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The process whereby the most qualified persons may be nominated as director of
the Company and such persons are elected or not elected to such position, as
determined by the stockholders, is the process at the heart of democratic
corporate governance. The Company believes that freedom in nomination and
election is the best way to assure that the Company is managed by a first-rate
Board.
It should be noted that the stockholders that submitted this proposal are
members of a group of five stockholders which has filed with the Securities
and Exchange Commission as a group by filing one (1) single joint group
Schedule 13D for all five stockholders. Other members of this same joint
group submitted the shareholder proposals relating to the adoption of
cumulative voting of the Board of Directors and elimination of the Company's
classified Board of Directors.
THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
PURSUANT TO THE PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION,
APPROVAL OF THE ABOVE SHAREHOLDER PROPOSAL WOULD REQUIRE THE AFFIRMATIVE VOTE
OF SIXTY-SIX AND TWO-THIRDS OF THE OUTSTANDING SHARES OF VOTING STOCK OF THE
COMPANY, VOTING AS A SINGLE CLASS. UNLESS EXPRESSLY INSTRUCTED OTHERWISE IN
THE PROXY, THE PERSONS NAMED IN THE ACCOMPANYING PROXY WILL VOTE THE SHARES
REPRESENTED THEREBY AGAINST SUCH SHAREHOLDER PROPOSAL. ABSTENTIONS AND NON-
VOTES WILL HAVE THE EFFECT OF VOTES AGAINST SUCH SHAREHOLDER PROPOSAL.
SHAREHOLDER PROPOSAL--Cumulative Voting
The Company has been advised by Riverside Capital Advisors, Inc. ("Riverside")
and Glenn S. Koach ("Koach"), Vice President of Riverside, 1650 Southeast 17th
Street, Suite 204, Fort Lauderdale, Florida 33316-1735, and the beneficial
owners of 238,520 shares of voting securities of the Company, that they intend
to present for consideration and action at the 1997 Annual Meeting the
resolution set forth below. See "Securities and Principal Holders--Security
Ownership of Certain Beneficial Owners."
RESOLVED, that the stockholders of the Company recommend that as soon as
practicable, the Board of Directors of the Company take all steps within
its legal power and in accordance with applicable law as are necessary
to institute cumulative voting in the election of directors.
Shareholder Supporting Statement
Since the Company stockholders currently vote their shares for each director
nominee on a one-share, one-vote basis, the holders of a majority of the votes
cast in an election of directors have the ability to control the election of
all directors and the holders of less than a majority of the votes cast may be
denied any direct representation on the Board.
The establishment of cumulative voting in the election of directors would
entitle each stockholder to as many votes as equals the number of shares of
the Company's voting stock he or she owns, multiplied by the number of
directors to be elected. All such votes may be cast for a single candidate,
or may be allocated among two or more candidates, as the stockholder sees fit.
The effect of cumulative voting is that stockholders may, if they allocate
their votes properly, have sufficient votes to elect one or more Board
members, notwithstanding that such stockholders own, in the aggregate, only a
minority of the shares being voted in the election.
In accordance with principles of corporate democracy, holders of a sizable
number of Company shares should be entitled to have their views and interests
represented on the Board whether or not they constitute a voting majority.
The stockholder voting system currently in place serves to perpetuate the
views of an entrenched majority of the Company's stockholders and offers no
direct voice on the Board for the views and interests of the Company's
minority stockholders, even if they hold a significant portion of the
Company's voting stock. Through the institution of cumulative voting, the
interests of the Company will be better served by enabling a broader range of
stockholder views and interests to be represented in Board deliberations.
Statement in Opposition to Shareholder Proposal
Directors should be elected on their ability and commitment to represent the
best interests of the Company and the stockholders as a whole. This principle
is best served under the Company's present democratic method for election of
directors, whereby each director is elected by a majority of all of the
stockholders of the Company who vote and each director's loyalty is clear to
all stockholders. The Board embraces this principle by seeking nominees on
the basis of personal achievements, business acumen, diversity, integrity,
sound judgment, energy, willingness to serve, and other criteria relevant to
their ability to be effective representatives of all of the stockholders of
the Company, not just a small group of stockholders.
