SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the registrant |X|
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
|X| Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CONNECTICUT BANCSHARES, INC.
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transactions applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
N/A
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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April 9, 2002
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders
of Connecticut Bancshares, Inc. The meeting will be held at The Colony, 51
Hartford Turnpike, Route 83, Vernon, Connecticut on Thursday, May 16, 2002, at
2:00 p.m., local time.
The notice of annual meeting and proxy statement appearing on the
following pages describe the formal business to be transacted at the meeting.
During the meeting, we will also report on the operations of the Company.
Directors and officers of the Company will be present, and a representative of
Arthur Andersen LLP, the Company's former independent auditors, and a
representative of Deloitte & Touche LLP, the Company's current independent
auditors, are expected to be present, to respond to appropriate questions of
stockholders.
It is important that your shares are represented at this meeting,
whether or not you attend the meeting in person and regardless of the number of
shares you own. To make sure your shares are represented, we urge you to
complete and mail the enclosed proxy card promptly. If you attend the meeting,
you may vote in person even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Richard P. Meduski
Richard P. Meduski
President and Chief Executive Officer
CONNECTICUT BANCSHARES, INC.
923 MAIN STREET
MANCHESTER, CONNECTICUT 06040
(860) 646-1700
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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Connecticut Bancshares, Inc. (the "Company") will hold its annual
meeting of stockholders at The Colony, 51 Hartford Turnpike, Route 83, Vernon,
Connecticut, on May 16, 2002, at 2:00 p.m., local time, for the following
purposes:
1. To elect four (4) directors to serve for a term of three years;
2. To approve the Connecticut Bancshares, Inc. 2002 Equity
Compensation Plan;
3. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the Company for the year ending December 31,
2002; and
4. To transact any other business that may properly come before the
meeting.
NOTE: The Board of Directors is not aware of any other business to come
before the meeting.
Only stockholders of record at the close of business on March 25, 2002
are entitled to receive notice of the meeting and to vote at the meeting and any
adjournment or postponement of the meeting.
Please complete and sign the enclosed form of proxy, which is solicited
by the Board of Directors, and mail it promptly in the enclosed envelope. The
proxy will not be used if you attend the meeting and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Carole L. Yungk
Carole L. Yungk
Corporate Secretary
Manchester, Connecticut
April 9, 2002
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
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PROXY STATEMENT
OF
CONNECTICUT BANCSHARES, INC.
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This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Connecticut Bancshares, Inc. (the
"Company") to be used at the annual meeting of stockholders of the Company. The
Company is the holding company for The Savings Bank of Manchester (the "Bank").
The annual meeting will be held at The Colony, 51 Hartford Turnpike, Route 83,
Vernon, Connecticut, on May 16, 2002, at 2:00 p.m., local time. This proxy
statement and the enclosed proxy card are being first mailed to shareholders of
record on or about April 9, 2002.
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VOTING AND PROXY PROCEDURE
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WHO CAN VOTE AT THE MEETING
You are entitled to vote your Company common stock if the records of the
Company show that you held your shares as of the close of business on March 25,
2002. As of the close of business on that date, a total of 11,249,826 shares of
Company common stock were outstanding. Each share of common stock has one vote.
As provided in the Company's Certificate of Incorporation, recordholders of the
Company's common stock who beneficially own, either directly or indirectly, in
excess of 10% of the Company's outstanding shares are not entitled to any vote
with respect to those shares held in excess of the 10% limit. In addition, the
Company's Certificate of Incorporation also provides that recordholders of the
Company's common stock who beneficially own, either directly or indirectly, in
excess of 5% of the Company's outstanding shares are not entitled to any vote
with respect to those shares held in excess of the 5% limit, unless the
beneficial owner owns, holds or controls such shares in the ordinary course of
business and not with the purpose or effect of changing or influencing the
control of the Company.
ATTENDING THE MEETING
If you are a beneficial owner of Company common stock held by a broker,
bank or other nominee (i.e., in "street name"), you will need proof of ownership
to be admitted to the meeting. A recent brokerage statement or letter from your
bank or broker are examples of proof of ownership. If you want to vote your
shares of Company common stock held in street name in person at the meeting, you
will have to get a written proxy in your name from the broker, bank or other
nominee who holds your shares.
VOTE REQUIRED
The annual meeting will be held only if there is a quorum. A majority of
the outstanding shares of common stock entitled to vote and represented at the
meeting constitutes a quorum. If you return valid proxy instructions or attend
the meeting in person, your shares will be counted for purposes of determining
whether there is a quorum, even if you abstain from voting. Broker non-votes
also will be counted for purposes of determining the existence of a quorum. A
broker non-vote occurs when a broker, bank or other nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner.
In voting on the election of directors, you may vote in favor of all
nominees, withhold votes as to all nominees or withhold votes as to specific
nominees. There is no cumulative voting for the election of directors. Directors
are elected by a plurality of the votes cast. This means that the nominees
receiving the greatest number of votes will be elected. Votes that are withheld
and broker non-votes will have no effect on the outcome of the election. In
voting on the approval of the Connecticut Bancshares, Inc. 2002 Equity
Compensation Plan and the ratification of the appointment of Deloitte & Touche
LLP as independent auditors, you may vote in favor of the proposal, vote against
the proposal or abstain from voting. These matters will be decided by the
affirmative vote of a majority of the votes cast on the matter. Broker non-votes
and abstentions will have no effect on the voting.
VOTING BY PROXY
The Company's Board of Directors is sending you this proxy statement for
the purpose of requesting that you allow your shares of Company common stock to
be represented at the annual meeting by the persons named in the enclosed proxy
card. If you are a stockholder of record (i.e., do not hold your shares in
street name), you may vote by proxy either by completing the enclosed proxy card
and mailing it in the postage-prepaid envelope provided, by telephone or by
Internet. Please see the enclosed proxy card for instructions for telephone and
Internet proxy voting procedures.
All shares of Company common stock represented at the meeting by
properly executed and dated proxies will be voted according to the instructions
indicated on the proxy card. If you sign, date and return a proxy card without
giving voting instructions, your shares will be voted as recommended by the
Company's Board of Directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE NOMINEES, "FOR" APPROVAL OF THE 2002 EQUITY COMPENSATION PLAN AND
"FOR" RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS.
If any matters not described in this proxy statement are properly
presented at the annual meeting, the persons named in the proxy card will use
their own best judgment to determine how to vote your shares. This includes a
motion to adjourn or postpone the meeting in order to solicit additional
proxies. If the annual meeting is postponed or adjourned, your Company common
stock may be voted by the persons named in the proxy card on the new meeting
date as well, unless you have revoked your proxy. The Company does not know of
any other matters to be presented at the meeting.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy you must either advise the Corporate Secretary of
the Company in writing before your common stock has been voted at the annual
meeting, deliver another valid proxy that bears a later date, or attend the
meeting and vote your shares in person. Attendance at the annual meeting will
not in itself revoke your proxy.
If your Company common stock is held in street name, you will receive
instructions from your broker, bank or other nominee that you must follow in
order to have your shares voted. Your broker or bank may allow you to deliver
your voting instructions via the telephone or the Internet. Please see the
instruction form that is provided by your broker, bank or other nominee and
which accompanies this proxy statement. If you wish to change your voting
instructions after you have returned your voting instruction form to your broker
or bank, you must contact your broker or bank.
2
PARTICIPANTS IN THE BANK'S ESOP AND SAVINGS PLAN
If you participate in the Bank's Employee Stock Ownership Plan (the
"ESOP"), or if you hold shares of Company common stock through the Bank's
Savings Plan, you will receive with this proxy statement a voting instruction
form for each plan that reflects all shares you may vote under the plan. Under
the terms of the ESOP, all shares held by the ESOP are voted by the ESOP
trustee, but each participant in the ESOP may direct the trustee how to vote the
shares of Company common stock allocated to the participant's plan account.
Subject to the exercise of its fiduciary duties, the ESOP trustee will vote all
unallocated shares of common stock held by the ESOP and allocated shares for
which no timely voting instructions are received in the same proportion as
shares for which it has received timely voting instructions. Under the terms of
the Savings Plan, a participant is entitled to direct the trustee as to the
shares credited to his or her account. The trustee will vote all shares for
which no directions are given or for which timely instructions were not received
in the same proportion as shares for which the trustee received timely voting
instructions. The deadline for returning your voting instructions to each of the
plan's trustees is May 9, 2002.
3
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STOCK OWNERSHIP
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The following table provides information as of March 25, 2002, about the
persons known by the Company to be the beneficial owners of more than 5% of the
Company's outstanding common stock. A person may be considered to own any shares
of common stock over which the person has, directly or indirectly, sole or
shared voting or investment power.
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES COMMON STOCK
OWNED OUTSTANDING
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Wellington Management Company, LLP 1,080,700(1) 9.6%
75 State Street
Boston, MA 02109
The Savings Bank of Manchester 897,725(2) 8.0%
Employee Stock Ownership Plan
923 Main Street
Manchester, CT 06040
SBM Charitable Foundation, Inc. 832,000(3) 7.4%
923 Main Street
Manchester, CT 06040
Private Capital Management, L.P. 586,400(4) 5.2%
Bruce S. Sherman
Gregg J. Powers
8889 Pelican Bay Boulevard
Naples, FL 34108
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(1) Based on information disclosed in a Schedule 13G filed with the Securities
and Exchange Commission on February 12, 2002.
