United officers indicated that People’s United was considering submitting an indication of interest to acquire LSB for $20.00 per share in cash. Separately, Mr. Mulligan and Ms. Walker met with the Chief Executive Officer and Chief Financial Officer of another prospective bidder, referred to elsewhere in this proxy statement as “Company B,” and Mr. Mulligan and other LSB senior executives participated in telephone discussions with other prospective bidders.

 

People’s United and four other banking companies that had entered into confidentiality agreements submitted written, non-binding indications of interest. LSB received the People’s United indication of interest on July 2, 2010 and the other indications of interest on July 8, 2010. Each proposal was subject to completion of due diligence by the potential acquirers and their representatives, as well as the negotiation of an acceptable definitive merger agreement. Beginning July 6, 2010, LSB granted People’s United access to LSB’s due diligence Web site, expecting, based upon the preliminary indications that Sandler O’Neill had received from other likely bidders, that the People’s United proposal would be among the more attractive indications of interest that LSB would receive.

The LSB board met on July 9, 2010, together with Ms. Walker, Sandler O’Neill and LSB’s counsel, Nutter, McClennen & Fish, LLP, to consider the five indications of interest. The LSB board focused primarily on indications provided by People’s United and two other banking companies headquartered in Massachusetts, referred to in this proxy statement as “Company A” and “Company B.” Sandler O’Neill summarized the details of each indication of interest and provided other relevant information regarding People’s United, Company A and Company B. People’s United proposed an all cash transaction in which LSB common stock would be acquired for a fixed price of $21.00 per share. Company A proposed a transaction in which 75 percent of the shares of LSB common stock would be acquired in exchange for a fixed number of shares of Company A stock and the remaining shares of LSB common stock would be acquired for the equivalent of $20.50 per share in cash. As of the close of trading in Company A stock on July 8, 2010, Company A’s proposal had a nominal value of $20.74 per share. Company B proposed to acquire all of the shares of LSB common stock in exchange for a fixed number of shares of Common B common stock. Company B’s proposal had a nominal value of between $19.00 and $20.00 based upon the closing price for Company B stock on July 8, 2010. Sandler O’Neill also provided the LSB board with a brief description of the other two expressions of interest that LSB received, each of which offered consideration that was materially less than the consideration proposed by Company B.

 

At the July 9, 2010 meeting Sandler O’Neill updated the LSB board on recent trading prices for community bank stocks and discussed developments in the mergers and acquisitions market for community banks and the range of valuations of LSB implied by recent transactions. The Sandler O’Neill presentation also analyzed in detail the consideration proposed by each of People’s United, Company A and Company B relative to various other financial metrics discussed in detail elsewhere in this proxy statement. See “— Opinion of LSB’s Financial Advisor.” Sandler O’Neil also informed the LSB board that Company A, in response to an inquiry from Sandler O’Neill, had stated that it did not expect that it would increase the amount of consideration that it proposed to pay for LSB common stock if Company A had an opportunity to complete its due diligence.

 

In evaluating the proposals submitted by People’s United, Company A and Company B, the LSB board focused primarily on the amount and type of consideration being offered, the ability of each party to obtain regulatory approval, including the probability that a transaction could be completed prior to December 31, 2010 and the impact of each transaction on LSB’s stockholders, employees and customers and the communities that LSB serves. In particular, the LSB board weighed the fixed, all cash proposal by People’s United with the proposals by Company A and Company B that would fluctuate in value based upon the respective market prices of their stock. The LSB board also considered the relative speed with which each bidder would likely complete due diligence and negotiate a definitive merger agreement. In that regard, Mr. Mulligan and Ms. Walker conveyed to the LSB board their impression that given the size of People’s United relative to LSB, there was a greater likelihood that People’s United would not seek to decrease the price that it proposed to pay LSB stockholders in the merger based upon its further due diligence review. Moreover, Sandler O’Neill reported that People’s United was prepared to conduct on-site due diligence the following day and was willing to negotiate a merger agreement based upon a draft to be provided by LSB. Sandler O’Neill also reported to the LSB board that People’s United had expressed a preference that LSB negotiate exclusively with People’s United with a view toward entering into a merger agreement by July 15, 2010.

 

At the conclusion of the July 9, 2010 meeting, the LSB board unanimously concluded that, after taking into account all of the relevant factors, the proposal submitted by People’s United was superior to the proposals submitted by Company A and Company B and that it would be in the best interest of LSB stockholders for LSB to enter into a business combination with People’s United on the terms proposed. The LSB board then directed LSB’s senior management to enter into exclusive negotiations with People’s United. The LSB board also concurred with Sandler O’Neill’s recommendation that LSB should not invite either Company A or Company B to conduct additional due diligence unless and until LSB abandoned negotiations with People’s United.

 

Later on July 9, LSB provided to People’s United the proposed forms of merger and voting agreements that Nutter had prepared, and on July 10, 2010, People’s United conducted its on-site due diligence.

During the ensuing week, LSB and People’s United and their respective representatives engaged in negotiations regarding the terms of the merger agreement, and People’s United and LSB completed their respective due diligence reviews of the other.

 

The LSB board next met on July 15, 2010. All of LSB’s directors were present in person, as were Ms. Walker, Sandler O’Neill and Nutter. Nutter provided a detailed review of the terms of the merger agreement and the voting agreement to be entered into by each of LSB’s directors and executive officers, discussed various legal considerations relevant to the proposed merger agreement, reviewed the terms of arrangements between certain LSB executives and People’s United to be entered into as of the closing (see “— Interests of Certain Persons in the Merger”), and described the regulatory and stockholder approvals necessary in order to complete the merger. Mr. Mulligan, Ms. Walker and Sandler O’Neill discussed their due diligence discussions with People’s United, which discussions focused primarily on the ability of People’s United to fund the aggregate merger consideration from existing financial resources, the pro forma capital ratios that People’s United expected to have following the completion of the merger and the other transaction that People’s United expected to announce concurrently with the LSB transaction, and other matters relevant to an assessment of whether People’s United could reasonably be expected to receive the requisite regulatory approvals on a timely basis. Sandler O’Neill then delivered a presentation which addressed in detail the financial terms of the Merger Agreement and the proposed merger. At the conclusion of that presentation, Sandler O’Neill orally opined to the LSB board that the per share merger consideration of $21.00 to be paid by People’s United pursuant to the terms of the Merger Agreement was fair to the holders of LSB common stock from a financial point of view, and Sandler O’Neill represented that it would deliver to LSB a written fairness opinion to the same effect as soon as practicable. (LSB received Sandler O’Neill’s written fairness opinion on July 21, 2010.)

 

The LSB board unanimously approved the Merger Agreement and the transactions contemplated thereby. Immediately thereafter, each of LSB’s directors and executive officers entered into a voting agreement with People’s United, and the parties then entered into the Merger Agreement. Shortly after the close of trading in LSB common stock on July 15, 2010, each of LSB and People’s United issued a press release publicly announcing the Merger Agreement.

 

The LSB board believes that the entire process described above, from the most recent reassessment of the adequacy of LSB’s capital resources to support our strategic plan through the execution and delivery the Merger Agreement, was conducted in a manner designed to reach an outcome that was in the best interest of our stockholders.

 

Between the date of the Merger Agreement and the date of this proxy statement, neither LSB nor any of its representatives has been contacted by any party other than People’s United with respect to a potential “Acquisition Proposal” (as defined in the Merger Agreement).

 

Financial Projections

 

In the first half of 2010, in connection with reassessing the adequacy of our capital resources to continue to support our strategic plan, senior management developed a set of internal financial projections covering the period from July 1, 2010 through December 31, 2011, and subsequently with the assistance of Sandler O’Neill, extended the period to include the years ending December 31, 2012 and 2013. These projections sometimes are referred to in this proxy statement as the “Management Projections.” A subset of the Management Projections is included below.

 

LSB does not, as a matter of course, publicly disclose projections of future revenues or earnings. During the period leading up to the Merger Agreement, however, senior management provided the Management Projections to LSB’s board of directors, LSB’s financial advisor, Sandler O’Neill, People’s United and the five other possible acquirers that signed the confidentiality agreement and received the confidential information memorandum. We have included in this section a subset of the Management Projections provided or made available to Sandler O’Neill, People’s United and those other possible acquirers, to give our shareholders access to certain non-public information for purposes of considering and evaluating the Merger. The Management Projections were not prepared with a view to compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information.

The Management Projections, including the subset of those projections included in this proxy statement, have been prepared by, and are the responsibility of, LSB’s management. Wolf & Company, P.C., our independent registered public accounting firm, has neither examined nor compiled the Management Projections and, accordingly, Wolf & Company, P.C. does not express an opinion or any other form of assurance with respect thereto. The report of Wolf & Company, P.C., independent registered public accounting firm, on LSB’s consolidated financial statements that is contained in LSB’s Annual Report on Form 10-K for the year ended December 31, 2009, relates to LSB’s historical financial information. It does not extend to the Management Projections and should not be read to do so.

 

In compiling the Management Projections, LSB’s management took into account LSB’s historical performance, combined with management’s estimates regarding future levels of investments, loans, deposits and borrowings, operating income, provision for loan losses and income taxes. The Management Projections were developed in a manner consistent with management’s historical development of budgets and were not developed for public disclosure. Although the Management Projections are presented with numerical specificity, these projections reflect numerous assumptions and estimates as to future events made by LSB’s management that LSB’s management believed were reasonable at the time the Management Projections were prepared. LSB believes that the Management Projections are not reflective of the manner in which People’s United would operate LSB after the Merger. In addition, factors such as industry performance and general business, economic, regulatory, market and financial conditions, all of which are difficult to predict and beyond the control of LSB’s management, may cause the Management Projections or the underlying assumptions to be inaccurate. Such factors include those that are more particularly described under the heading “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009 as updated by our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010. Accordingly, there can be no assurance that the Management Projections will be realized, and actual results may be materially greater or less than those contained in the projections. The inclusion of the subset of the Management Projections in this proxy statement should not be regarded as an indication that LSB’s board of directors, Sandler O’Neill, People’s United or any other recipient of the Management Projections considered, or now considers, the Management Projections to be a reliable prediction of future results and such projections should not be relied on as such.

 

The Management Projections reflected management’s assessment, at that time, of LSB’s prospects given its current operating environment. LSB does not intend to update or otherwise revise the Management Projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Management Projections are shown to be in error.

 

Management Projections Provided to Sandler O’Neill and People’s United

 

Sandler O’Neill relied upon the Management Projections summarized below in connection with its financial and valuation analyses, including its net present value analysis, which was among the factors considered by Sandler O’Neill in its opinion to LSB’s Board. See “— Opinion of LSB’s Financial Advisor” beginning on page 28. LSB also provided those projections to People’s United and other possible acquirers in the confidential information memorandum.