The Company agrees that independent minded directors are important to the
effectiveness of your Board and that honest differences of opinion among
experienced, knowledgeable persons with the objective of promoting the best
interests of the stockholders can often lead to more thoroughly discussed
decisions. However, the adoption of cumulative voting would allow a
relatively small group of stockholders to elect one or more directors to
advocate the special interests or points of view of that group, regardless of
the wishes of the majority of stockholders and regardless of the best interest
of the Company. The election of directors to the Board who have been elected
by a particular group through cumulative voting, may lead to adversarial Board
meetings with each director advocating the position of the group responsible
for such director's election, rather than a position which is in the best
interest of the Company and all of the stockholders. This could cause
divisions in the Board and could adversely affect the operations of the
business and affairs of the Company.
The Company notes that the stockholders who submitted this proposal are
members of a group of five stockholders which has filed with the Securities
and Exchange Commission as a group by filing one (1) single joint group
Schedule 13D for all five stockholders. Other members of this same joint
group submitted the shareholders proposal relating to elimination of a
classified Board of Directors and amendment to the Bylaws requiring the
Company not to nominate or renominate as a director any person who is 70 years
of age or older. If the Company amended its Restated Certificate of
Incorporation to provide for cumulative voting of the Board of Directors of
the Company and to eliminate the classified Board of Directors, this single
joint group of five stockholders would singlehandedly be able to elect a
person to the Board against the votes and wishes of all other stockholders of
the Company assuming Riverside converted into Common Stock all shares of non-
voting convertible preferred stock held by it and assuming that there
continues to be six or more directors on the Board.
The Company recognizes that every stockholder of LSB is a minority stockholder
and, consequently, that the future of the minority stockholders is the future
of the Company. Therefore, the Company strongly believes each director
elected to the Board should feel a responsibility to serve the best interests
of all of its stockholders rather than the special interests of a particular
group . The Company believes that the current system of voting, providing for
the election of directors by plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote, provides
the best assurance that the directors' decisions will be in the best interests
of all stockholders and will provide the most effective management for the
Company.
Approval of the proposal will require the affirmative vote of a majority of
the votes cast by holders of voting stock entitled to vote at the Annual
Meeting who are present in person or represented by proxy, voting as a single
class. Approval of this proposal would not, however, require that the
requested action be taken since the proposal is only a recommendation to the
Board of Directors. In order to institute cumulative voting, it would be
necessary to amend the Company's Certificate of Incorporation. Under Delaware
law, an amendment to the Company's Certificate of Incorporation relating to
cumulative voting must first be recommended by the Board of Directors of the
Company to the shareholders of the Company entitled to vote and thereafter
such amendment must be approved by a majority of the outstanding stock of the
Company entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE AGAINST THIS
PROPOSAL.
UNLESS EXPRESSLY INSTRUCTED OTHERWISE IN THE PROXY, THE PERSONS NAMED IN THE
ACCOMPANYING PROXY WILL VOTE THE SHARES REPRESENTED THEREBY AGAINST SUCH
SHAREHOLDER PROPOSAL. ABSTENTIONS AND NON-VOTES HAVE THE EFFECT OF VOTES
AGAINST SUCH SHAREHOLDER PROPOSAL.
SHAREHOLDER PROPOSAL--Elimination of Staggered Board
The Company has been advised by Granite Capital, L.P. ("Granite"), 126 East
56th Street, 25th Floor, New York, New York 10022, and beneficial owner of
319,220 shares of voting securities of the Company, that they intend to
present for consideration and action at the 1997 Annual Meeting the resolution
set forth below. See footnote (7) under "Securities and Principal Holders--
Security Ownership of Certain Beneficial Owners."
RESOLVED, that the stockholders of the Company recommend that as soon as
practicable, the Board of Directors take all steps within its legal
power and in accordance with applicable law as are necessary to
declassify the Board for the purpose of director elections, such
declassification to be effected in a manner that does not affect the
unexpired terms of directors previously elected.