(2) Under the terms of the ESOP, the ESOP trustee will vote shares allocated to
participants' accounts in the manner directed by the participants. As of
March 25, 2002, 118,973 shares had been allocated under the ESOP and
778,752 shares remain unallocated. The ESOP trustee, subject to its
fiduciary responsibilities, will vote unallocated shares and allocated
shares for which no timely voting instructions are received in the same
proportion as shares for which the trustee has received timely voting
instructions from participants.
(3) SBM Charitable Foundation, Inc. was established and funded in connection
with the Bank's conversion to the stock holding company form of
organization on March 1, 2000. The terms of the gift instrument require
that all shares of common stock held by the SBM Charitable Foundation, Inc.
must be voted in the same ratio as all other shares of the Company's common
stock on all proposals considered by stockholders of the Company.
(4) Based on information disclosed in a Schedule 13G filed with the Securities
and Exchange Commission on February 19, 2002.
4
The following table provides information as of March 25, 2002 about the
shares of Company common stock that may be considered to be owned by each
director or nominee for director of the Company, by the executive officers named
in the Summary Compensation Table and by all directors and executive officers of
the Company as a group. A person may be considered to beneficially own any
shares of common stock over which he or she has, directly or indirectly, sole or
shared voting or investment power. Unless otherwise indicated, each of the named
individuals has sole voting and investment power with respect to the shares
shown.
NUMBER OF
SHARES THAT MAY
BE ACQUIRED
NUMBER OF WITHIN 60 DAYS PERCENT OF
SHARES OWNED BY EXERCISING COMMON STOCK
NAME (1)(2)(3)(4) OPTIONS OUTSTANDING (5)
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Douglas K. Anderson 79,789(6) 17,972 *
A. Paul Berte 17,131 2,808 *
Timothy J. Devanney 18,882(7)(8) 5,616 *
Sheila B. Flanagan 36,232(9) 5,616 *
Michael J. Hartl 3,019 2,000 *
John D. LaBelle, Jr. 17,232(10) 5,616 *
Eric A. Marziali 41,848 - *
Richard P. Meduski 133,720(11) 44,928 1.6%
Timothy J. Moynihan 2,500(12) - *
Jon L. Norris 16,240 2,808 *
William D. O'Neill 40,232(8) 5,616 *
Charles L. Pike 78,729 22,464 *
Laurence P. Rubinow 37,232(13) 4,616 *
Roger A. Somerville 42,793(14) 5,000 *
John G. Sommers 36,232(15) 5,616 *
Thomas E. Toomey 16,232(16) 3,616 *
Gregory S. Wolff 37,043(17) - *
All Directors and Executive Officers as a Group (20 persons) 651,086(8) 134,292 6.9%
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*Less than 1.0% of shares outstanding.
(1) Includes shares of unvested restricted stock awarded as follows: each of
Messrs. Berte, Devanney, LaBelle, Marziali, Norris, O'Neill, Rubinow,
Sommers, Toomey and Wolff and Ms. Flanagan, 8,985; Mr. Meduski, 84,651
shares; Mr. Pike, 51,913 shares; Mr. Anderson, 41,130 shares; Mr.
Somerville, 25,159 shares; and Mr. Hartl, 1,600 shares. Each participant
has voting but not investment power as to shares of unvested restricted
stock.
(2) Includes shares held in trust by The Savings Bank of Manchester Savings
401(k) Plan as to which each individual has investment power as follows:
Mr. Meduski, 25,336 shares; Mr. Pike, 25,336 shares; Mr. Anderson, 16,296
shares; Mr. Somerville, 11,179 shares; and Mr. Hartl, 428 shares.
(3) Includes shares held in a separate trust in which Guarantee Trust Company
serves as a trustee as follows: Ms. Flanagan, 7,000 shares; Mr. LaBelle,
1,500 shares; and Mr. Anderson, 8,500 shares.
(4) Includes shares allocated to the account of individuals under the ESOP as
of December 31, 2001 as to which each individual has voting but not
investment power as follows: Mr. Meduski, 1,480 shares; Mr. Anderson,
1,480 shares; Mr. Pike, 1,480 shares; Mr. Somerville, 1,478 shares; and
Mr. Hartl 749 shares.
(5) Based on 11,249,826 shares of Company common stock outstanding and
entitled to vote as of March 25, 2002, plus the number of shares that may
be acquired through the exercise of stock options exercisable within 60
days of March 25, 2002.
(6) Includes 2,000 shares held by Mr. Anderson's children and 100 shares held
by Mr. Anderson's spouse.
(7) Includes 450 shares held by Mr. Devanney's children, 200 shares held by
Mr. Devanney as custodian for his children under the Connecticut UGMA and
2,000 shares represents Mr. Devanney's beneficial interest of shares owned
by Highland Park Market of Glastonbury, Inc. and by Highland Park Market,
Inc.
(8) Includes 4,000 shares owned by the St. James School Foundation, Inc.
Messrs. Devanney and O'Neill serve as trustees of the foundation and share
voting control with others with respect to the shares owned by the
foundation.
(9) Includes 18,000 shares held by Ms. Flanagan's spouse's individual
retirement account.
(10) Includes 1,000 shares held by Mr. LaBelle's spouse, 1,500 shares held by
Mr. LaBelle's spouse as custodian for their children and 1,000 shares held
in a separate trust through the LaBelle, LaBelle, Naab & Horvath, P.C.
Profit Sharing Plan.
(11) Includes 1,090 shares held by Mr. Meduski's spouse.
(12) Includes 2,500 shares held by Mr. Moynihan's individual retirement
account.
(13) Includes 5,000 shares held by Mr. Rubinow's son and 7,500 shares held by
Mr. Rubinow's spouse.
(14) Includes 900 shares held by Mr. Somerville's spouse's individual
retirement account.
(15) Includes 10,000 shares representing Mr. Sommers' beneficial interest of
shares owned by Allied Printing Services, Inc.
(16) Includes 1,000 shares held by Mr. Toomey's spouse.
(17) Includes 12,694 shares held by Mr. Wolff's individual retirement account.
5
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INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
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The four nominees for election as director were unanimously nominated by
the Nominating Committee of the Board of Directors. None of the nominees were
nominated according to any agreement or understanding between any of them and
the Company.
The Connecticut Bancshares, Inc. 2002 Equity Compensation Plan is being
presented to stockholders for approval. See Proposal 2 for more information.
Directors, officers and employees of the Company and the Bank may be granted
stock awards and options under the 2002 Equity Compensation Plan.
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PROPOSAL 1 -- ELECTION OF DIRECTORS
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The Company's Board of Directors consists of thirteen members, twelve of
whom are not employees of the Company or the Bank. The Board is divided into
three classes with three-year staggered terms, with approximately one-third of
the directors elected each year. The nominees for election this year are Timothy
J. Devanney, Sheila B. Flanagan, Eric A. Marziali and William D. O'Neill, each
of whom is a director of the Company and the Bank.
It is intended that the proxies solicited by the Board of Directors will
be voted for the election of the nominees named above. If any nominee is unable
to serve, the persons named in the proxy card would vote your shares to approve
the election of any substitute proposed by the Board of Directors.
Alternatively, the Board of Directors may adopt a resolution to reduce the size
of the Board. At this time, the Board of Directors knows of no reason why any
nominee might be unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL OF
THE NOMINEES.
Information regarding each nominee, as well as each director continuing
in office and each executive officer who is not a director, is provided below.
Unless otherwise stated, each individual has held his or her current occupation
for the last five years. The age indicated in each individual's biography is as
of December 31, 2001. The indicated period for service as a director includes
service as a director of the Bank. There are no family relationships among the
directors except that Mr. Toomey's niece is married to Mr. Devanney.
NOMINEES FOR ELECTION AS DIRECTORS
Timothy J. Devanney is the President of Highland Park Market of
Manchester and Highland Park Market of Glastonbury, and a Member of Highland
Park Market of Farmington L.L.C., all of which are retail grocery businesses.
Mr. Devanney is 49 years old and has been a director since 1999.
Sheila B. Flanagan is a retired attorney and acted as a consultant
between 1996 and 1999. Before 1996, she served as in-house counsel to the
Massachusetts Mutual Life Insurance Company. Ms. Flanagan is 61 years old and
has been a director since 1987.
Eric A. Marziali has served as the President of United Abrasives, Inc.
and SAIT Overseas Trading and Technical Corp., and Vice President of United
Abrasives Canada, Inc., all related entities, which manufacture abrasive
products, since 1982. Mr. Marziali is 43 years old and has been a director since
1999.
6
William D. O'Neill is an Adjunct Professor at the College of Engineering
at the University of Rhode Island. Before he became an Adjunct Professor, Mr.
O'Neill was a consultant to Fuss & O'Neill Inc. and served as its President
until June, 1999. Fuss & O'Neill is a civil and environmental engineering firm
with headquarters in Manchester, Connecticut and offices in Massachusetts, Rhode
Island and Vermont. Mr. O'Neill is 63 years old and has been a director since
1998.
DIRECTORS CONTINUING IN OFFICE
The following directors have a term ending in 2003:
A. Paul Berte is a self-employed attorney in Manchester, Connecticut.
Mr. Berte is 60 years old and has been a director since 1993.