 

Recommendation of the Board of Directors; Reasons for the Merger

 

Recommendation of the Board of Directors

 

The LSB board of directors unanimously determined that the Merger Agreement and the Merger were advisable and in the best interest of our stockholders, adopted the Merger Agreement and approved the Merger, and recommended that LSB’s stockholders approve the Merger Agreement. In connection with the foregoing, the board considered the opinion of Sandler O’Neill, LSB’s financial advisor, in making its recommendation. For more information on the opinion of Sandler O’Neill, see the section entitled “— Opinion of LSB’s Financial Advisor” beginning on page 28 of this proxy statement. The LSB board of directors unanimously recommends that you vote “FOR” approval of the Merger Agreement.

 

Reasons for the Merger

 

In reaching its determination, our board consulted with senior management and our financial and legal advisors, drew on their knowledge of the business, operations, properties, assets, financial condition, operating results, historical market prices and prospects of our company, and considered the following factors in favor of the Merger:

 

 

 

 

 

In the course of its deliberations, our board also considered a variety of risks and other countervailing factors, including:

 

 

 

 

 

The foregoing discussion of the factors considered by our board is not intended to be exhaustive, but does set forth the principal factors considered by our board. Our board collectively reached the unanimous conclusion to adopt the Merger Agreement and approve the Merger in light of the various factors described above and other factors that each member of our board felt was appropriate. In view of the wide variety of factors considered by our board in connection with its evaluation of the Merger and the complexity of these matters, our board did not consider it practical and did not attempt to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision. Rather, our board made its recommendation based on the totality of information presented to and the investigation conducted by it. In considering the factors discussed above, individual directors may have given different weights to different factors.

 

After evaluating these factors and consulting with our legal counsel and financial advisors, our board determined that the Merger Agreement was advisable and in the best interest of our stockholders. Accordingly, our board has unanimously adopted the Merger Agreement and approved the Merger. Our board unanimously recommends that you vote “FOR” approval of the Merger Agreement.

 

Opinion of LSB’s Financial Advisor

 

By letter dated June 11, 2010, LSB retained Sandler O’Neill to act as its financial advisor in connection with a possible business combination or other strategic transaction. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. LSB’s board of directors selected Sandler O’Neill on the basis of the firm’s reputation and its experience and expertise in transactions similar to those contemplated by the Merger Agreement.

 

Sandler O’Neill acted as financial advisor to LSB in connection with the proposed transaction and participated in certain of the negotiations leading to the execution of the Merger Agreement. At the July 15, 2010 meeting at which LSB’s board considered and adopted the Merger Agreement, Sandler O’Neill delivered to the board its oral opinion, that, as of such date, the Merger Consideration was fair to the holders of LSB common stock from a financial point of view, and delivered a written fairness opinion to the same effect on July 21, 2010. The full text of Sandler O’Neill’s opinion is annexed hereto as Annex B. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the opinion. LSB’s stockholders are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

 

Sandler O’Neill’s opinion speaks only as of the date of its opinion. The opinion was directed to LSB’s board and is directed only to the fairness of the Merger Consideration to LSB stockholders from a financial point of view. It does not address the underlying business decision of LSB to engage in the Merger or any other aspect of the Merger and is not a recommendation to any LSB stockholder as to how such stockholder should vote at the Special Meeting with respect to the Merger or any other matter.

In connection with rendering its July 15, 2010 opinion, Sandler O’Neill reviewed and considered, among other things:

 

(1) the Merger Agreement;

 

(2) certain publicly available and other historical financial information of LSB that it deemed relevant;

 

(3) the Management Projections;

 

(4) certain publicly available financial statements and other historical financial information of People’s United that it deemed relevant in determining People’s United’s financial capacity to undertake the Merger;

 

(5) to the extent publicly available, the financial terms of certain recent business combinations in the banking industry;

 

(6) the current market environment generally and the banking environment in particular; and

 

(7) such other information, financial studies, analyses and investigations and financial, economic and market criteria as it considered relevant.

 

In performing its review, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to it from public sources, that was provided to it by LSB or its representatives or that was otherwise reviewed by it, and assumed such accuracy and completeness for purposes of rendering its opinion. Sandler O’Neill further relied on the assurances of the management of each of LSB and People’s United that they were not aware of any facts or circumstances that would make any of such information inaccurate or misleading. Sandler O’Neill was not asked to undertake, and has not undertaken, an independent verification of any of such information and Sandler O’Neill does not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of LSB or People’s United or any of their subsidiaries, or the collectability of any such assets, nor has Sandler O’Neill been furnished with any such evaluations or appraisals. Sandler O’Neill did not make an independent evaluation of the adequacy of the allowance for loan losses of LSB or People’s United nor has Sandler O’Neill reviewed any individual credit files relating to LSB or People’s United. Sandler O’Neill assumed, with LSB’s consent, that the respective allowances for loan losses for both LSB and People’s United were adequate to cover such losses and will be adequate on a pro forma basis for the combined entity.

 

With respect to the internal financial projections provided by senior management of LSB (referred to in this proxy statement as the Management Projections) and the estimated earning and growth rates discussed with senior management and used by Sandler O’Neill in its analyses, LSB’s management confirmed to Sandler O’Neill that it reflected the best currently available estimates and judgments of management of the future financial performance of LSB, and Sandler O’Neill assumed that such performance would be achieved. Sandler O’Neill expressed no opinion as to such Management Projections or the assumptions on which they were based. Sandler O’Neill also assumed that there had been no material change in LSB’s and People’s United’s assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to Sandler O’Neill. Sandler O’Neill further assumed in all respects material to Sandler O’Neill’s analysis that each of LSB and People’s United would remain as a going concern for all periods relevant to Sandler O’Neill’s analyses, that all of the representations and warranties contained in the Merger Agreement and all related agreements were true and correct, that each party to the agreements will perform all of the covenants required to be performed by such party under the agreements, that the conditions precedent in the agreements will not be waived. Finally, with LSB’s consent, Sandler O’Neill assumed the accuracy of the advice LSB received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the Merger and the other transactions contemplated by the Merger Agreement.

 

Sandler O’Neill’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion. Events occurring after the

date of the opinion could materially affect the opinion. Sandler O’Neill did not undertake to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date of the opinion.

 

Sandler O’Neill’s opinion is directed to the LSB board of directors in connection with its consideration of the Merger and does not constitute a recommendation to any stockholder of LSB as to how such stockholder should vote at any meeting of stockholders called to consider and vote upon the Merger. Sandler O’Neill’s opinion is directed only to the fairness, from a financial point of view, of the Merger Consideration to holders of LSB common stock and does not address the underlying business decision of LSB to engage in the Merger, the relative merits of the Merger as compared to any other alternative business strategies that might exist for LSB or the effect of any other transaction in which LSB might engage. Sandler O’Neill’s opinion is not to be quoted or referred to, in whole or in part, in a registration statement, prospectus, proxy statement or in any other document, nor shall Sandler O’Neill’s opinion be used for any other purpose, without Sandler O’Neill’s prior written consent. The opinion was approved by Sandler O’Neill’s fairness opinion committee and does not address the amount of compensation to be received in the Merger by any LSB officer, director or employee.

 

Summary of Proposal.   Sandler O’Neill reviewed the financial terms of the proposed transaction. Using $21.00 per share in cash, Sandler O’Neill calculated an aggregate transaction value of $95.9 million, which was comprised of a Common Stock Consideration of $94.6 million and an Option Consideration of $1.2 million. Based upon financial information as or for the twelve month period ended March 31, 2010, Sandler O’Neill calculated the following transaction ratios:

 

 

The aggregate transaction value of approximately $95.9 million is based upon the offer price per share of $21.00, 4,506,686 LSB common shares outstanding, and 210,400 options outstanding with a weighted average exercise price of $15.12.

 

Comparable Company Analysis.   Sandler O’Neill used publicly available information to perform a comparison of selected financial and market trading information for LSB.

 

Sandler O’Neill also used publicly available information to compare selected financial and market trading information for LSB and a group of financial institutions selected by Sandler O’Neill. The LSB peer group consisted of publicly traded commercial banks and thrifts in the New England region with assets between $600 million and $3 billion:

 

 

The analysis compared publicly available financial information for LSB and the high, low, mean and median financial and market trading data for the LSB peer group as of or for the twelve-month period ended

March 31, 2010. The table below sets forth the data for LSB and the median data for the LSB peer group as of or for the twelve-month period ended March 31, 2010, with pricing data as of July 14, 2010.

 

Comparable Company Analysis

 

 

Net Present Value Analysis.   Sandler O’Neill performed an analysis that estimated the present value per common share of LSB through December 31, 2013, assuming that LSB performed in accordance with the Management Projections. First, to approximate the terminal value of LSB common stock at December 31, 2013, Sandler O’Neill applied price to last twelve months earnings multiples of 8.0x to 18.0x and multiples of discount rate ranging from 12.2% to 18.2%. Second, to approximate the terminal value of LSB common stock at December 31, 2013, Sandler O’Neill calculated using the same range of price to last twelve months earnings multiples (8.0x — 18.0x) applied to a range of discounts and premiums to the Management Projections. The range applied to the budgeted net income was 25% under budget to 25% over budget, using a discount rate of 15.2% for the tabular analysis. Third, to approximate the terminal value of LSB common stock at December 31, 2013, Sandler O’Neill applied price to tangible book value multiples ranging from 75% to 150% and multiples of discount rates ranging from 12.2% to 18.2%. As illustrated in the following tables, this analysis indicated an imputed range of values per share for LSB common stock of $9.20 to $23.41 when applying the price/earnings multiples to the various discount rates, $7.77 to $26.48 when applying the price/earnings multiples to the -25% / +25% budget range, and $8.49 to $19.19 when applying multiples of tangible book value to the various discount rates.

 

Earnings Per Share Multiples

 

Tangible Book Value Multiples

 

 

In connection with its analyses, Sandler O’Neill considered and discussed with LSB’s board how the present value analyses would be affected by changes in the underlying assumptions, including variations with respect to net income. Sandler O’Neill noted that the discounted dividend stream and terminal value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

 

Analysis of Selected Merger Transactions.   Sandler O’Neill reviewed two sets of mergers and acquisitions. The first set of mergers and acquisitions included 33 transactions announced from January 1, 2009 through July 14, 2010 involving nationwide commercial banks and thrifts with announced transaction values between $15 million and $200 million. The second set of mergers and acquisitions included 5 transactions since January 1, 2009 through July 14, 2010 involving New England commercial banks and thrifts. Sandler O’Neill reviewed the following multiples: transaction price at announcement to last twelve months’ earnings per share, transaction price to book value, transaction price to tangible book value, tangible book premium to core deposits, and transaction price to seller’s stock price two days before announcement. As illustrated in the following table, Sandler O’Neill compared the proposed merger multiples to the median multiples of comparable transactions.