Shareholder Supporting Statement
Company directors are currently divided into three classes consisting of three
directors each. A single class of directors is elected to a three-year term
at each annual meeting of stockholders. This "staggered" Board structure is
detrimental to the interests of the Company's stockholders in two significant
respects.
First, the three-year terms of the Company's directors dilute their
accountability to stockholders. Individual directors whose performance may
not be satisfactory to the Company's stockholders are nevertheless assured of
three-year terms. Even if a majority of the Company's stockholders are
dissatisfied with the performance of its Board, they may be unable to
effectuate a change in a controlling majority of its members until after two
annual Board elections. Directors should be properly accountable to
stockholders through elections on an annual basis.
Second, a staggered Board often discourages takeover proposals since an
outside suitor may be unable to obtain control of the Board until after at
least two annual Board elections. An increased potentiality for a takeover
would enhance the Board's accountability to stockholder interests and, by
deterring such takeovers, the Board may be denying the Company's stockholders
opportunities to maximize their investment in the Company. The opportunity
for the Company's stockholders to consider takeover proposals that might be in
their interests to accept should not be diminished by unnecessary impediments
to potential acquirers of the Company.
Statement in Opposition to Shareholder Proposal
Since the inception of the Company in 1969, the Company has had a classified
Board providing for three-year staggered terms rather than only one-year
terms. The Company firmly believes that a classified board has been, and
continues to be, in the best interests of the Company and its stockholders.
Continuity, long-term business strategy and policy, and stability in the
management of the Company's affairs are enhanced by having directors who serve
three-year, rather than one-year, terms. This system generally assures that,
at any given time, at least two-thirds of the directors will have at least one
year of prior experience and familiarity with the business and affairs of the
Company.
A classified board is a widely used safeguard to protect against inadequate
tender offers or unsolicited attempts to seize control of a company. The
Company's classified Board is intended to encourage a person seeking to obtain
control of the Company to negotiate with the Board. Because the Company's
classified Board generally prevents a hostile actor from replacing the Board
in less than twelve (12) months, the classified system gives the Board time
and ability to evaluate any proposal, to study alternatives, to negotiate the
best result for all stockholders, and to ensure that stockholder value is
maximized.
In the statement in support of its proposal, the proponent suggests that
staggered terms lessen the directors' accountability to the stockholders. The
Board disagrees. Any director may be removed by the stockholders at any
time for cause, and each year approximately one-third of the directors stand
for election. The Board believes that these factors provide an effective
balance between accountability and the need for stability and experience on
the Board.
It should be noted that the stockholder that submitted this proposal is a
member of a group of five stockholders which has filed with the Securities and
Exchange Commission as a group by filing one (1) single joint group Schedule
13D for all five stockholders. Other members of this same joint group
submitted the stockholder proposals relating to the adoption of cumulative
voting of the Board of Directors and amendment to the Bylaws requiring the
Company not to nominate or renominate as a director any person who is 70 years
of age or older.
Approval of the proposal will require the affirmative vote of a majority of
the votes cast by holders of voting stock entitled to vote at the Annual
Meeting who are present in person or represented by proxy, voting as a single
class. Approval of this proposal would not, however, require that the
requested action be taken since the proposal is only a recommendation to the
Board of Directors. In order to declassify the Board, it would be necessary
to amend the Company's Certificate of Incorporation. Under Delaware law an
amendment to the Company's Certificate of Incorporation to eliminate the
Company's classified board must first be recommended by the Board of Directors
to the shareholders of the Company entitled to vote, and thereafter under the
Company's Certificate of Incorporation such amendment would require the
affirmative vote of sixty-six and two-thirds of the outstanding shares of
voting stock of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE AGAINST THIS
PROPOSAL.
UNLESS EXPRESSLY INSTRUCTED OTHERWISE IN THE PROXY, THE PERSONS NAMED IN THE
ACCOMPANYING PROXY WILL VOTE THE SHARES REPRESENTED THEREBY AGAINST SUCH
SHAREHOLDER PROPOSAL. ABSTENTIONS AND NON-VOTES HAVE THE EFFECT OF VOTES
AGAINST SUCH SHAREHOLDER PROPOSAL.