John D. LaBelle, Jr. is a principal with the law firm of LaBelle,
LaBelle, Naab & Horvath P.C., Manchester, Connecticut. Mr. LaBelle is 52 years
old and has been a director since 1991.
Jon L. Norris is the co-owner and operator of Independent Insurance
Center, Inc., a full-service insurance agency in which he is also a principal
financial partner. Mr. Norris also operates the Norris Corp. Insurance Agency.
Mr. Norris is 60 years old and has been a director since 1996.
Laurence P. Rubinow has served as Chairman of the Board of the Bank and
the Company since 2000. He is the President and Chief Executive Officer of the
law firm of Woodhouse, Rubinow & Macht, P.C., located in Manchester,
Connecticut. Mr. Rubinow is the son of Eleanor S. Rubinow, a Director Emeritus.
Mr. Rubinow is 57 years old and has been a director since 1996.
Gregory S. Wolff has since April 2001 been a managing member of
Wolff-Zackin Financial LLC, a business and wealth management firm located in
Vernon, Connecticut. From 1985 to April, 2001, Mr. Wolff was chief executive
officer of Wolff-Zackin & Associates Inc., an insurance agency. Mr. Wolff is 50
years old and has been a director since 1997.
The following directors have a term ending in 2004:
Richard P. Meduski has served as the President and Chief Executive
Officer of the Company since its formation in 1999. From 1988 to October, 2001,
Mr. Meduski was President and Treasurer of the Bank. Since October, 2001, Mr.
Meduski has served as Chief Executive Officer and Treasurer of the Bank. Mr.
Meduski is 56 years old and has been a director since 1983.
John G. Sommers is the President of Allied Printing Services Inc., a
commercial printing company, located in Manchester, Connecticut. Mr. Sommers is
46 years old and has been a director since 1993.
Thomas E. Toomey is retired. Prior to his retirement, Mr. Toomey was the
Executive Vice President of Marketing Specialists, Inc., a marketing firm. Until
1997, he was the President of Toomey DeLong Food Brokers, a wholesale grocer,
which no longer operates. Mr. Toomey is 68 years old and has been a director
since 1981.
Timothy J. Moynihan is the former President of the Metro Hartford
Chamber of Commerce and former director of First Federal Saving and Loan
Association of East Hartford, Connecticut, which was acquired by the Company in
August, 2001. Mr. Moynihan is 60 years old and has been a director since 2001.
7
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Douglas K. Anderson joined the Bank in 1987 and served full-time as
Executive Vice President until 1995, at which time he changed his employment
status to part-time in order to become President and Chief Executive Officer of
Open Solutions, Inc., a computer software provider, located in Glastonbury,
Connecticut and the Bank's primary computer software provider. In 1999, Mr.
Anderson resigned as President and Chief Executive Officer of Open Solutions,
Inc. and returned to full-time employment with the Bank. Mr. Anderson is now a
director and the President of the Bank, Executive Vice President of the Company
and a director of Open Solutions, Inc. Mr. Anderson is 51 years of age.
Charles L. Pike joined the Bank in 1983 and serves as the First
Executive Vice President and Senior Loan Officer. Mr. Pike is also a director of
the Bank and First Executive Vice President of the Company. Mr. Pike is 58 years
of age.
Roger A. Somerville joined the Bank in 1984 as a commercial loan
officer. He has been Senior Vice President of Commercial Lending since 1988. Mr.
Somerville is 57 years of age.
Michael J. Hartl has been Senior Vice President of the Company since
April, 2000, and was appointed Chief Financial Officer of the Bank and the
Company in November, 2000. Prior to joining the Company in 2000, Mr. Hartl was
Executive Vice President and Chief Financial Officer of Norwich Financial Corp.
Mr. Hartl is 60 years of age.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company and Bank conduct business through meetings of the Boards of
Directors and through activities of their committees. The Board of Directors of
the Company meets at least on a quarterly basis. The Board of Directors of the
Bank generally meets on a monthly basis and may have additional meetings as
needed. During 2001, the Board of Directors of the Company held 15 meetings and
the Board of Directors of the Bank held 16 meetings. No director attended fewer
than 75% of the total meetings of the Board of Directors and Committees on which
such director served during 2001. The Board of Directors of the Company
maintains the following committees, the nature and composition of which are
described below:
AUDIT COMMITTEE. The Audit Committee consists of Messrs. Norris, Berte,
Devanney, LaBelle and Moynihan and Ms. Flanagan. The primary role of the Audit
Committee is to assist the Board of Directors in its oversight of the integrity
of the Company's processes and systems of internal control concerning accounting
and financial reporting and to review compliance with applicable laws and
regulations. The committee is also responsible for engaging the Company's
independent auditor and its internal auditor and monitoring their conduct and
independence. The Audit Committee met six times in 2001.
COMPENSATION COMMITTEE. The Compensation Committee consists of Messrs.
Marziali, Berte, Devanney, Sommers and Wolff and Ms. Flanagan. This committee is
responsible for making recommendations to the full Board of Directors on all
matters regarding compensation and fringe benefits. The Compensation Committee
met 13 times in 2001.
NOMINATING COMMITTEE. The Company's Nominating Committee, consisting of
Messrs. Wolff, Marziali, Norris and Sommers, considers and recommends the
nominees for director to stand for election at the Company's Annual Meeting of
Shareholders. The Company's Bylaws provide for shareholder nominations for
directors. See "Stockholder Proposals and Nominations." The Nominating
Committee met six times in 2001 and also on March 5, 2002.
8
DIRECTORS' COMPENSATION
FEES. Non-employee directors of the Bank each receive an annual retainer
of $15,000, $750 for each board meeting attended and $200 for each committee
meeting attended. In addition, the Chairman of the Audit Committee also receives
an annual retainer of $5,000. Non-employee directors of the Company receive an
annual retainer of $15,000. The Chairman of the Board of the Company receives an
annual retainer of $90,000 in lieu of these amounts.
DIRECTORS' CONSULTATION PLAN. The Bank maintains a post-retirement
consultation program for incumbent non-employee directors to ensure the
continued availability of its retired directors as consultants to management
because of their significant knowledge of and involvement in the Bank's
operations. A director who retires at age 70 with at least 10 years of service
receives an annual benefit equal to 50% of the average cash board compensation
(retainers and meeting fees) received by the director over the three years
preceding retirement. The benefit increases by 5% for each additional year of
service with a maximum benefit equal to 100% of final average board compensation
payable after 20 years of service. The benefit is payable until the earlier to
occur of the tenth anniversary of the director's retirement or the director's
death. A director with at least 10 years of service may elect to retire before
age 70 but after age 65 with a corresponding reduction in the benefit equal to
5% for each year the director's age is less than age 70. The plan provides that
each married retired director is guaranteed at least five annual payments. If a
retired director dies before the receipt of at least five annual payments, any
remaining payments will be made to the retired director's surviving spouse to
ensure that a minimum of five payments are made. The plan also provides that the
surviving spouse of an active director with at least 10 years of service who
dies before age 65 receives a benefit payable for five years equal to 50% of the
benefit the director would have been eligible to receive had the director
attained age 70 before his death, and that the surviving spouse of an active
director with at least 10 years of service who dies after attaining age 65
receives a benefit payable for five years equal to 100% of what that director
would have received. In the event of a change in control (as defined in the
plan), each incumbent director will be deemed retired for purposes of the plan
and will receive a lump sum benefit equal to the present value of the normal
retirement benefit with each director assumed to have at least 10 years of
service.
INCENTIVE PLAN. Under the Connecticut Bancshares, Inc. 2000 Stock-Based
Incentive Plan which was adopted by the Company's stockholders on October 2,
2000 and amended on May 14, 2001, each non-employee director of the Company or
the Bank, except for Mr. Moynihan, received non-statutory stock options to
purchase 28,080 shares of common stock at an exercise price of $17.625 per
share, the fair market value of the common stock on December 15, 2000, the date
the option was granted. Additionally, on January 2, 2001, non-employee
directors, except for Mr. Moynihan, were granted stock awards for 11,232 shares.
Both the awards and options vest equally over a five-year period. The Board of
Directors amended the Incentive Plan on March 26, 2001 and the shareholders
approved the amendment on May 14, 2001 to provide for acceleration of vesting of
the options and stock awards upon a change in control of the Company or Bank or,
at the discretion of the committee administering the Incentive Plan, upon an
optionee's retirement.
9
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE. The following information is furnished for
the chief executive officer and the four other highest paid executive officers
of the Bank who received salary and bonus of $100,000 or more during the year
ended December 31, 2001 ("Named Executive Officers").