 

 

Pro Forma Capital Ratios.   During the course of the transaction, LSB discussed with the senior management of People’s United the projected pro forma tangible common equity/tangible assets ratio for the transaction with LSB. People’s United noted that, concurrent with its merger with LSB, it was also going to announce a second acquisition involving another financial institution. People’s United indicated a tangible common equity/tangible assets ratio, pro forma for both LSB transaction and the aforementioned second transaction of approximately 15.0%.

 

Miscellaneous.   Sandler O’Neill acted as LSB’s financial advisor in connection with the Merger and will receive a fee of approximate $959,000 for its services, a substantial portion of which is contingent upon the consummation of the Merger. Sandler O’Neill will also receive a fee of $150,000 for rendering its opinion. LSB has agreed to indemnify Sandler O’Neill against certain liabilities arising out of its engagement. In the ordinary course of its business as a broker-dealer, Sandler O’Neill may purchase securities from and sell securities to LSB and People’s United and their respective affiliates.

Certain Effects of the Merger

 

If LSB stockholders approve the Merger Agreement and the other conditions to the closing of the Merger are either satisfied or waived, Merger Sub will be merged with and into LSB, with LSB as the surviving corporation. After the Merger, LSB will be a wholly-owned subsidiary of People’s United.

 

When the Merger is completed, each share of LSB common stock issued and outstanding immediately prior to the effective time of the Merger (other than treasury shares, shares held by subsidiaries of LSB and shares held by People’s United and its subsidiaries) will be converted into the right to receive $21.00 in cash without interest and less any applicable withholding taxes.

 

In addition to the Merger Consideration, People’s United has agreed to pay or cause to be paid, together with the Merger Consideration, any regular quarterly dividend declared but unpaid as of the closing date of the Merger, with respect to each share of our common stock issued and outstanding on the record date for such dividend, and an amount per share of our common stock equal to the product of $0.001 multiplied by the number of days from but not including the record date for the most recent regular quarterly dividend declared and paid prior to the closing date of the Merger through and including such closing date.

 

Also, at the effective time of the Merger:

 

 

At the effective time of the Merger, current LSB stockholders will cease to have ownership interests in LSB or rights as LSB stockholders. Therefore, such current stockholders of LSB will not participate in any future earnings or growth of LSB or People’s United and will not benefit from any appreciation in the value of LSB or People’s United.

 

LSB’s common stock is currently registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and is quoted on the Nasdaq Global Market under the symbol “LSBX.” As a result of the Merger, People’s United will own all of the capital stock of LSB. After the Merger, LSB common stock will cease to be quoted on the Nasdaq Global Market. In addition, registration of LSB common stock under the Exchange Act will be terminated. This termination will make certain provisions of the Exchange Act, such as the requirement of furnishing a proxy or information statement in connection with stockholders’ meetings, no longer applicable to LSB. After the effective time of the Merger, LSB will no longer be required to file periodic reports with the SEC.

 

At the effective time of the Merger, the directors of Merger Sub immediately prior to the effective time of the Merger will become the directors of the surviving corporation and the officers of Merger Sub immediately prior to the effective time of the Merger will become the officers of the surviving corporation. The articles of organization of LSB will be amended and restated to be the same as the articles of organization of Merger Sub as in effect immediately prior to the effective time of the Merger, except that the name shall not be amended. The bylaws of LSB will be amended and restated to be the same as the bylaws of Merger Sub as in effect immediately prior to the effective time of the Merger.

 

INTERESTS OF CERTAIN PERSONS IN THE MERGER

 

In considering the recommendations of our board with respect to the Merger Agreement, you should be aware that LSB’s directors and executive officers have interests in the Merger that may be different from, or in addition to, those of LSB’s stockholders generally. These interests may create potential conflicts of interest. The board of directors was aware of these interests and considered them, among other matters, when it adopted the Merger Agreement and approved the Merger and voted to recommend that LSB’s stockholders vote in favor of approving the Merger Agreement.

 

Change in Control Payments

 

In 2006 and 2007, LSB and River Bank entered into special termination agreements with certain executive officers. These agreements provide generally that if the officer’s employment with LSB is terminated for any reason (other than death, disability or cause) within two years of a change-in-control, the officer will be entitled to receive a lump-sum severance payment and certain benefit continuation rights. The gross amount of the severance payment under these agreements is equal to approximately three times the affected officer’s average taxable annual compensation over the five previous calendar years of his or her employment with LSB (or such shorter period in which the officer was employed) reduced by the sum of one dollar and the present value of any other payment or benefit received by the executive that is deemed a “parachute payment” within the meaning of Section 280G of the Code. The benefit continuation rights under these agreements provide that the affected officer would be entitled to the continuation of his of her life, medical and disability benefits at the same level of coverage and at the same out-of-pocket cost to the officer, immediately prior to the change-in-control, or at the officer’s election, the earlier commencement of the proposed business combination (as defined in the special termination agreement) that results in such change-in-control. The present value of the employer-paid portion of the insurance premiums for the continued coverage, assuming commencement of the benefit continuation on November 1, 2010 using applicable discount rates in effect in July 2010, is approximately $42,000 for each of the executive officers. Under the Merger Agreement, People’s United has agreed that each of the officers party to a special termination agreement shall terminate employment immediately following the effective time of the Merger, and be entitled to receive the severance payments determined in accordance with his or her special termination agreement.

 

The following table sets forth, for such officer, the amount payable under the special termination agreements, if the Merger is completed on November 1, 2010:

 

 

 

 

Additionally, Jacob Kojalo, River Bank’s Executive Vice President, Commercial Lending, may receive a change in control payment under LSB’s special separation plan, which is described in the section entitled

“Employee Matters — Severance Obligations.” Pursuant to the special separation plan, if Mr. Kojalo’s employment is terminated other than for cause within one year following the effective date of the Merger, he will be entitled to receive an amount equal to 78 weeks’ compensation, or approximately $249,000, and benefit continuation from the date of termination until the earlier of (i) one year, or (ii) he becomes eligible to participate in another group health plan.

 

Consulting Agreements

 

The Merger Agreement provides that, at closing, People’s United will enter into consulting agreements with certain officers of LSB. The consulting agreements have terms ranging from six months to two years, and provide compensation to certain officers in exchange for consulting services in amounts from $30,000 per six months to $90,000 per year, as set forth in the following table:

 

 

Under the consulting agreements, during the consulting period, the consultant agrees to be available to People’s United to provide the consulting services reasonably requested by People’s United. The consulting agreements provide, however, that the level of services provided by any consultant will be no more than 20% of the average level of services provided by the consultant to LSB during the preceding three years. If the consulting services are terminated by People’s United prior to the expiration of the consulting period other than for cause, the consultant is entitled to the balance of the consulting fee that he or she would otherwise be entitled to for the remainder of the consulting period. Additionally, each of the officers who enter into consulting agreements agrees not to hire or solicit for employment any of the employees of the surviving corporation or of People’s United during the term of the consulting agreement and for one year thereafter.

 

Retention Payments

 

Under the Merger Agreement, LSB may pay retention bonuses up to a maximum aggregate amount to employees and officers, subject to the satisfaction of certain requirements and the employee or officer’s continued employment with LSB until the closing date. The employees and officers are also entitled to the retention payments if LSB terminates the employee’s or officer’s employment without cause on or prior to the closing date, or if such employee’s or officer’s employment terminates on or prior to the closing date due to his or her death or permanent disability. The Merger Agreement provides for the maximum retention payments that may be made to certain senior executive officers, including Gerald T. Mulligan (up to $100,000), Diane L. Walker (up to $70,000), and Stephen B. Jones, Teresa K. Flynn and Michael J. Ecker (each, up to $50,000), subject in each case to the executive’s satisfaction of individual performance goals and significant assistance in the closing of the transactions contemplated by the Merger Agreement.

 

The Merger Agreement establishes a retention bonus pool in the amount of $150,000 to be distributed, in the discretion of LSB, to LSB employees (other than those executive officers listed in the preceding paragraph) as of the closing date, subject to the employees’ continued employment with LSB until the closing date. The allocation of such pool amount among LSB’s employees is subject to the consent of People’s United, which People’s United has agreed not to unreasonably withhold. Further, any portion of the aggregate retention pool for non-executives that is not paid out as of the closing date will be added to the pool of funds available for employee 2010 annual bonuses, as further described below.

 

2010 Annual Bonuses

 

The Merger Agreement provides that LSB employees, including our executive officers, may receive 2010 annual bonus payments at closing. The LSB board of directors has the discretion to allocate 2010 annual bonus payments to employees of LSB, subject, in all cases, to the affected employee’s continued employment

with LSB through the closing date. Additionally, the 2010 annual bonuses that the LSB board of directors may award to certain executive officers are subject to LSB’s achievement of 2010 performance goals and the respective executive’s satisfaction of applicable performance standards and expectations, as determined by the LSB board of directors.

 

The Merger Agreement provides that the aggregate amount of 2010 annual bonuses paid will not exceed $340,000, increased by any portion of the aggregate retention pool for LSB non-executive employees that is not paid out on the closing date. The LSB board of directors has determined that not more than $100,000 of this amount may be paid in the aggregate to our executive officers as 2010 annual bonuses.

 

Indemnification and Insurance

 

Under the terms of the Merger Agreement, our directors and executive officers will be entitled to indemnification in specified circumstances. Additionally, People’s United has agreed to purchase an extended reporting period endorsement for LSB’s directors and officers that will provide coverage for at least six years on terms not materially less favorable to LSB’s directors and officers than LSB’s current directors’ and officers’ liability insurance policy, subject to certain exceptions. The indemnification and insurance provisions are more fully described in the section entitled “The Merger Agreement — Indemnification and Insurance” on page 52 of this proxy statement.

 

VOTING AGREEMENTS

 

In connection with the Merger Agreement, People’s United entered into voting agreements with LSB’s directors and executive officers, who are also stockholders of our company or hold stock options, consisting of John P. Bachini, Malcolm W. Brawn, Thomas J. Burke, Richard H. Harrington, Robert F. Hatem, Marsha A. McDonough, Kathleen Boshar Reynolds, Fred P. Shaheen, Gerald T. Mulligan, Michael J. Ecker, Teresa K. Flynn, Stephen B. Jones, Jacob Kojalo, and Diane L. Walker. As of the record date, there were [ • ] shares of LSB common stock subject to the voting agreements, which represented approximately [ • ]% of the outstanding LSB common stock as of that date.

 

Pursuant to the voting agreements, each of these stockholders has agreed that, at the Special Meeting held in connection with the Merger Agreement or for purposes of any other vote taken in connection with the Merger Agreement, he or she would:

 

 

Nothing in the voting agreements will be deemed to apply to, or limit in any manner, the obligations of the stockholders to comply with whatever fiduciary duties they may have as a director, officer or employee of LSB.

The voting agreements will terminate on the earliest to occur of (1) the approval of the Merger Agreement by not less than two-thirds of the shares of LSB common stock then outstanding and entitled to vote, (2) the termination of the Merger Agreement in accordance with its terms, or (3) upon mutual written agreement of the parties to the voting agreement.