ANNUAL
COMPENSATION(1) LONG-TERM COMPENSATION
--------------- ----------------------
RESTRICTED SECURITIES ALL
NAME AND STOCK UNDERLYING OTHER
POSITION YEAR SALARY BONUS(3) AWARDS(4) OPTIONS/SARs(#) COMPENSATION(5)(6)
- -------- ---- ------ -------- ---------- --------------- ------------------
Richard P. Meduski ..................... 2001 $350,000 $195,000 $1,931,106 -- $110,913
Chief Executive Officer and 2000 330,750 125,000 -- 224,640 77,823
Treasurer 1999 294,000 110,000 -- -- 41,135
Douglas K. Anderson .................... 2001 192,600 86,700 938,287 -- 35,807
President 2000 180,000 46,800 -- 89,856 20,144
1999 73,302 15,200 -- -- 3,199
Charles L. Pike ........................ 2001 232,447 83,700 1,184,279 -- 41,925
First Executive Vice President 2000 220,329 50,700 -- 112,320 24,893
1999 195,848 37,300 -- -- 4,800
Roger A. Somerville .................... 2001 147,459 33,300 573,944 -- 23,812
Senior Vice President 2000 140,437 25,300 -- 25,000 18,329
1999 124,883 27,500 -- -- 4,339
Michael J. Hartl(2) .................... 2001 147,700 53,250 36,500 -- 24,455
Senior Vice President and 2000 68,077 19,600 -- 10,000 --
Chief Financial Officer
- ---------------------------
(1) Does not include the aggregate amount of perquisites and other personal
benefits, which was less than 10% of the total annual salary and bonus
reported.
(2) Mr. Hartl began his employment with the Company in April, 2000.
(3) Represents board awarded discretionary cash bonus.
(4) Includes stock awards of 105,814, 51,413, 64,892, 31,449, and 2,000 shares
granted to Messrs. Meduski, Anderson, Pike, Somerville and Hartl,
respectively, under the Connecticut Bancshares, Inc. 2000 Stock-Based
Incentive Plan. The dollar amounts set forth in the table represent the
market value on the date of the grant. The awards began vesting in five
equal annual installments on January 2, 2002, the first anniversary of the
effective date of the awards. When shares become vested and are
distributed, the recipients will also receive an amount equal to the
accumulated cash and stock dividends (if any) with respect thereto, plus
earnings thereon. All awards vest immediately upon termination of
employment due to death, disability, or following a change in control. The
vesting of awards may also be accelerated upon retirement. As of December
31, 2001, the market value of the stock awards held by Messrs. Meduski,
Anderson, Pike, Somerville and Hartl was $2,735,292, $1,329,026,
$1,677,458, $812,957 and $51,700, respectively.
(5) Consists of employer contributions to the Bank's 401(k) plan of $5,100,
$5,100, $5,100, $4,424 and $5,093 and ESOP allocations with a market value
of $19,388, $19,388, $19,388, $19,388 and $19,362, for Messrs. Meduski,
Anderson, Pike, Somerville, and Hartl respectively. Also includes $36,335
paid to Mr. Meduski for premiums on an insurance policy in connection with
an insurance-funded supplemental retirement program.
(6) Includes employer contributions under The Savings Bank of Manchester SERP
for Messrs. Meduski, Anderson and Pike of $50,090, $11,319 and $17,437,
respectively.
10
EMPLOYMENT AGREEMENTS. The Bank and the Company maintain three-year
employment agreements with Messrs. Meduski, Anderson, Pike and Somerville. Under
the employment agreements, the current salary levels for Messrs. Meduski,
Anderson, Pike and Somerville are $358,750, $197,415, $238,258 and $151,146,
respectively. On the anniversary of the commencement date of the employment
agreements, the term of the employment agreements may be extended for an
additional year at the discretion of the Board of Directors. The agreements are
terminable by the employers at any time, by each executive if he is assigned
duties inconsistent with his initial position, duties, responsibilities and
status, or upon the occurrence of certain events specified by applicable
regulations. If any executive's employment is terminated without cause or upon
the executive's voluntary termination following the occurrence of an event
described in the preceding sentence, the Bank or the Company would be required
to honor the terms of the agreement through the expiration of the current term,
including payment of current cash compensation and continuation of employee
benefits.
The employment agreements also provide for a severance payment and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Bank or the Company. A severance payment also
will be provided on a similar basis in connection with a voluntary termination
of employment where, after a change in control, an executive is assigned duties
inconsistent with his position, duties, responsibilities and status immediately
before such change in control.
Even though both the Bank and the Company employment agreements provide
for a severance payment if a change in control occurs, the executive would only
be entitled to receive a severance payment under one agreement. The executive
would also be entitled to receive an additional tax indemnification payment if
payments under the employment agreements or any other payments triggered
liability under the Internal Revenue Code (the "Code") as an excise tax
constituting "excess parachute payments." Under applicable law, the excise tax
is triggered by change in control-related payments which equal or exceed three
times the executive's average annual compensation over the five years preceding
the change in control. The excise tax equals 20% of the amount of the payment in
excess of one times the executive's average compensation over the preceding
five-year period.
Payments to the executive under the Bank's employment agreement are
guaranteed by the Company if payments or benefits are not paid by the Bank.
Payment under the Company's employment agreement will be made by the Company.
The employment agreements also provide that the Bank and the Company will
indemnify the executive to the fullest extent legally allowable.
The employment agreements restrict each executive from competing against
the Company or the Bank for a period of one year from the date of termination of
the agreement if the executive is terminated without cause, except if such
termination occurs after a change in control.
CHANGE-IN-CONTROL AGREEMENT. The Bank entered into a three-year change
in control agreement with Mr. Hartl in 2000. The agreement may be renewed
annually by the Board of Directors. The agreement provides, that if following a
change in control of the Company or the Bank, Mr. Hartl's employment with the
Bank is terminated, involuntarily or under certain circumstances set forth in
the agreement, voluntarily, Mr. Hartl is entitled to receive a severance payment
equal to three times his average annual compensation for the five most recent
taxable years preceding termination. In addition to his severance payment, Mr.
Hartl is also entitled to continued life, medical and disability coverage for
thirty-six (36) months following his termination of employment.
PENSION PLAN. The Bank maintains a non-contributory pension plan for its
employees. Generally, employees of the Bank begin participation in the pension
plan once they reach age 21 and complete 1,000 hours of service in a consecutive
12-month period. A participant in the pension plan becomes vested in his
11
or her accrued benefit under the pension plan upon the earlier of the: (i)
attainment of the "normal retirement age" (as described in the pension plan)
while employed at the Bank; or (ii) completion of five vesting years with the
Bank. Participants are credited with vesting years for each plan year in which
they complete at least 1,000 hours of service.
A participant's accrued benefit under the pension plan is determined by
multiplying 2% of the participant's annual compensation (defined as average
annual compensation for the three consecutive calendar years that produce the
highest average) by the number of years of service the participant has with the
Bank up to thirty (30). However, pension benefits are reduced 1/15th for each of
the first five years and 1/30th for each of the next five years, by which
benefit commencement precedes normal retirement. Pension benefits are payable in
equal monthly installments for life, or for married persons as a joint survivor
annuity over the lives of the participant and spouse. If a participant dies
while employed by the Bank, a death benefit will be payable to either his or her
spouse or estate, or named beneficiary, equal to the entire amount of the
participant's accrued benefit in the plan. If a participant is terminated from
employment with a vested benefit and dies before starting to receive payments,
the benefit will be payable on his or her behalf. Married participants in the
pension plan may elect, with spousal consent where required by law, to receive
their pension benefits in the form of a 50%, 75% or 100% joint and survivor
annuity or a life only payment option.
The following table indicates the annual retirement benefits that would
be payable under the pension plan and the related supplemental executive
retirement plan (see below) upon retirement at age 65 to a participant electing
to receive his or her pension benefit in the standard form of benefit, assuming
various specified levels of plan compensation and various specified years of
credited service. Under the Code, maximum annual benefits under the pension plan
are limited to $135,000 and annual compensation for calculation purposes is
limited to $170,000 for the 2001 calendar year.
AVERAGE YEARS OF SERVICE
ANNUAL ----------------------------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30+
----------------- ----------- ----------- ----------- ----------- ----------- -----------
$125,000 $12,500 $25,000 $37,500 $50,000 $62,500 $75,000
150,000 15,000 30,000 45,000 60,000 75,000 90,000
175,000 17,500 35,000 52,500 70,000 87,500 105,000
200,000 20,000 40,000 60,000 80,000 100,000 120,000
250,000 25,000 50,000 75,000 100,000 125,000 150,000
300,000 30,000 60,000 90,000 120,000 150,000 180,000
350,000 35,000 70,000 105,000 140,000 175,000 210,000
400,000 40,000 80,000 120,000 160,000 200,000 240,000
450,000 45,000 90,000 135,000 180,000 225,000 270,000
500,000 50,000 100,000 150,000 200,000 250,000 300,000
550,000 55,000 110,000 165,000 220,000 275,000 330,000
600,000 60,000 120,000 180,000 240,000 300,000 360,000
650,000 65,000 130,000 195,000 260,000 325,000 390,000
675,000 67,500 135,000 202,500 270,000 337,500 405,000
The pension plan benefits listed in the table above are not reduced for
Social Security benefits or any other offset amount. As of January 1, 2002,
Messrs. Meduski, Pike, Anderson, Somerville and Hartl had 18, 18, 15, 17 and 1
years of service with the Bank, respectively, for purposes of the pension plan.
12
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Bank maintains individual
supplemental executive retirement agreements with Messrs. Meduski and Pike to
provide them with benefits that cannot be provided under the Bank's
tax-qualified defined benefit pension plan (as described above) due to certain
Code limitations. In addition, the Bank maintains a separate supplemental
executive retirement plan through which Mr. Anderson is eligible to receive an
"excess" benefit similar to those provided to Messrs. Meduski and Pike under
their individual agreements. Mr. Meduski has also been designated as a
participant under a separate provision of the supplemental executive retirement
plan which provides him with a retirement benefit equal to 60% of his final
average compensation for the three consecutive years which produce the highest
average, reduced by the benefits payable to him under the pension plan and his
individual supplemental retirement agreement. The benefits available under these
arrangements are reflected in the pension plan table based on their current
years of service and levels of compensation.
The Bank's supplemental executive retirement plan also provides Messrs.
Meduski, Pike and Anderson with a supplemental retirement benefit determined by
reference to the participant's average annual benefits under the Bank's 401(k)
plan, ESOP and a related ESOP excess benefit provision of the supplemental plan.
With respect to the ESOP portion of the supplemental executive retirement plan,
at retirement, the plan provides that a participant is entitled to receive a
supplemental benefit equal to the average annual benefits the participant would
have received with respect to the ESOP (including excess benefits) had the
participant remained employed through the repayment of any ESOP loan outstanding
as of his retirement, reduced by benefits actually accrued under the ESOP
(including excess benefits) through the date of retirement. In the event of a
change in control of the Company or the Bank (as defined in the plan), these
benefits would be available to the participant on the same basis as if the
participant had retired on the effective date of the change in control.
INCENTIVE PLAN. The Company's stockholders adopted the Incentive Plan on
October 2, 2000 and adopted amendments to the plan on May 14, 2001. It provides
discretionary awards of options to purchase common stock and awards of
restricted common stock to officers, directors and employees as determined by a
committee of the Board of Directors. The following table lists all grants of
options under the Incentive Plan to the current Named Executive Officers for
fiscal year 2001 and contains certain information about potential value of those
options based upon certain assumptions as to the appreciation of the Company's
stock over the life of the option.
13
FISCAL YEAR-END OPTION VALUES
The following table provides certain information with respect to the
number of shares of Company common stock represented by outstanding options held
by those individuals as of December 31, 2001. Also reported are the values for
"in-the-money" options which represent the positive spread between the exercise
price of any such existing stock options and the year-end stock price.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FISCAL YEAR-END(#) OPTIONS AT FISCAL YEAR-END($)(1)
-------------------------------------------- ------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------------- --------------------- ---------------- ------------------
Richard P. Meduski 44,928 179,712 $369,533 $1,478,131
Charles L. Pike 22,464 89,856 184,766 739,066
Douglas K. Anderson 17,972 71,884 147,820 591,246
Roger A. Somerville 5,000 20,000 41,125 164,500
Michael J. Hartl 2,000 8,000 16,450 65,800
- ----------------------------
(1) Value of unexercised in-the-money stock options equals the market value of
shares covered by in-the-money options on December 31, 2001 less the
option exercise price. Options are in-the-money if the market value of
shares covered by the options is greater than the exercise price.
COMMITTEE REPORTS
The Reports of the Compensation and Audit Committees and the stock
performance graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, and shall not otherwise be deemed filed under such Acts, except to
the extent the Company specifically incorporates this information by reference.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Securities and Exchange Commission, the
Company is required to provide certain data and information in regard to the
compensation and benefits provided to the Company's Chief Executive Officer and
the other executive officers of the Company. The disclosure requirements for
these executive officers include the use of a report explaining the rationale
and considerations that led to fundamental compensation decisions affecting
those individuals. In fulfillment of this requirement, the Compensation
Committee has prepared the following report for inclusion in this proxy
statement. Since the Company has no employees other than Bank employees who
perform services for the Company without additional compensation, the Company's
Compensation Committee evaluates the performance of each Named Executive
Officer, including the Chief Executive Officer, and makes recommendations to the
Board of Directors which reviews the recommendations and determines the
compensation based on its report.
COMPENSATION PRACTICES. The Company's executive compensation practices
are intended to attract and retain qualified executives, to recognize and reward
individual contributions and achievement and to offer a compensation package
that is competitive in the financial industry and motivational to each
individual executive. In furtherance of these objectives, the Company and the
Bank maintain a compensation program for executive officers, which consists of a
base salary and a bonus. The salary levels are intended to be consistent and
competitive with the practices of other comparable financial institutions and
each executive's level of responsibility. In making its determinations, the
Compensation Committee utilizes surveys inter alia of compensation paid to
executive officers performing similar duties for depository institutions and
their holding companies with particular focus on the level of compensation paid
by institutions of comparable size
14
and characteristics primarily in Connecticut. Salary increases are aimed at
reflecting the overall performance of the Company and the performance of the
individual executive officer.
A Board awarded discretionary bonus is also provided to executive
officers. Such bonuses are subject to limitations as a percentage of salary and
budget constraints. In addition, the named executive officers participate in
other benefit plans available to all employees including the 401(k) Plan.
LONG TERM INCENTIVE COMPENSATION. The Company maintains the Incentive
Plan under which executive officers received grants and awards of common stock
and options to purchase common stock of the Company. The specific grants of
options for the Named Executive Officers are reflected in the Summary
Compensation Table. The Board believes that stock ownership is a significant
incentive in building stockholder value and in aligning the interests of
employees with stockholders, since the value of this component of compensation
increases as the common stock of the Company appreciates in value.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. During the fiscal year
ended December 31, 2001, Mr. Meduski's base salary was $350,000. In addition, he
received a performance bonus of $195,000 and other compensation totaling
$110,913 as set forth in the Summary Compensation Table appearing earlier in
this proxy statement. This resulted in total compensation of $655,913. The Board
of Directors believes that Mr. Meduski's compensation is appropriate based upon
his performance in managing the Company and the Company's financial performance
during the 2001 fiscal year.
COMPENSATION COMMITTEE
Eric A. Marziali, Chairman
John G. Sommers
A. Paul Berte
Sheila B. Flanagan
Gregory S. Wolff
Timothy J. Devanney
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company or the Bank serves or has served as
a member of the compensation committee of another entity, one of whose executive
officers serves on the Compensation Committee of the Company or the Bank. No
executive officer of the Company or the Bank serves or has served as a director
of another entity, one of whose executive officers serves on the Compensation
Committee of the Company or the Bank.
15
STOCK PERFORMANCE GRAPH. The following graph compares the cumulative
total stockholder return on the Company's common stock with the cumulative total
return on the Nasdaq Index and with the SNL $1 Billion to $5 Billion Asset
Thrift Index. The graph assumes that $100 was invested at the close of business
on March 2, 2000, the initial day of trading of the Company's common stock.
Total return assumes the reinvestment of all dividends.
[GRAPH OMITTED]
Period Ended
-----------------------------------------------------------------
3/02/00 6/30/00 12/31/00 6/30/01 12/31/01
--------- ---------- --------- --------- -----------
Connecticut Bancshares, Inc.................... $100.00 $142.68 $178.05 $256.52 $256.74
The Nasdaq Index (U.S. Companies).............. 100.00 84.23 51.90 45.66 41.18
SNL $1 B to $5 B Asset Thrift Index............ 100.00 104.43 135.47 178.12 193.14
16
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is responsible for
assisting the Board of Directors in fulfilling its responsibility to the
stockholders relating to corporate accounting, reporting practices and the
quality and integrity of the financial reports of the Company. Additionally, the
Audit Committee selects the auditors and reviews their independence and their
annual audit. The Audit Committee is comprised of six directors, each of whom is
independent under National Association of Securities Dealer's listing standards.
The Audit Committee acts under a written charter adopted by the Board of
Directors.
The Audit Committee reviewed and discussed the annual financial
statements with management and the independent accountants. As part of this
process, management represented to the Audit Committee that the financial
statements were prepared in accordance with accounting principles generally
accepted in the United States. The Audit Committee also received and reviewed
written disclosures and a letter from the accountants concerning their
independence as required under applicable standards for auditors of public
companies. The Audit Committee discussed with the accountants the contents of
such materials, the accountant's independence and the additional matters
required under Statement on Auditing Standards No. 61. Based on such review and
discussions, the Audit Committee recommended that the Board of Directors include
the Company's audited consolidated financial statements for the year ended
December 31, 2001 in the Company's Form 10-K filing with the Securities and
Exchange Commission.
AUDIT COMMITTEE
Jon L. Norris, Chairman
A. Paul Berte
Timothy J. Devanney
Sheila B. Flanagan
John D. LaBelle, Jr.
Timothy J. Moynihan
- --------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- --------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who own
more than 10% of any registered class of the Company's equity securities, to
file reports of beneficial securities ownership and changes in beneficial
securities ownership with the SEC. Executive officers, directors and greater
than 10% stockholders are required by regulation to furnish the Company with
copies of all Section 16(a) reports they file.
Based solely on its review of the copies of the reports it has received
and written representations provided to the Company from the individuals
required to file the reports, the Company believes that during the year ended
2001, each of its executive officers and directors has complied with applicable
reporting requirements for transactions in Company common stock.
17
- --------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
- --------------------------------------------------------------------------------
LOANS AND EXTENSIONS OF CREDIT. Federal regulations require that all
loans or extensions of credit to executive officers and directors must generally
be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, unless the loan or extension of credit is made under a benefit
program generally available to all other employees and does not give preference
to any insider over any other employee, and must not involve more than the
normal risk of repayment or present other unfavorable features. In addition,
loans made to a director or executive officer in an amount that, when aggregated
with the amount of all other loans to the person and his or her related
interests, are in excess of the greater of $25,000 or 5% of the Bank's capital
and surplus, up to a maximum of $500,000, must be approved in advance by a
majority of the disinterested members of the Board of Directors.