 

THE MERGER AGREEMENT

 

The following is a summary of the material terms of the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated in this proxy statement by reference. This description is qualified in its entirety by, and made subject to, the more complete information set forth in the Merger Agreement. You should read the Merger Agreement carefully and in its entirety. This summary may not contain all of the information about the Merger Agreement that is important to you.

 

Except for the Merger Agreement’s status as a contractual document that establishes and governs the legal relations of the parties thereto with respect to the Merger, we do not intend for its text to be a source of factual, business or operational information about us and our subsidiaries. The representations, warranties and covenants made by the parties in the Merger Agreement are qualified and limited, including by information in the schedules referenced in the Merger Agreement that we delivered in connection with the execution of the Merger Agreement. Representations and warranties may be used as a tool to allocate risks between the respective parties to the Merger Agreement, including where the parties do not have complete knowledge of all facts, instead of establishing such matters as facts. Furthermore, the representations and warranties may be subject to different standards of materiality applicable to the contracting parties, which may differ from what may be viewed as material by our stockholders. These representations and warranties may or may not have been accurate as of any specific date and do not purport to be accurate as of the date of this proxy statement. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the Merger Agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement. Accordingly, the representations and warranties should not be relied upon as statements of factual information. Stockholders are not third-party beneficiaries under the Merger Agreement and, therefore, may not directly enforce or rely on its terms and conditions and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of LSB or our affiliates.

 

Structure

 

If all of the conditions to the Merger are satisfied or waived in accordance with the Merger Agreement, Merger Sub, a wholly-owned subsidiary of People’s United created solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, will merge with and into LSB, with LSB being the surviving corporation. LSB will cease to exist as a separate company and LSB common stock will no longer be listed on the NASDAQ Global Market and we will no longer file periodic reports with the Securities and Exchange Commission. After the Merger, LSB will be a wholly-owned subsidiary of People’s United. We sometimes refer to LSB after the Merger as the surviving corporation.

 

People’s United has the right at any time to change the structure of the business combination set forth in the Merger Agreement, unless such change in structure would change the amount or kind of consideration or would materially impede or delay the closing of the Merger.

 

Effective Time

 

The merger will become effective when the articles of merger have been filed with the Secretary of the Commonwealth of Massachusetts unless LSB and People’s United agree to specify a later effective time in the articles of merger. We expect the Merger to become effective as soon as practicable after the Special Meeting and the satisfaction or waiver of all of the other conditions to closing the Merger. We refer to the time at which the Merger is consummated as the effective time. Although we expect that the Merger will be

consummated during the fourth quarter of 2010, we cannot specify when, or assure you that, we and People’s United will satisfy or waive all of the conditions to the Merger.

 

Articles of Organization and Bylaws

 

The articles of organization of LSB will be amended and restated to be the same as the articles of organization of Merger Sub as in effect immediately prior to the effective time of the Merger, except that the name shall not be amended. The bylaws of LSB will be amended and restated to be the same as the bylaws of Merger Sub as in effect immediately prior to the effective time of the Merger.

 

Board of Directors and Officers of the Surviving Corporation

 

The directors of Merger Sub immediately prior to the Merger will become the directors of the surviving corporation following the Merger. The officers of Merger Sub immediately prior to the Merger will become the officers of the surviving corporation following the Merger.

 

Merger Consideration

 

At the effective time of the Merger, each outstanding share of LSB common stock will be converted into the right to receive $21.00 per share, other than shares held as treasury stock or shares owned by any wholly owned subsidiary of LSB or People’s United, except for shares held in a fiduciary capacity. No interest will be paid with respect to the Merger Consideration. In addition to the Merger Consideration, People’s United has agreed to pay or cause to be paid (i) any regular quarterly dividend declared in compliance with the Merger Agreement but unpaid as of the closing date of the Merger, with respect to each share of our common stock issued and outstanding on the record date for such dividend, and (ii) an amount per share of our common stock equal to the product of $0.001 multiplied by the number of days from but not including the record date for the most recent regular quarterly dividend declared and paid prior to the closing date of the Merger through and including such closing date.

 

Treatment of Options and Restricted Stock

 

At the effective time, each issued and outstanding option to purchase shares of LSB common stock will automatically be converted into the right to receive an amount in cash equal to the difference (if positive) between $21.00 and the exercise price of the option, subject to applicable tax withholdings. As of August 6, 2010 there were outstanding options to purchase 210,400 shares of LSB common stock with an exercise price per share less than the Merger Consideration.

 

In addition, if the effective time of the merger occurs before December 10, 2010, 6,750 shares of issued and outstanding LSB common stock granted in the fall of 2009 to Gerald T. Mulligan, Michael J. Ecker, and Stephen B. Jones under LSB’s 2006 Stock Option and Incentive Plan and that are subject to transfer restrictions prior to that date will be automatically released from such transfer restriction and converted into the right to receive $21.00 per share.

 

Dissenting Shares and Appraisal Rights

 

As noted elsewhere in this proxy statement, we do not believe that holders of LSB common stock are entitled to appraisal rights in connection with the Merger because stockholders will receive only cash for their shares and no director, officer, or controlling stockholder has a direct or indirect material financial interest in the Merger other than in his, her or its capacity as a stockholder of LSB or as a director, officer, employee or consultant of LSB pursuant to a bona fide arrangement with LSB. The relevant provisions of the Massachusetts Business Corporation Act have not yet been the subject of judicial interpretation, however, and a court conceivably might disagree with our interpretation and decide that LSB stockholders may assert appraisal rights in connection with the Merger. We reserve the right to challenge any purported exercise of appraisal rights in respect of the Merger. If you want to consider asserting appraisal rights, you should obtain legal advice. See “Appraisal Rights” beginning on page 54 for further information.

Rights of Holders of LSB Common Stock at the Effective Time of the Merger

 

At the effective time of the Merger, holders of our common stock will cease to be, and will have no rights as, our stockholders, other than the right to receive the merger consideration and any unpaid dividends with a record date occurring prior to the effective time of the Merger. After the Merger occurs, there will be no transfers on our stock transfer books of any shares of our common stock.

 

Exchange of Stock Certificates

 

Prior to the effective time of the Merger, People’s United will appoint a paying agent that will make payment of the Merger Consideration in exchange for certificates representing shares of LSB common stock. People’s United will deposit sufficient cash with the paying agent on or before the effective time of the Merger in order to permit the payment of the Merger Consideration. As soon as reasonably practicable after the effective time of the Merger, but in no event later than five business days after the effective time of the Merger, the paying agent will mail to each holder of record of a certificate representing shares of LSB common stock, a letter of transmittal and instructions explaining how to surrender your shares of our common stock in exchange for the Merger Consideration. The letter of transmittal and instructions will specify that delivery will be effected and risk of loss and title to stock certificates will pass only upon proper delivery of the stock certificate to the paying agent and will specify how to properly surrender your stock certificates for payment.

 

You should not send your stock certificates for exchange until you receive the letter of transmittal and instructions referred to above. Do not return your stock certificate with the enclosed proxy card.

 

When you deliver your stock certificates to the paying agent along with a properly executed letter of transmittal and any other required documents, you will be entitled to receive the Merger Consideration provided for under the Merger Agreement for each share of common stock previously represented by your stock certificate, and the stock certificate will be canceled. People’s United, the paying agent and the surviving corporation will be entitled to deduct and withhold from the Merger Consideration any amounts required to be withheld under the Internal Revenue Code or any provision of federal, state, local or foreign law. Holders of our common stock who hold shares in book-entry (rather than certificated) form are not required to deliver an executed letter of transmittal or certificate in order to receive the Merger Consideration to which they are entitled under the Merger Agreement.

 

You are not entitled to receive any interest on the Merger Consideration. The paying agent will issue a check for the Merger Consideration only in the name in which a surrendered stock certificate is registered, unless the stock certificate surrendered is properly endorsed, or otherwise in proper form for transfer, and you show that you paid any applicable stock transfer taxes. Until surrendered in accordance with the provisions stated above, each certificate will, after the effective time of the Merger, represent only the right to receive the Merger Consideration.

 

Beginning one year after the effective time of the Merger, if requested by People’s United, the paying agent will transfer all remaining cash and any documents to People’s United or such other person as directed by People’s United, and People’s United or such other person as directed by People’s United will act as the paying agent. In the event that People’s United requests such a transfer, LSB’s former stockholders may look to People’s United for any amounts owed to them. None of People’s United, People’s United Bank, Merger Sub, LSB, River Bank or the paying agent will be liable to any person in respect of any cash delivered to a public official pursuant to applicable abandoned property, escheat or similar law. If any certificates have not been surrendered prior to three years after the effective time, the amount payable for such certificates will become the property of the surviving corporation to the extent permitted by law.

 

After the effective time of the Merger, there will be no transfers of certificates that previously represented common stock on our stock record books. If, after the effective time of the Merger, stock certificates are presented to People’s United, the surviving corporation or the paying agent for payment, they will be canceled and exchanged for the Merger Consideration, without interest. However, no holder of a stock certificate will have any greater rights against the surviving corporation than may be accorded to general creditors of the surviving corporation under applicable law.

If any of your certificates representing our common stock have been lost, stolen or destroyed, you will be entitled to obtain the Merger Consideration after you make an affidavit of that fact and, if required by People’s United or the paying agent, post a bond as People’s United or the paying agent may direct as indemnity against any claim that may be made against the surviving corporation with respect to your lost, stolen or destroyed stock certificates.

 

Representations and Warranties

 

In the Merger Agreement, LSB and River Bank made customary representations and warranties, subject to exceptions that were disclosed to People’s United, concerning our business and assets. These representations and warranties related to, among other things:

 

 

 

The Merger Agreement also contains customary representations and warranties of People’s United, People’s United Bank and Merger Sub relating to, among other things:

 

 

Many of the representations and warranties are qualified by a material adverse effect standard. A material adverse effect means, with respect to LSB, any fact, change, event, development, effect or circumstance that, individually or in the aggregate, (a) are, or would reasonably be expected to be, materially adverse to the business, operations, assets, liabilities, condition (financial or otherwise), results of operations, cash flows or properties of LSB and its subsidiaries, taken as a whole, or (b) would reasonably be expected to prevent, materially delay or materially impair LSB from performing our obligations under the Merger Agreement or consummating the transactions contemplated by the Merger Agreement on a timely basis, without including the impact of:

 

 

 

With respect to People’s United, a material adverse effect means any fact, change, event, development, effect or circumstance that (a) individually or in the aggregate, would reasonably be expected to materially delay or materially impair the ability of People’s United, People’s United Bank or Merger Sub to perform its respective obligations under the Merger Agreement or to consummate the Merger on a timely basis or (b) has a material adverse effect on the ability of People’s United to obtain in a timely manner all required regulatory approvals.