The Bank offers full-time employees of the Bank who satisfy certain
criteria and the general underwriting standards of the Bank, mortgage loans with
interest rates which may be up to 1% below the rates offered to the Bank's other
customers (the "Employee Mortgage Rate Program" or "EMR"). The EMR is limited to
the purchase, construction or refinance of an employee's owner-occupied primary
residence. The EMR normally ceases upon termination of employment or if the
property is no longer the employee's primary residence. Upon termination of the
EMR, the interest rate reverts to the contract rate in effect at the time that
the loan was extended. All other terms and conditions contained in the original
mortgage and note continue to remain in effect. With the exception of EMR loans,
the Bank's policy provides that all loans made by the Bank to its executive
officers and directors be made in the ordinary course of business, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and do not
involve more than the normal risk of collectibility or present other unfavorable
features. The aggregate amount of loans by the Bank to its executive officers
and directors was approximately $6.8 million at December 31, 2001, all of which
were performing according to their original terms at December 31, 2001.
OTHER TRANSACTIONS. Mr. Anderson, the Bank's President and the
Company's Executive Vice President, is a director and a significant shareholder
of Open Solutions, Inc., the Bank's computer software provider. For the year
ended December 31, 2001, the Bank paid fees of $1,402,753 to Open Solutions,
Inc.
The Bank uses the services of the law firms of LaBelle, LaBelle, Naab &
Horvath, P.C. and Woodhouse, Rubinow & Macht, P.C. Messrs. LaBelle and Rubinow,
directors of the Company and the Bank, are partners of each of their respective
firms. Both law firms are used for a variety of legal work in the ordinary
course of the Bank's business. Payments by the Bank to Mr. LaBelle's law firm
totaled $3,033 for the year ended December 31, 2001. Payments by the Bank to Mr.
Rubinow's law firm totaled $20,925 for the year ended December 31, 2001.
The Company uses Allied Printing Services, Inc. for various printing
services, including the printing of the Company's Proxy Statement and Annual
Report to Stockholders. Mr. Sommers is the President of Allied Printing
Services, Inc. Total payments by the Company to Allied Printing Services, Inc.
totalled $246,315 for the year ended December 31, 2001.
18
- --------------------------------------------------------------------------------
PROPOSAL 2 -- APPROVAL OF THE CONNECTICUT BANCSHARES, INC.
2002 EQUITY COMPENSATION PLAN
- --------------------------------------------------------------------------------
GENERAL
The Board of Directors of the Company approved the 2002 Equity
Compensation Plan (the "Plan") on March 25, 2002, subject to ratification by the
Company's stockholders. The Board of Directors believes that the granting of
stock options and restricted stock awards is an important component of the
Company's overall compensation philosophy. In order to continue to be able to
attract and retain employees and Board members, the Company must have the
ability to offer market competitive, long-term compensation opportunities. The
Board believes that the availability of stock-based benefits is a key component
in this strategy and that this strategy also furthers the objective of aligning
the interests of management and Company shareholders.
Like the Company's 2000 Stock-Based Incentive Plan approved by
stockholders on October 2, 2000, the Plan will allow the Company to use stock
options and restricted stock to reward performance and build the participants'
equity interests in the Company by providing long-term incentives and rewards to
officers, employees and directors who provide services to the Company and its
subsidiaries and who contribute to the success of the Company by their
innovation, ability, industry, loyalty and exceptional service. The Company's
2000 Stock-Based Incentive Plan provided for the issuance of 1,123,200 shares of
Company common stock upon the exercise of incentive and non-statutory stock
options and 449,280 shares of Company common stock upon the grant of restricted
stock awards. Currently, 77,644 shares of Company common stock remain available
for the grant of stock options under the 2000 Stock-Based Incentive Plan and no
shares remain available for the grant of restricted stock awards. The weighted
average remaining term for outstanding stock options and restricted stock awards
under the 2000 Stock-Based Incentive Plan is 8.99 years and 4.0 years,
respectively.
The following summary is a brief description of the material features
of the Plan. This summary is qualified in its entirety by reference to the Plan,
a copy of which is attached as Appendix A.
SUMMARY OF THE PLAN
TYPE OF AWARDS. The Plan provides for the grant of incentive stock
options ("ISOs"), within the meaning of Section 422 of the Code, Non-Qualified
Stock Options ("NQSOs"), which do not satisfy the requirements for ISO
treatment, and Restricted Stock Awards ("RSAs").
ADMINISTRATION. The Plan is administered by the Compensation Committee
of the Company's Board of Directors. Subject to the terms of the Plan and
resolutions of the Board of Directors, the Committee interprets the Plan and is
authorized to make all determinations and decisions thereunder. The Compensation
Committee also determines the participants to whom stock options and RSAs will
be granted, the type of stock options that will be granted, the amount of stock
options and RSAs that will be granted and the terms and conditions applicable to
such awards.
PARTICIPANTS. All employees and Directors of the Company and its
subsidiaries, as well as other persons who render services to the Company, are
eligible to participate in the Plan.
NUMBER OF SHARES OF COMMON STOCK AVAILABLE. The Company has reserved
843,750 shares of common stock for issuance under the Plan. Of that amount, no
more than 168,750 shares may be used for RSA grants. However, up to 843,750
shares may be granted as stock options. Shares of common stock to
19
be issued under the Plan may be either authorized but unissued shares, or
reacquired shares held by the Company in its treasury. Any shares subject to a
stock option which expires or is terminated unexercised or an unvested or
canceled restricted stock award will again be available for issuance under the
Plan.
TERMS OF STOCK OPTION GRANTS. The exercise price of each ISO or NQSO
will not be less than 100% of the fair market value of the Company common stock
on the date the ISO or NQSO is granted. The plan does not permit the repricing
of previously granted stock options or the cancellation and regrant of stock
options without stockholder approval. The aggregate fair market value of the
shares for which ISOs granted to any employee may be exercisable for the first
time by such employee during any calendar year (under all stock option plans of
the Company and its subsidiaries) may not exceed $100,000.
Under accounting principles generally accepted in the United States of
America, compensation expense is generally not recognized with respect to the
award of options to officers and employees of the Company and its subsidiaries.
The exercise price of an option may be paid in cash, common stock or
other property, by the surrender of all or part of the option being exercised,
by the immediate sale through a broker of the number of shares being acquired
sufficient to pay the purchase price, or by a combination of these methods, as
and to the extent permitted by the Compensation Committee.
Under the Plan, the Compensation Committee may permit participants to
transfer options to eligible transferees (as such eligibility is determined by
the Compensation Committee). Each option may be exercised during the holder's
lifetime, only by the holder or the holder's guardian or legal representative,
and after death only by the holder's beneficiary or, absent a beneficiary, by
the estate or by a person who acquired the right to exercise the option by will
or the laws of descent and distribution. Options may become exercisable in full
at the time of grant or at such other times and in such installments as the
Compensation Committee determines or as may be specified in the Plan. Options
may be exercised during periods before and after the participant terminates
employment, as the case may be, to the extent authorized by the Compensation
Committee or specified in the Plan. However, no option may be exercised after
the tenth anniversary of the date the option was granted. The Compensation
Committee may, at any time and without additional consideration, accelerate the
date on which an option becomes exercisable.
TERMS OF RESTRICTED STOCK AWARDS. Subject to the terms of the Plan, the
Compensation Committee has the authority to determine the number of shares
subject to an RSA and the dates on which an RSA will vest.
RSA recipients may also receive amounts equal to accumulated cash and
stock dividends or other distributions (if any) with respect to the shares
awarded in the form of restricted stock. In addition, RSA recipients may direct
the voting of shares of common stock awarded to them.
RSAs vest in accordance with the terms of the Plan and as specified in
each RSA recipient's award agreement. The Compensation Committee may, at any
time and without additional consideration, accelerate the time period in which
an RSA vests. RSAs are transferable only by will or the laws of descent and
distribution.
EFFECT OF A CHANGE IN CONTROL. In the event of a change in control (as
defined in the Plan) each outstanding stock option grant and RSA will become
fully vested. Vested stock options will remain exercisable for their unexpired
term.
TERM OF THE PLAN. The Plan will be effective upon shareholder approval.
The Plan will expire on the tenth anniversary of the effective date, unless
terminated sooner by the Board.
20
AMENDMENT OF THE PLAN. The Plan allows the Board to amend the Plan in
certain respects without stockholder approval, unless such approval is required
to comply with a tax law, regulatory requirement or specific provision of the
Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following brief
description of the material tax consequences of stock options and restricted
stock awards granted under the Plan is based on federal income tax laws
currently in effect and does not purport to be a complete description of such
federal income tax consequences.
STOCK OPTIONS. There are generally no federal income tax consequences
either to the optionee or to the Company upon the grant of an ISO or NQSO. On
the exercise of an ISO during employment or within three months thereafter, the
optionee will not recognize any income and the Company will not be entitled to a
deduction, although the excess of the fair market value of the shares on the
date of exercise over the option price is includible in the optionee's
alternative minimum taxable income, which may give rise to alternative minimum
tax liability for the optionee. Generally, if the optionee disposes of shares
acquired upon exercise of an ISO within two years of the date of grant or one
year of the date of exercise, the optionee will recognize ordinary income, and
the Company will be entitled to a deduction, equal to the excess of the fair
market value of the shares on the date of exercise over the option price
(limited generally to the gain on the sale). The balance of any gain or loss
will be treated as a capital gain or loss to the optionee. If the shares are
disposed of after the two year and one year periods mentioned above, the Company
will not be entitled to any deduction, and the entire gain or loss for the
optionee will be treated as a capital gain or loss.