 

The representations and warranties included in the Merger Agreement are complicated and not easily summarized. You are urged to carefully read Articles III and IV of the Merger Agreement, which is attached to this proxy statement as Annex A .

 

LSB’s Conduct of Business Prior to Completing the Merger

 

Under the Merger Agreement, LSB has agreed that, from the date of the Merger Agreement through the effective time of the Merger or the date, if any, on which the Merger Agreement is terminated, as discussed in the section entitled “— Termination of the Merger Agreement” beginning on page 49 of this proxy statement, LSB and its subsidiaries will not, except as expressly permitted by the Merger Agreement, required by law or to the extent that People’s United otherwise consents in writing:

 

 

 

 

 

 

 

 

 

 

 

 

The agreements relating to the conduct of our business contained in the Merger Agreement are complicated and not easily summarized. You are urged to carefully read Article V of the Merger Agreement, which is attached to this proxy statement as Annex A .

 

People’s United’s Conduct of Business Prior to Completing the Merger

 

From the date of the Merger Agreement through the effective time of the Merger or the date, if any, on which the Merger Agreement is terminated, as discussed in the section entitled “— Termination of the Merger

Agreement” beginning on page 49 of this proxy statement, People’s United has agreed, and has agreed to cause its subsidiaries, except as permitted by the Merger Agreement or required by law, and unless consented to by LSB, not to knowingly take any action that would, or would reasonably be likely to result in (1) any of its representations and warranties in the Merger Agreement being or becoming untrue in any material respect at any time prior to the effective time of the Merger, (2) any of the conditions to the Merger set forth in Article VII of the Merger Agreement not being satisfied, (3) a material violation of any provision of the Merger Agreement, or (4) a material and adverse effect or delay on People’s United’s ability to timely receive any regulatory approvals or otherwise perform its obligations under the Merger Agreement or consummate the transactions contemplated thereby.

 

Stockholder Meeting

 

LSB has agreed to hold as promptly as practicable a meeting of our stockholders to vote on the proposal to approve the Merger Agreement. We have also agreed to ensure that the Special Meeting is called, noticed and held and that all proxies are solicited in compliance with the Massachusetts Business Corporation Act, the articles of organization and bylaws of LSB, and all other applicable legal requirements. In the event that the LSB board of directors withdraws, qualifies or modifies its recommendation that the stockholders approve the Merger Agreement as a result of a Superior Proposal in accordance with the Merger Agreement, LSB nevertheless is required under the Merger Agreement to hold the Special Meeting and submit the Merger Agreement to the stockholders for approval.

 

Conditions to the Merger

 

The obligations of LSB and People’s United to consummate the Merger are subject to the satisfaction or waiver of the following conditions:

 

 

LSB’s obligation to consummate the Merger is subject to the satisfaction of the following additional conditions, any of which can be waived by us:

 

 

 

The obligation of People’s United to consummate the Merger is subject to the satisfaction of the following additional conditions, any of which can be waived by People’s United:

 

 

Solicitation of Proposals from Other Parties

 

LSB has agreed that it and its subsidiaries and its and their respective officers or directors will and will use reasonable best efforts to cause their respective employees, investment bankers, financial advisors, attorneys, accountants, consultants, affiliates and other agents (which are sometimes referred to as LSB’s representatives) not to, directly or indirectly:

 

 

 

An Acquisition Proposal means an inquiry, offer or proposal (other than an offer or proposal from People’s United), whether or not in writing, contemplating, relating to, or that could reasonably be expected to lead to, an acquisition transaction. An acquisition transaction means:

 

 

If, prior to the approval of the Merger Agreement by our stockholders, we receive a bona fide unsolicited written Acquisition Proposal that did not result from a breach by us of any of the no solicitation provisions in the Merger Agreement, as discussed above, our board may participate in discussions or negotiations regarding the unsolicited Acquisition Proposal or furnish the third party with, or otherwise afford access to the third party of, any information with respect to us or any of our subsidiaries or otherwise relating to the Acquisition Proposal if:

 

 

 

 

A Superior Proposal means any bona fide written proposal (on its most recently amended or modified terms, if amended or modified) made by a third party to enter into an acquisition transaction on terms that our

board determines in its good faith judgment, after consultation with and having considered the advice of outside legal counsel and a nationally recognized, independent financial advisor:

 

 

 

 

in each case taking into account all legal, financial, regulatory and other aspects of the proposal.

 

We have agreed to promptly, and in any event within 24 hours, notify People’s United in writing if any proposals or offers are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with, us or any of our representatives, in each case in connection with any Acquisition Proposal. Any such notice will indicate the name of the person initiating such discussions or negotiations or making such proposal, offer or information request and the material terms and conditions of any proposals or offers and, in the case of written materials, providing copies of such materials. We are also required to keep People’s United informed, on a current basis, of the status and terms of any such proposal, offer, information request, negotiations or discussions (including any amendments or modifications to such proposal, offer or request).

 

Under the Merger Agreement, we agreed that our board would not:

 

 

 

However, prior to the approval of the Merger Agreement by our stockholders, our board may approve or recommend to our stockholders a Superior Proposal and withdraw, qualify or modify the LSB recommendation in connection therewith, if our board reasonably determines in good faith, after consultation with and having considered the advice of outside legal counsel and a nationally recognized, independent financial advisor, that

the failure to take such actions would be reasonably likely to violate its fiduciary duties to our stockholders under applicable law. In the event that our board makes this determination, we must provide five business days prior written notice to People’s United that our board has decided that a bona fide unsolicited written Acquisition Proposal that we received (that did not result from a breach of the no solicitation provisions of the Merger Agreement discussed above) constitutes a Superior Proposal. During the five business day period after People’s United’s receipt of the notice of a Superior Proposal, we and our board must cooperate and negotiate in good faith with People’s United to make such adjustments, modifications or amendments to the terms and conditions of the Merger Agreement as would enable us to proceed with our board’s original recommendation with respect to the Merger Agreement without requiring us to approve or recommend to our stockholders a Superior Proposal and withdraw, qualify or modify the LSB recommendation. At the end of the five business day notice period, and after taking into account any such adjusted, modified or amended terms as may have been proposed by People’s United during such period, our board must, again, determine in good faith, after consultation with and having considered the advice of outside legal counsel and a nationally recognized, independent financial advisor, that

 

 

Termination of the Merger Agreement

 

Either People’s United or LSB may terminate the Merger Agreement at or prior to the effective time of the Merger if any of the following occurs:

 

 

In addition, People’s United has the right to unilaterally terminate the Merger Agreement (we sometimes refer to these termination rights as People’s United’s unilateral termination rights) if:

 

 

 

 

 

We have the right to terminate the Merger Agreement unilaterally at any time prior to our stockholders approving the Merger Agreement if:

 

 

 

Termination Fee; Expenses

 

The Merger Agreement requires us to pay People’s United a termination fee equal to $3.5 million if:

 

 

 

 

 

Additionally, LSB is required to pay People’s United an amount equal to 15% of the termination fee if, on or before the date of termination, an Acquisition Proposal has been publicly disclosed or announced and not withdrawn by a specified date, and:

 

 

In the event that LSB is required to pay an amount equal to 15% of the termination fee under the circumstances set forth above, and within 18 months of the termination of the Merger Agreement, LSB has consummated a transaction or entered into a definitive agreement for a transaction with any third party that constitutes an acquisition transaction, then LSB must pay the remaining 85% of the termination fee to People’s United upon consummation of such transaction. For the purpose of this provision, the definition of acquisition transaction as defined in more detail in the section entitled “— Solicitation of Proposals from Other Parties” beginning on page 46 of this proxy statement, is modified so that all references to “15% or more” are replaced with “50% or more.”

 

Additionally, the Merger Agreement requires us to pay People’s United $250,000 to cover its expenses and opportunity costs if the Merger Agreement is terminated by either party because LSB’s stockholders did not approve the Merger or no vote was held by the required date or by People’s United because LSB breached a representation or warranty, or materially breached a covenant or agreement in the Merger Agreement and such breach was not or could not be cured within 30 days after written notice of the breach, but the termination fee has not been paid or is not then payable.

 

Employee Matters

 

Employee Benefit Plans.   Under the terms of the Merger Agreement, for one year after the effective time of the Merger, People’s United will maintain compensation levels (including annual cash incentive compensation opportunities) for the employees of LSB and any of our subsidiaries who remain employed after the effective time of the Merger that are at least at the same levels as compensation in effect as of July 15, 2010. People’s United has the right to enroll the employees who remain employed after the effective time of the Merger in the retirement, health and welfare benefit plans of either People’s United or People’s United Bank, so long as during the 12-month period after the effective time, the benefits under those plans are no less favorable for employees of LSB than for similarly situated employees of People’s United Bank.

 

Our employees will receive full credit for service with us for purposes of eligibility, vesting and other appropriate benefits, including applicability of minimum waiting periods for participation, but excluding

benefit accrual under People’s United’s defined benefit pension plan, with respect to any employee benefit plans or arrangements maintained by People’s United or any of its subsidiaries. People’s United has also agreed to waive all pre-existing conditions or limitations, eligibility waiting periods or required physical examinations under any health or similar plan of People’s United for our employees, to the extent that our employees had satisfied any similar limitations or requirements under the corresponding plan in which our employees participated immediately prior to the closing date of the Merger. In addition, any deductibles paid by our employees under our health plans in the plan year in which the closing date of the Merger occurs will be credited towards the deductibles under the health plans of People’s United and its subsidiaries.

 

Severance Obligations.   People’s United has agreed to honor, in accordance with their terms, all disclosed compensation, employment, severance, change of control and deferred compensation obligations of LSB and our subsidiaries. If the employment of an eligible employee of LSB or our subsidiaries is terminated by People’s United for any reason other than cause within one year following the effective time of the Merger, People’s United agrees to provide the eligible employee severance benefits as determined under the LSB special separation plan in effect on July 15, 2010. The special separation plan, adopted in 2007, generally provides that each LSB employee (other than employees who are parties to a change in control agreement) is entitled to receive a lump-sum separation payment in an amount equal to two weeks’ compensation for each year of service, subject to certain minimum payments that vary based upon the employee’s job description and generally subject to a maximum payment equal to 60 weeks’ compensation, if his or her employment is terminated other than for cause within one year after a change in control (as defined in the special separation plan). For any employee who is an executive vice president, the minimum severance payment is 78 weeks and there is no maximum severance payment. Additionally, under the special separation plan, employees who are terminated other than for cause within one year of a change in control (which includes the completion of the Merger) may elect to continue coverage under certain benefit plans for a period of one year or until such time as the employee becomes eligible to participate in another group health plan, whichever is earlier.

 

Retention Bonuses.   LSB has created a retention bonus plan for non-executive employees in an aggregate amount of up to $150,000. Distributions from this plan will be allocated among certain of our employees as we may determine with the consent of People’s United, subject to the employees’ continued employment with LSB through the closing.