On exercise of an NQSO, the excess of the date-of-exercise fair market
value of the shares acquired over the option price will generally be taxable to
the optionee as ordinary income and deductible by the Company, provided the
Company properly withholds taxes in respect of the exercise. This disposition of
shares acquired upon the exercise of a NQSO will generally result in a capital
gain or loss for the optionee, but will have no tax consequences for the
Company.
RESTRICTED STOCK AWARDS. A participant who has been awarded restricted
stock under the plan and does not make an election under Section 83(b) of the
Code will not recognize taxable income at the time of the award. At the time any
transfer or forfeiture restrictions applicable to the RSA lapse, the recipient
will recognize ordinary income and the Company will be entitled to a
corresponding deduction equal to the fair market value of the stock at such
time. Any dividend paid to the recipient on the restricted stock at or prior to
such time will be ordinary compensation income to the recipient and deductible
as such by the Company.
An RSA recipient who makes an election under Section 83(b) of the Code
will recognize ordinary income at the time of the award and the Company will be
entitled to a corresponding deduction equal to the fair market value of the
stock at such time. Any dividends subsequently paid to the recipient on the
restricted stock will be dividend income to the recipient and not deductible by
the Company. If the recipient makes a Section 83(b) election, there are no
federal income tax consequences either to the recipient or the Company at the
time any applicable transfer or forfeiture restrictions lapse.
NEW PLAN BENEFITS. The Company anticipates that grant of stock options
and restricted stock awards will be made to non-employee directors, officers and
employees on or after the effective date of the Plan at levels consistent with
other peer institutions. However, the Board has not made specific determinations
regarding the timing or size of individual awards.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE
CONNECTICUT BANCSHARES, INC. 2002 EQUITY COMPENSATION PLAN.
21
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PROPOSAL 3 -- RATIFICATION OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
GENERAL
Arthur Andersen LLP served as the Company's independent auditors for
the fiscal year ended December 31, 2001. A representative of Arthur Andersen LLP
is expected to be present at the annual meeting to respond to appropriate
questions from stockholders and will have the opportunity to make a statement
should he or she desire to do so. The Board of Directors has appointed Deloitte
& Touche LLP to be the Company's independent auditors for the fiscal year ending
December 31, 2002, subject to the ratification by stockholders. A representative
of Deloitte & Touche LLP is expected to be present at the annual meeting to
respond to appropriate questions from stockholders and will have the opportunity
to make a statement should he or she desire to do so.
If the ratification of the appointment of independent auditors is not
approved by a majority of the votes cast by stockholders at the annual meeting,
the Board of Directors would consider other independent public accountants. THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF INDEPENDENT AUDITORS.
CHANGE IN INDEPENDENT AUDITORS
On April 2, 2002, the Company's Board of Directors, at the
recommendation of its Audit Committee, terminated the engagement of Arthur
Andersen LLP and engaged Deloitte & Touche LLP as the Company's certifying
accountants. The report of Arthur Andersen LLP on the Company's financial
statements for either of the last two fiscal years did not contain an adverse
opinion or a disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope, or accounting principles. During the Company's two
most recent fiscal years and the subsequent interim period preceding the date of
termination of the engagement of Arthur Andersen LLP, the Company was not in
disagreement with Arthur Andersen LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of Arthur Andersen LLP, would
have caused Arthur Andersen LLP to make reference to the subject matter of the
disagreement in connection with its report. Furthermore, during this same time
period, Arthur Andersen LLP did not advise, and has not indicated to the Company
that it had reason to advise, the Company of any "reportable event" as that term
is defined in Item 304(a) of Securities and Exchange Commission Regulation S-K.
The Company has not consulted with Deloitte & Touche LLP during the Company's
two most recent fiscal years nor during any subsequent interim period prior to
Deloitte & Touche LLP's engagement regarding the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's financial statements.
22
AUDIT FEES
The following table sets forth the fees billed to the Company for the
fiscal year ended December 31, 2001 by Arthur Andersen LLP:
Audit Fees................................. $147,030
All other fees(1).......................... 185,015
--------
$332,045
========
------------------
(1) Includes $101,015 for tax-related and other services and $84,000 for
the acquisition of First Federal Savings and Loan Association of
East Hartford.
The Audit Committee has considered whether the provision of non-audit
services to the Company by Arthur Andersen LLP is compatible with maintaining
Arthur Andersen LLP's independence.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The Company will pay the cost of solicitation of proxies on behalf of
its Board of Directors. In addition to soliciting proxies by mail, Georgeson
Shareholder Communications Inc., a proxy solicitation firm, will assist the
Company in soliciting proxies for the annual meeting and will be paid a fee of
$6,500, plus out-of-pocket expenses. Proxies may also be solicited personally or
by telephone by directors, officers and other employees of the Company and the
Bank without any additional compensation. The Company will also request persons,
firms and corporations holding shares in their names, or in the name of their
nominees, which are beneficially owned by others, to send proxy materials to,
and obtain proxies from, the beneficial owners, and will reimburse those record
holders for their reasonable expenses in doing so.
The Company's Annual Report to Stockholders has been mailed to all
persons who were stockholders as of the close of business on March 25, 2002. Any
stockholder who has not received a copy of the Annual Report may obtain a copy
by writing to the Secretary of the Company. The Annual Report is not to be
treated as part of the proxy solicitation material or as having been
incorporated in this proxy statement by reference.
A COPY OF THE COMPANY'S FORM 10-K (WITHOUT EXHIBITS) FOR THE FISCAL
YEAR ENDED DECEMBER 31, 2001, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE CLOSE OF
BUSINESS ON MARCH 25, 2002 UPON WRITTEN REQUEST TO CAROLE L. YUNGK, CORPORATE
SECRETARY, CONNECTICUT BANCSHARES, INC., 923 MAIN STREET, MANCHESTER,
CONNECTICUT 06040.
23
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STOCKHOLDER PROPOSALS AND NOMINATIONS
- --------------------------------------------------------------------------------
To be considered for inclusion in the Company's proxy statement and
form of proxy relating to the 2003 Annual Meeting of Stockholders, a stockholder
proposal must be received by the Corporate Secretary of the Company at the
address set forth on the Notice of Annual Meeting of Stockholders not later than
December 10, 2002. If such annual meeting is held on a date more than 30
calendar days from May 16, 2003, a stockholder's proposal must be received by a
reasonable time before the Company begins to print and mail its proxy materials
for such annual meeting. Any such proposal will be subject to the proxy rules of
the Securities and Exchange Commission.
The Bylaws of the Company set forth the procedures by which a
stockholder may properly bring business before a meeting of stockholders,
including director nominations. Pursuant to the Bylaws, only business brought by
or at the direction of the Board of Directors may be conducted at a special
meeting. The Bylaws of the Company provide an advance notice procedure for a
stockholder to properly bring business before an annual meeting. The stockholder
must give written advance notice to the Corporate Secretary of the Company not
less than ninety (90) days before the date originally fixed for such meeting;
provided, however, that in the event that less than one hundred (100) days
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the tenth day following the date on which the
Company's notice to stockholders of the annual meeting date was mailed or such
public disclosure was made. In order for a stockholder to bring business before
the Company's 2003 Annual Meeting of Stockholders, the Company would have to
receive notice of such business not later than February 15, 2003, assuming the
2003 Annual Meeting is held on May 16, 2003 and that the Company provides at
least 100 days notice of the date of the meeting. The advance notice by
stockholders must include certain information required by the Bylaws. In the
case of nominations to the Board of Directors, certain information regarding the
nominee must be provided. A copy of the Bylaws may be obtained from the Company.
Notwithstanding the advance notice provisions of the Company's Bylaws, the
Company is not required to include in its proxy statement or proxy related to
any annual meeting a shareholder proposal that fails to meet all of the
requirements of the proxy rules of the Securities and Exchange Commission in
effect when the Company receives any such proposal.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Carole L. Yungk
Carole L. Yungk
Corporate Secretary
Manchester, Connecticut
April 9, 2002
24
APPENDIX A
CONNECTICUT BANCSHARES, INC.
2002 EQUITY COMPENSATION PLAN
1. DEFINITIONS.
-----------
(a) "Affiliate" means any "parent corporation" or "subsidiary
corporation" of the Holding Company, as such terms are defined in Sections
424(e) and 424(f) of the Code.
(b) "Award" means, individually or collectively, a grant under the Plan
of Non-Statutory Stock Options, Incentive Stock Options and Stock Awards.
(c) "Award Agreement" means an agreement evidencing and setting forth
the terms of an Award.
(d) "Bank" means The Savings Bank of Manchester, a
Connecticut-chartered savings bank.
(e) "Board of Directors" means the board of directors of the Holding
Company.