 

2010 Bonuses.   River Bank will continue to accrue annual cash bonuses in the ordinary course consistent with past practices, which may be distributed to employees, including one or more executive officers, at the closing or as soon as practicable thereafter, but not later than the effective time of the Merger. LSB’s board of directors has the discretion to allocate the 2010 annual bonus payments to employees and executive officers of LSB subject to certain conditions, including the continued employment of the employee or executive officer with LSB through the closing date. The Merger Agreement provides that the aggregate amount of 2010 annual bonuses paid will not exceed $340,000, increased by any portion of the aggregate retention pool for LSB non-executive employees that is not paid out on the closing date. The LSB board of directors has determined that not more than $100,000 of this amount may be paid in the aggregate to our executive officers as 2010 annual bonuses.

 

Indemnification and Insurance

 

People’s United has agreed that all rights to indemnification and all limitations of liability existing in favor of each of our and our subsidiaries’ former and present directors and officers, as provided in our articles of organization and bylaws or similar governing documents of a subsidiary as in effect on July 15, 2010, with respect to matters occurring on or prior to the effective time of the Merger will continue from and after the effective time of the Merger for a period of six years from the effective time of the Merger. All rights to indemnification with respect to any claim asserted or made within such period will continue until the final disposition of the claim.

 

Before the effective time of the Merger, People’s United will purchase an extended reporting period endorsement for our directors and officers under our existing directors’ and officers’ liability insurance coverage. The endorsement must be in a form acceptable to us with coverage for a period of six years following the effective time of the Merger of not less than the existing coverage under, and with other terms not materially less favorable to, our directors and officers than our current directors’ and officers’ liability insurance policy.

However, the aggregate cost for this insurance cannot exceed 200% of the amount of the annual premiums most recently paid by us for such insurance. If such amount is insufficient to obtain such coverage, then People’s United will purchase an endorsement with the greatest coverage available for a cost not exceeding exceed 200% of the amount of the annual premiums most recently paid by us for such insurance.

 

Access to Information

 

From the date of the Merger Agreement to the effective time of the Merger, or the earlier termination of the Merger Agreement, LSB must provide to People’s United and its officers, employees, counsel, accountants, advisors and other authorized representatives full access during normal business hours with reasonable notice, to all of LSB’s properties, books, contracts, commitments and records.

 

In addition, LSB must furnish to People’s United a copy of all reports, schedules or other documents filed by it pursuant to the requirements of federal or state securities, banking or similar laws and all other information concerning the business and personnel of LSB that People’s United may reasonably request. However, LSB is not required to permit inspection or disclose any information if access or disclosure of that information (i) jeopardizes the attorney-client privilege of the entity in possession of the information or (ii) may reasonably be deemed to violate any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to July 15, 2010. Furthermore, People’s United must keep any confidential information exchanged in strict confidence.

 

Source of Funds

 

People’s United’s obligation to consummate the Merger is not conditioned upon its obtaining financing. People’s United intends to finance the Merger through internal cash resources.

 

Other Covenants

 

The Merger Agreement also contains covenants relating to the preparation and distribution of this proxy statement and all requisite regulatory filings, as well as covenants related to the sharing of information and transition and coordination of consolidating the operations of River Bank with People’s United Bank.

 

Expenses

 

Each party will pay all expenses incurred by it in connection with the Merger Agreement and the Merger.

 

Amendment and Waiver

 

Any provision of the Merger Agreement may be amended if such amendment is in writing and approved by the board of directors of both LSB and People’s United, and signed in the same manner as the Merger Agreement. Any provision of the agreement may be waived by the party against whom the waiver is to be effective. However, after approval of the Merger Agreement by our stockholders, no amendment of the Merger Agreement may be made which, by law, requires further approval of our stockholders without obtaining that approval. While we do not have any current intention to waive any of the conditions to closing in favor of LSB, we may determine that such a waiver is in the best interest of our stockholders because the benefits of closing the Merger outweigh the detriments, if any, of waiving such condition.

 

LITIGATION RELATED TO THE MERGER

 

George Assad, Jr. and William S. Madden, both alleged LSB stockholders, each filed putative class action lawsuits on July 27, 2010 and August 10, 2010, respectively, allegedly on behalf of all LSB stockholders in the Massachusetts Superior Court, Essex County against LSB, River Bank, the LSB board of directors, People’s United, People’s United Bank and Merger Sub. The case filed by Mr. Assad is captioned George Assad, Jr. v. LSB Corporation et al., Civ. A. No. 2010-1616. The case filed by Mr. Madden is captioned William S. Madden v. LSB Corporation et al., Civ. A. No. 2010-1702. The complaints generally allege that the LSB board of directors breached its fiduciary duties by approving the Merger Agreement because, plaintiffs

allege, the proposed merger would deny LSB stockholders the right to share proportionately in the value of LSB’s ongoing business and future growth, the Merger Consideration of $21.00 per share is inadequate, the Merger Agreement’s termination fee and no solicitation provisions discourage bids from other sources, and the transaction unfairly benefits LSB’s board of directors and chief executive officer to the disadvantage of LSB stockholders. The complaints also allege that People’s United, People’s United Bank and Merger Sub aided and abetted our board’s breach of fiduciary duties.

 

The plaintiffs seek the following relief:

 

 

LSB believes that the allegations in the complaints are without merit and intends to vigorously defend both actions.

 

APPRAISAL RIGHTS

 

LSB does not believe appraisal rights are available in the Merger

 

The term “appraisal rights” refers generally to the right of stockholders in certain mergers and other transactions to dissent from such transaction and instead demand the payment of a fair price for their shares, as determined independently. We believe that appraisal rights should not be available to our stockholders with respect to the Merger. The relevant provisions of the Massachusetts Business Corporation Act have not yet been the subject of judicial interpretation, however, and a court conceivably might disagree with our interpretation and decide that LSB stockholders may assert appraisal rights in connection with the Merger.

 

Part 13 of the Massachusetts Business Corporations Act (“MBCA”) generally provides that stockholders of a Massachusetts corporation are entitled to appraisal rights in the event of a merger. However, under Section 13.02 of the MBCA, appraisal rights are not available in respect of an all-cash merger unless a director, officer, or controlling stockholder has a direct or indirect material financial interest in the Merger other than in his capacity as:

 

 

We are not aware of any material financial interest of a type that would cause appraisal rights to be available. For this reason, we reserve the right to challenge any purported exercise of appraisal rights in respect of the Merger. If you want to consider asserting appraisal rights, you should obtain legal advice.

If you believe you are entitled to appraisal rights under Massachusetts law, in order to exercise these rights you must:

 

 

Because a submitted proxy not marked “against” or “abstain” will be voted “for” the approval of the Merger Agreement and “for” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies, the submission of a proxy card not marked “against” or “abstain” will result in the waiver of appraisal rights, to the extent such rights are available. If a broker, bank or other nominee holds your shares of LSB common stock and you want to attempt to assert appraisal rights, you must instruct your nominee to take the steps necessary to enable you to assert appraisal rights. If you or your nominee fails to follow all of the steps required by the statute, you will lose your right of appraisal (to the extent such right otherwise would be available).

 

Any stockholder who believes he, she or it is entitled to appraisal rights and who wishes to preserve those rights should carefully review Part 13 of the MBCA, attached as Annex C to this proxy statement, which sets forth the procedures to be complied with in perfecting any such rights. Failure to strictly comply with the procedures specified in Part 13 of the MBCA would result in the loss of any appraisal rights to which such stockholder may otherwise be entitled.

 

The remainder of this Section entitled “Appraisal Rights” is for informational purposes in the event our stockholders are entitled to appraisal rights under the MBCA. LSB maintains that appraisal rights are not available in connection with the Merger and reserves the right to challenge any purported exercise of appraisal rights in respect of the Merger.

 

Overview of appraisal rights

 

Appraisal rights may offer stockholders the ability to demand payment for their shares of LSB common stock in the event they are dissatisfied with the consideration that they are to receive in connection with the Merger. Stockholders who perfect any appraisal rights that they may have and follow certain procedures in the manner prescribed by the MBCA may be entitled to have their shares converted into the right to receive from LSB such cash consideration as may be determined to be due pursuant to Part 13 of the MBCA, if applicable.

 

Stockholders who approve the Merger Agreement will not be entitled to any appraisal rights.

 

Only a holder of record of shares of LSB common stock may exercise appraisal rights, and if a holder exercises appraisal rights, he, she or it must exercise such rights with respect to all classes of shares. The following discussion is not a complete statement of the law pertaining to appraisal rights under the MBCA and is qualified in its entirety by the full text of Part 13 of the MBCA, which is attached to this proxy statement as Annex C. Please read Part 13 of the MBCA carefully, because exercising appraisal rights involves several procedural steps, and failure to follow appraisal procedures could result in the loss of such rights. Stockholders should consult with their advisors, including legal counsel, in connection with any demand for appraisal.

 

Under the MBCA, stockholders who perfect their rights to appraisal, if such rights are available, in accordance with Part 13 of the MBCA and do not thereafter withdraw their demands for appraisal or otherwise lose their appraisal rights, in each case in accordance with the MBCA, will be entitled to appraisal rights and to obtain payment of the fair value of their shares of LSB common stock, together with a fair rate of interest. Stockholders should be aware that the fair value of their shares of LSB common stock as determined by Part 13 of the MBCA could be more than, the same as or less than the consideration they would receive as a result of the Merger if they did not seek appraisal of their shares. Stockholders who wish to exercise appraisal

rights, if any, or to preserve their right to do so, should review the following discussion and Part 13 of the MBCA carefully. Stockholders who fail to timely and properly comply with the procedures specified could lose their appraisal rights (if applicable to the Merger).

 

Notice of Stockholder Intent to Exercise Appraisal Rights

 

As an initial step, a stockholder who intends to demand appraisal rights must:

 

 

A stockholder intending to demand appraisal rights must deliver a written notice (including fax or e-mail) to LSB’s principal office at the address noted below, either by mail, by hand, messenger or delivery service or by fax:

 

LSB Corporation
30 Massachusetts Avenue
North Andover, Massachusetts 01845
Tel. (978) 725-7500
Fax. (978) 725-7593

 

If LSB does not receive a stockholder’s written intent to demand appraisal prior to the vote at the Special Meeting of stockholders, or if such stockholder votes, or causes or permits to be voted, his, her or its shares of LSB common stock in favor of the Merger Agreement, such stockholder will not be entitled to payment for his, her or its shares under the appraisal provisions of the MBCA.

 

Notification of Appraisal Rights Following Merger; Stockholder Certification

 

If the proposed merger becomes effective through an affirmative vote of not less than two-thirds of the outstanding shares of LSB common stock, Part 13 of the MBCA (if applicable) requires LSB to deliver a written appraisal notice to all stockholders who satisfied the requirements described above. The appraisal notice must be sent by LSB no earlier than the date the Merger became effective and no later than 10 days after such date. The appraisal notice must contain a form to be completed by the stockholder, which we refer to as the stockholder certification, in which the stockholder certifies (1) whether or not beneficial ownership of those shares for which appraisal rights are asserted was acquired before the date of the first announcement to stockholders of the principal terms of the Merger (i.e., July 15, 2010), which we refer to as the Merger announcement date, and (2) that the stockholder did not vote for the Merger Agreement. If the stockholder does not return the completed form within the specified time period, he, she or it will be deemed to have accepted payment in full satisfaction of LSB’s obligations under Section 13.24(b)(3) of the MBCA. The appraisal notice must also include a copy of Part 13 of the MBCA and must state certain information, including the following:

 

 

 

A stockholder who wishes to exercise appraisal rights must certify on the stockholder certification whether the beneficial owner of the shares acquired beneficial ownership before the Merger announcement date. If a stockholder fails to make this certification, LSB may elect to treat the stockholder’s shares as after-acquired shares (discussed below and defined herein). In addition, a stockholder who wishes to exercise appraisal rights must execute and return the stockholder certification and, in the case of certificated shares, deposit the certificates in accordance with the terms of the appraisal notice. Once a stockholder deposits his, her or its certificates or, in the case of uncertificated shares, returns the executed stockholder certifications, the stockholder loses all rights as a stockholder unless the stockholder withdraws from the appraisal process by notifying LSB in writing by the withdrawal deadline. A stockholder who does not withdraw from the appraisal process in this manner may not later withdraw without LSB’s written consent. A stockholder who does not execute and return the stockholder certification and deposit the share certificates by the applicable dates set forth in the appraisal notice is not entitled to payment under Part 13 of the MBCA.

 

Assertion of Rights by Nominees and Beneficial Owners

 

A record stockholder may assert appraisal rights as to fewer than all the shares registered in his, her or its name but owned by a beneficial stockholder only if the record stockholder objects with respect to all shares of the class or series owned by the beneficial stockholder and notifies LSB in writing of the name and address of each beneficial stockholder on whose behalf appraisal rights are being asserted. The rights of a record stockholder who asserts appraisal rights for only part of the shares held of record in the record stockholder’s name shall be determined as if the shares as to which the record stockholder objects and the record stockholder’s other shares were registered in the names of different record stockholders. A beneficial stockholder may assert appraisal rights as to shares of any class or series held on behalf of the stockholder only if the stockholder submits to LSB the record stockholder’s written consent to the assertion of such rights with respect to all shares of the class or series that are beneficially owned by the beneficial stockholder no later than the stockholder certification due date.

 

Payment for Shares Acquired Before Merger Announcement Date

 

Except with respect to after-acquired shares, within 30 days after the stockholder certification due date, LSB must pay in cash to those stockholders who complied with the procedural requirements the amount LSB estimates to be the fair value of their shares, plus interest. The fair value of the shares is the value of the shares immediately before the effective time of the Merger, excluding any element of value arising from the expectation or accomplishment of the Merger, unless exclusion would be inequitable. Interest accrues from the effective time of the Merger until the date of payment, at the average rate currently paid by LSB on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances.

 

The foregoing payment to each stockholder must be accompanied by (1) recent financial statements of LSB, (2) a statement of LSB’s estimate of the fair value of the shares, which estimate must equal or exceed LSB’s estimate given in the appraisal notice, and (3) a statement that stockholders who complied with the procedural requirements have the right to demand further payment. A stockholder who has been paid and is dissatisfied with the amount of the payment must notify LSB in writing of his, her or its estimate of the fair value of the shares and demand payment of that estimate plus interest, less the payment already made. A stockholder who fails to notify LSB in writing of his, her or its demand to be paid such stockholder’s stated estimate of the fair value plus interest within 30 days after receiving LSB’s payment waives the right to demand payment and will be entitled only to the payment made by LSB based on LSB ’s estimate of the fair value of the shares.

Offer to Pay for After-Acquired Shares

 

LSB may withhold payment from any stockholder who did not certify that beneficial ownership of all of such stockholder’s shares for which appraisal rights are asserted was acquired before the Merger announcement date, which we refer to as the after-acquired shares. If LSB elects to withhold payment, within 30 days after the stockholder certification due date, it must provide such stockholders notice of certain information, including LSB’s estimate of fair value and such stockholder’s right to accept LSB’s estimate of fair value, plus interest, in full satisfaction of their demands. Those stockholders who wish to accept LSB’s offer must notify LSB of their acceptance within 30 days after receiving the offer. Within 10 days after receiving a stockholder’s acceptance, LSB must pay in cash the amount it offered in full satisfaction of the accepting stockholder’s demand. Those stockholders who do not reject LSB ’s offer in a timely manner, or who otherwise do not satisfy the requirement outlined above for demanding appraisal, will be deemed to have accepted LSB’s offer, and LSB must pay to them in cash the amount it offered to pay within 40 days after sending the payment offer.

 

A stockholder offered payment who is dissatisfied with that offer must reject the offer and demand payment of his, her or its stated estimate of the fair value of the shares plus interest. A stockholder who fails to notify LSB in writing of his, her or its demand to be paid his, her or its stated estimate of the fair value plus interest within 30 days after receiving LSB’s offer of payment waives the right to demand payment and will be entitled only to the payment offered by LSB based on LSB’s estimate of the fair value of the shares.

 

Procedures if Stockholder is Dissatisfied with Payment or Offer

 

If a stockholder makes a demand for payment which remains unsettled, LSB must commence an equitable proceeding in Essex Superior Court, Commonwealth of Massachusetts, within 60 days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If LSB does not commence the proceeding within the 60-day period, it must pay in cash to each stockholder the amount the stockholder demanded plus interest. LSB must make all stockholders whose demands remain unsettled parties to the proceeding as an action against their shares, and all parties must be served with a copy of the petition. Each stockholder made a party to the proceeding is entitled to judgment (1) for the amount, if any, by which the court finds the fair value of the stockholder’s shares, plus interest, exceeds the amount paid by LSB to the stockholder for such shares or (2) for the fair value, plus interest, of the stockholder’s shares for which LSB elected to withhold payment.

 

The jurisdiction of the court in which the proceeding is commenced is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers have the powers described in the order appointing them, or in any amendment to it, and the stockholders demanding appraisal rights are entitled to the same discovery rights as parties in other civil proceedings.

 

Court Costs and Counsel Fees

 

The court in an appraisal proceeding must determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court must assess any costs against LSB, except that the court may assess costs against all or some of the stockholders demanding appraisal, in amounts the court finds equitable, to the extent the court finds such stockholders acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by Section 13 of the MBCA.

 

The court in an appraisal proceeding may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable:

 

 

If the court in an appraisal proceeding finds that the services of counsel for any stockholder were of substantial benefit to other stockholders similarly situated, and that the fees for those services should not be assessed against LSB, the court may award to such counsel reasonable fees to be paid out of the amounts awarded the stockholders who were benefited. To the extent LSB fails to make a required payment pursuant to Part 13 of the MBCA, the stockholder may sue directly for the amount owed and, to the extent successful, shall be entitled to recover from LSB all costs and expenses of the suit, including counsel fees.

 

FEDERAL INCOME TAX CONSEQUENCES

 

The following discussion summarizes the material U.S. federal income tax considerations of the Merger generally relevant to holders of our capital stock, assuming that the Merger is consummated, and does not purport to be a complete analysis of all potential tax effects of the Merger. This discussion is based upon interpretations of the Internal Revenue Code, Treasury Regulations promulgated under the Internal Revenue Code and judicial decisions and administrative rulings as of the date of this proxy statement, all of which are subject to change or differing interpretations, including changes and interpretations with retroactive effect. The discussion below does not address all U.S. federal income tax consequences or any state, local or foreign tax consequences of the Merger. The tax treatment of our stockholders may vary depending upon each stockholder’s particular situation. This discussion does not apply to stockholders who received our stock pursuant to the exercise of employee stock options, warrants or otherwise as compensation. Also, stockholders subject to special treatment, including:

 

 

may be subject to special rules not discussed below. This discussion also does not address the U.S. federal income tax consequences of the Merger to holders of our capital stock that do not hold such stock as a capital asset.

 

A “U.S. stockholder” is a stockholder that, for U.S. federal income tax purposes, is:

 

 

A “non-U.S. stockholder” is a person (other than a partnership) that is not a U.S. stockholder.

 

For investors who own our capital stock through a partnership, the U.S. federal income tax treatment will generally depend upon the status of the partner and the activities of the partnership. Such investors should consult their own tax advisor as to their particular tax consequences.

 

This discussion of certain material U.S. federal income tax considerations is provided for general information purposes only and is not intended to provide, and shall not be interpreted as providing, tax

advice. You are urged to consult your own tax advisor with respect to the particular U.S. federal income tax consequences to you of the Merger, including any special considerations related to your particular situation, as well as the applicability and effect of any state, local, foreign or other tax laws or applicable tax treaty and changes in any applicable tax laws.

 

Consequences to U.S. Stockholders

 

For U.S. stockholders, the Merger will be a taxable event and each U.S. stockholder will recognize capital gain or loss with respect to our capital stock, measured by the excess of the amount of Merger Consideration received by such U.S. stockholder in exchange for our capital stock over such U.S. stockholder’s tax basis in the exchanged capital stock. If a U.S. stockholder acquired our capital stock by purchase, the U.S. stockholder’s adjusted tax basis in our capital stock will generally equal the amount the U.S. stockholder paid for the stock, less any returns of capital that the U.S. stockholder might have received with regard to the stock. In the case of a U.S. stockholder that holds multiple blocks of our capital stock (i.e., blocks of our capital stock acquired separately at different times and/or prices), gain or loss must be calculated and accounted for separately for each block.

 

The gain or loss on the sale of our common stock will constitute long-term capital gain or loss if that capital stock had been held for more than one year as of the effective time of the Merger. If a U.S. stockholder receiving long-term capital gain is an individual, then the capital gain will generally be subject to tax at a maximum rate of 15%. U.S. stockholders that are taxable as corporations for U.S. federal income tax purposes will generally be subject to 35% tax on any gain (whether long-term or short-term) from the sale or exchange of our capital stock. A U.S. stockholder may deduct capital losses only to the extent that the U.S. stockholder has capital gains in a given tax year, plus up to $3,000 for individual U.S. stockholders.

 

U.S. stockholders of our common stock may be subject to information reporting and backup withholding on any cash payments such holders receive in the Merger. Generally, a U.S. stockholder will not be subject to backup withholding provided that such stockholder timely furnishes a correct taxpayer identification number and certifies that such holder is not subject to backup withholding on the substitute Form W-9 or successor form included in the letter of transmittal such holder will receive.

 

Any amounts withheld under the backup withholding rules will generally be allowed as a refund or credit against a U.S. stockholder’s U.S. federal income tax liability, provided such holder timely furnishes the required information to the Internal Revenue Service.

 

Consequences to Non-U.S. Stockholders

 

The discussion related to tax consequences to non-U.S. stockholders provides only a general summary of possible U.S. tax consequences to non-U.S. stockholders and does not purport to address all situations or stockholders’ individual circumstances. The application of U.S. tax law to non-U.S. stockholders is particularly complicated and subject to varying interpretation. Further, the tax consequences of the Merger to non-U.S. stockholders may be subject to foreign laws, rules and regulations, as well as applicable tax treaties. You should consult your own tax advisor with respect to the particular U.S. federal income tax consequences to you of the Merger.

 

Any gain realized on the receipt of cash in the merger by a non-U.S. stockholder generally will not be subject to U.S. federal income tax unless:

 

 

An individual non-U.S. stockholder described in the first bullet point immediately above will be subject to tax on the net gain derived from the Merger under regular graduated U.S. federal income tax rates. An

individual non-U.S. stock holder described in the second bullet point immediately above will be subject to a flat 30% tax on the gain derived from the Merger, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States. If a non-U.S. stockholder that is a foreign corporation falls under the first bullet point immediately above, it will be subject to tax on its net gain in the same manner as if it were a United States person as defined under the Internal Revenue Code and may be subject to an additional branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty.

 

Information reporting and, depending on the circumstances, backup withholding will apply to the payments received in the Merger, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. stockholder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Internal Revenue Code) or such owner otherwise establishes an exemption. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. stock holder’s U.S. federal income tax liability, if any, provided that such non-U.S. stockholder furnishes the required information to the Internal Revenue Service in a timely manner.

 

REGULATORY APPROVALS AND OTHER INFORMATION

 

Before LSB and People’s United may complete the Merger and the Bank Merger, we must obtain a number of regulatory approvals from, or give notices to, federal and state bank regulators, as summarized below.

 

Regulatory Approvals Required for the Merger

 

Office of Thrift Supervision

 

In order to consummate the merger of River Bank with and into People’s United Bank, People’s United must receive approval from the Office of Thrift Supervision of their application to acquire LSB and River Bank. The Office of Thrift Supervision must also approve People’s United’s application to merge River Bank with and into People’s United Bank (or with an interim depository institution formed by People’s United to facilitate the merger). In making its determination, the Office of Thrift Supervision must consider, among other factors, the financial and managerial resources and future prospects of the existing and resulting institutions, and the convenience and needs of the communities to be served. In addition, the Office of Thrift Supervision cannot approve a transaction if it will result in a monopoly or otherwise substantially lessen competition in a manner inconsistent with applicable law.

 

Board of Governors of the Federal Reserve

 

People’s United and People’s United Bank must obtain from the Board of Governors of the Federal Reserve System, or the Federal Reserve Bank of New York acting on delegated authority, a waiver from the application requirements of Section 3 of the Bank Holding Company Act of 1956 prior to consummating the Merger and the Bank Merger.

 

State Regulatory Filings

 

Before the completion of the merger, the Massachusetts Board of Bank Incorporation must approve the petition for People’s United to acquire LSB and for People’s United to become a bank holding company for purposes of Massachusetts law. Additionally, People’s United Bank must receive the approval of its application to the Massachusetts Division of Banks for the merger of River Bank with and into People’s United Bank (or with an interim depository institution formed by People’s United to facilitate the merger). Under Massachusetts law, the Massachusetts Commissioner of Banks may authorize an acquisition of a state bank by an out-of-state acquirer; provided (1) the laws of the jurisdiction in which the acquirer has its principal place of business expressly authorize, under conditions no more restrictive than those imposed by Massachusetts law, a Massachusetts bank to exercise like authority; (2) the target Massachusetts bank has been in existence for a

period of three years or more; and (3) the acquirer will not control more than thirty percent of the total insured deposits in Massachusetts following the acquisition. The Commissioner has authority to waive certain statutory requirements if he determines that economic conditions warrant granting such waiver.

 

Similarly, the Massachusetts Board of Bank Incorporation must approve a company’s petition to become a bank holding company and to acquire another financial institution. The Board’s decision is based on a finding of whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted by the acquisition. In making such determination, the Board considers a showing of net new benefits, such as initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices within the Massachusetts bank’s delineated local community. The Board must also receive (1) notice from the Massachusetts Housing Partnership Fund that arrangements have been made satisfactory to the fund for the acquirer to make 0.90 percent of its assets located in Massachusetts available for call by the fund for a period of ten years for the purpose of providing loans to the fund for financing qualified low- and moderate-income housing acquisition or ownership programs; and (2) written assurances from the acquirer that a resident of Massachusetts will occupy a position of an executive officer in the acquired Massachusetts bank or any successor institution for so long as such acquirer controls the institution. Finally, the acquirer must maintain, for a period of two years, an asset base in the acquired institution equal to or greater than the total assets of such institution on the date of acquisition, unless such requirement is waived by the Commissioner if, in his judgment, economic conditions warrant a waiver.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information, as of August 6, 2010, regarding the beneficial ownership of common stock by: (i) each director; (ii) each of the executive officers during the last fiscal year; (iii) all directors and such executive officers as a group; and (iv) each person who, to the knowledge of LSB, beneficially owned more than 5% of the common stock at August 6, 2010. Except as otherwise noted, the persons named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned.

 

 

 

ADJOURNMENT OF THE SPECIAL MEETING

 

(Proposal 2)

 

We are submitting a proposal for consideration at the Special Meeting to authorize the named proxies to approve one or more adjournments of the Special Meeting if there are not sufficient votes to approve the Merger Agreement at the time of the Special Meeting. Even though a quorum may be present at the Special Meeting, it is possible that we may not have received sufficient votes to approve the Merger Agreement by the time of the Special Meeting. In that event, we would need to adjourn the Special Meeting in order to solicit additional proxies. The adjournment proposal relates only to an adjournment of the Special Meeting for purposes of soliciting additional proxies to obtain the requisite stockholder approval to approve the Merger Agreement. Any other adjournment of the Special Meeting (e.g., an adjournment required because of the absence of a quorum) would be voted upon pursuant to the discretionary authority granted by the proxy.

 

The proposal to approve one or more adjournments of the Special Meeting requires the affirmative vote of holders of a majority of the shares of LSB common stock voting on the proposal.

 

Our board recommends that you vote “FOR” the adjournment proposal so that proxies may be used for the purpose described above, should it become necessary. Properly executed proxies will be voted “FOR” the adjournment proposal, unless otherwise indicated on the proxies. If the Special Meeting is adjourned for 30 days or less, we are not required to give notice of the time and place of the adjourned meeting (other than announcement at the Special Meeting) unless our board fixes a new record date for the Special Meeting.

 

The adjournment proposal relates only to an adjournment of the Special Meeting occurring for purposes of soliciting additional proxies for approval of the Merger Agreement proposal in the event that there are insufficient votes to approve that proposal. Our board retains full authority to the extent set forth in our bylaws and Massachusetts law to postpone the Special Meeting before it is convened, without the consent of any of our stockholders.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We are subject to the information filing requirements of the Exchange Act and, in accordance with the Exchange Act, are obligated to file with the Securities and Exchange Commission periodic reports, proxy statements and other information relating to our business, financial condition and other matters. These reports, proxy statements and other information may be inspected at the Securities and Exchange Commission’s office at the public reference facilities of the Securities and Exchange Commission, which are located at Room 1024, Judiciary Plaza, at 450 Fifth Street, NW, Washington, D.C. 20549. Copies of these materials can be obtained, upon payment of the Securities and Exchange Commission’s customary charges, by writing to the Securities and Exchange Commission’s principal office at 450 Fifth Street, NW, Washington, D.C. 20549. All documents filed by LSB with the Securities and Exchange Commission may be obtained for free at the Securities and Exchange Commission’s website at www.sec.gov. In addition, the documents filed with the Securities and Exchange Commission by LSB may be obtained free of charge by directing such request to our Secretary at (978) 725-7500 or at our offices located at 30 Massachusetts Avenue, North Andover, Massachusetts 01845 or from our website at www.riverbk.com.

 

STOCKHOLDER PROPOSALS

 

LSB will hold a 2011 annual meeting of stockholders only if the merger is not consummated. Under the rules of the SEC, if any stockholder intends to present a proposal at the next annual meeting of stockholders and desires that it be considered for inclusion in LSB’s proxy statement and form of proxy for such meeting, it must be received by LSB not less than 120 calendar days before the anniversary of the mailing date of LSB’s proxy statement for the prior year. Accordingly, if any stockholder intends to present a proposal at the 2011 annual meeting of stockholders, if one is held, and wishes it to be considered in LSB’s proxy statement and form of proxy, such proposal must be received by LSB on or before November 22, 2010. In addition,

LSB’s bylaws provide that any director nominations and new business submitted by a stockholder must be filed with the secretary of LSB no fewer than 60 days, but no more than 90 days, prior to the date of the one-year anniversary of the previous annual meeting, and that no other nominations or proposals by stockholders shall be acted upon at the annual meeting. If, however, the annual meeting, if any, is more than 30 days earlier or more than 60 days later than the anniversary date of the prior annual meeting, then notice shall be timely if delivered to or mailed and received by LSB not later than the close of business on the later of (a) the 75th day prior to the scheduled date of such annual meeting or (b) the 15th day following the day on which public disclosure of the date of such annual meeting is first made by LSB. Certain exceptions under the bylaws apply to annual meetings of stockholders at which newly created seats of the board of directors are to be filled. Any such proposal should be mailed to: Cynthia J. Milne, Secretary, LSB Corporation, 30 Massachusetts Avenue, North Andover, Massachusetts 01845.

 

You should rely only on the information contained in this proxy statement to vote your shares of our common stock at the Special Meeting. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement.

 

This proxy statement is dated [ • ], 2010. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date, and the mailing of this proxy statement to stockholders does not create any implication to the contrary. If any of the information in this proxy statement becomes materially inaccurate prior to the Special Meeting, we will update and/or correct that information to the extent required by applicable law. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make such proxy solicitation in such jurisdiction.

 

IMPORTANT

 

YOUR VOTE IS IMPORTANT. REGARDLESS OF THE NUMBER OF SHARES OF OUR COMMON STOCK THAT YOU OWN, PLEASE VOTE AS RECOMMENDED BY OUR BOARD BY COMPLETING, SIGNING, DATING AND PROMPTLY RETURNING THE ENCLOSED PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED OR BY VOTING YOUR SHARES THROUGH THE INTERNET OR BY TELEPHONE.

Annex A

 

 

AGREEMENT AND PLAN OF MERGER
by and among
People’s United Financial, Inc.,
People’s United Bank,
Bridgeport Merger Corporation,
LSB Corporation,
and
River Bank
Dated as of July 15, 2010

 

 

TABLE OF CONTENTS