(f) "Change in Control" of the Bank or the Holding Company shall mean
an event of a nature that: (i) would be required to be reported in response to
Item 1(a) of the current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); (ii) results in a Change in Control of the Bank or the Holding
Company within the meaning of the Change in Bank Control Act and the Rules and
Regulations promulgated by the Federal Deposit Insurance Corporation ("FDIC") at
12 C.F.R. ss. 303.4(a), with respect to the Bank, and the Rules and Regulations
promulgated by the Office of Thrift Supervision ("OTS") (or its predecessor
agency), with respect to the Holding Company, as in effect on the date of this
Agreement; or (iii) without limitation such a Change in Control shall be deemed
to have occurred at such time as (A) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of voting securities of the Bank or the Holding Company representing
20% or more of the Bank's or the Holding Company's outstanding voting securities
or right to acquire such securities except for any voting securities of the Bank
purchased by the Holding Company and any voting securities purchased by any
employee benefit plan of the Holding Company or its Subsidiaries, (B)
individuals who constitute the Board on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the Holding Company's
stockholders was approved by a Nominating Committee solely composed of members
which are Incumbent Board members, shall be, for purposes of this clause (B),
considered as though he were a member of the Incumbent Board, (C) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Holding Company or similar transaction occurs or is
effectuated in which the Bank or Holding Company is not the resulting entity, or
(D) a proxy statement has been distributed soliciting proxies from stockholders
of the Holding Company, by someone other than the current management of the
Holding Company, seeking stockholder approval of a plan of reorganization,
merger or consolidation of the Holding Company or Bank with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to such plan or transaction are exchanged for or
converted into cash or property or securities not issued by the Bank or the
Holding Company shall be distributed, or (E) a tender offer is made for 20% or
more of the voting securities of the Bank or Holding Company then outstanding.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the committee designated by the Board of
Directors, pursuant to Section 2 of the Plan, to administer the Plan.
(i) "Common Stock" means the common stock of the Holding Company, par
value $.01 per share.
(j) "Date of Grant" means the effective date of an Award.
(k) "Disability" means any mental or physical condition with respect to
which the Participant qualifies for and receives benefits for under a long-term
disability plan of the Holding Company or an Affiliate, or in the absence of
such a long-term disability plan or coverage under such a plan, "Disability"
shall mean a physical or mental condition which, in the sole discretion of the
Committee, is reasonably expected to be of indefinite duration and to
substantially prevent the Participant from fulfilling his or her duties or
responsibilities to the Holding Company or an Affiliate.
(l) "Effective Date" means the date the Plan is approved by
shareholders.
(m) "Employee" means any person employed by the Holding Company or an
Affiliate. Directors who are employed by the Holding Company or an Affiliate
shall be considered Employees under the Plan.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(o) "Exercise Price" means the price at which a Participant may
purchase a share of Common Stock pursuant to an Option.
(p) "Fair Market Value" means the market price of Common Stock,
determined by the Committee as follows:
(i) If the Common Stock was traded on the date in question on
The Nasdaq Stock Market, then the Fair Market Value shall be
equal to the closing price reported for such date;
(ii) If the Common Stock was traded on a stock exchange on the
date in question, then the Fair Market Value shall be equal
to the closing price reported by the applicable composite
transactions report for such date; and
(iii) If neither of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee
in good faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by
the Committee shall be based on the prices reported in The
Wall Street Journal. The Committee's determination of Fair
Market Value shall be conclusive and binding on all persons.
(q) "Holding Company" means Connecticut Bancshares, Inc., a Delaware
corporation.
(r) "Incentive Stock Option" means a stock option granted to a
Participant, pursuant to Section 7 of the Plan, that is intended to meet the
requirements of Section 422 of the Code.
(s) "Non-Statutory Stock Option" means a stock option granted to a
Participant pursuant to the terms of the Plan but which is not intended to be
and is not identified as an Incentive Stock Option or a stock option granted
under the Plan which is intended to be and is identified as an Incentive Stock
Option but which does not meet the requirements of Section 422 of the Code.
A-2
(t) "Option" means an Incentive Stock Option or Non-Statutory Stock
Option.
(u) "Outside Director" means a member of the board(s) of directors of
the Holding Company or an Affiliate who is not also an Employee of the Holding
Company or an Affiliate.
(v) "Participant" means any person who holds an outstanding Award.
(w) "Performance Award" means an Award granted to a Participant
pursuant to Section 9 of the Plan.
(x) "Plan" means this Connecticut Bancshares, Inc. 2002 Equity
Compensation Plan.
(y) "Retirement" means retirement from employment with the Holding
Company or an Affiliate in accordance with the then current retirement policies
of the Holding Company or Affiliate, as applicable. "Retirement" with respect to
an Outside Director means the termination of service from the board(s) of
directors of the Holding Company and any Affiliate following written notice to
such board(s) of directors of the Outside Director's intention to retire.
(z) "Stock Award" means an Award granted to a Participant pursuant to
Section 8 of the Plan.
(aa) "Termination for Cause" means termination because of a
Participant's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or material breach of any provision of any
employment agreement between the Holding Company and/or any subsidiary of the
Holding Company and a Participant.
(bb) "Trust" means a trust established by the Board of Directors in
connection with this Plan to hold Common Stock or other property for the
purposes set forth in the Plan.
(cc) "Trustee" means any person or entity approved by the Board of
Directors or its designee(s) to hold any of the Trust assets.
2. ADMINISTRATION.
--------------
(a) The Committee shall administer the Plan. The Committee shall
consist of two or more disinterested directors of the Holding Company, who shall
be appointed by the Board of Directors. A member of the Board of Directors shall
be deemed to be "disinterested" only if he or she satisfies: (i) such
requirements as the Securities and Exchange Commission may establish for
non-employee directors administering plans intended to qualify for exemption
under Rule 16b-3 (or its successor) under the Exchange Act and (ii) such
requirements as the Internal Revenue Service may establish for outside directors
acting under plans intended to qualify for exemption under Section 162(m)(4)(C)
of the Code. The Board of Directors may also appoint one or more separate
committees of the Board of Directors, each composed of one or more directors of
the Holding Company or an Affiliate who need not be disinterested, that may
grant Awards and administer the Plan with respect to Employees, Outside
Directors, and other individuals who are not considered officers or directors of
the Holding Company under Section 16 of the Exchange Act or for whom Awards are
not intended to satisfy the provisions of Section 162(m) of the Code.
(b) The Committee shall (i) select the Employees and Outside Directors
who are to receive Awards under the Plan, (ii) determine the type, number,
vesting requirements and other features and conditions of such Awards, (iii)
interpret the Plan and Award Agreements in all respects and (iv) make all
A-3
other decisions relating to the operation of the Plan. The Committee may adopt
such rules or guidelines as it deems appropriate to implement the Plan. The
Committee's determinations under the Plan shall be final and binding on all
persons.
(c) Each Award shall be evidenced by a written agreement ("Award
Agreement") containing such provisions as may be required by the Plan and
otherwise approved by the Committee. The Chairman of the Committee and such
other directors and officers as shall be designated by the Committee is hereby
authorized to execute Award Agreements on behalf of the Company or an Affiliate
and to cause them to be delivered to the recipients of Awards. Each Award
Agreement shall constitute a binding contract between the Holding Company or an
Affiliate and the Participant, and every Participant, upon acceptance of an
Award Agreement, shall be bound by the terms and restrictions of the Plan and
the Award Agreement. The terms of each Award Agreement shall be in accordance
with the Plan, but each Award Agreement may include any additional provisions
and restrictions determined by the Committee, in its discretion, provided that
such additional provisions and restrictions are not inconsistent with the terms
of the Plan.
In particular and at a minimum, the Committee shall set forth in each
Award Agreement:
(i) the type of Award granted;
(ii) the Exercise Price of any Option;
(iii) the number of shares subject to the Award;
(iv) the expiration date of the Award;
(v) the manner, time, and rate (cumulative or otherwise) of
exercise or vesting of such Award; and
(vi) the restrictions, if any, placed upon such Award, or upon
shares which may be issued upon exercise of such Award.
(d) The Committee may delegate all authority for: (i) the determination
of forms of payment to be made by or received by the Plan and (ii) the execution
of any Award Agreement. The Committee may rely on the descriptions,
representations, reports and estimates provided to it by the management of the
Holding Company or an Affiliate for determinations to be made pursuant to the
Plan.
3. TYPES OF AWARDS.
---------------
The following Awards may be granted under the Plan:
(a) Non-Statutory Stock Options.
(b) Incentive Stock Options.
(c) Stock Awards.
4. STOCK SUBJECT TO THE PLAN.
-------------------------
Subject to adjustment as provided in Section 13 of the Plan, the number
of shares reserved for awards under the Plan is 843,750 including for purchase
pursuant to the exercise of Options (Incentive Stock Options and Non-Statutory
Stock Options); provided, however, that no more than 168,750 may be used for
grants of Restricted Stock Awards. The shares of Common Stock issued under the
Plan may be either authorized but unissued shares or authorized shares
previously issued and acquired or reacquired by the Holding Company. Shares
underlying outstanding awards will be unavailable for any other use, including
future grants under the Plan, except that, to the extent the awards terminate,
expire or are forfeited without vesting or having been exercised, new awards may
be granted with respect to these shares subject to the limitations set forth in
this Section 4.
A-4
5. ELIGIBILITY.
-----------
Subject to the terms of the Plan, all Employees and Outside Directors
shall be eligible to receive Awards under the Plan. In addition, the Committee
may grant eligibility to consultants and advisors of the Holding Company or an
Affiliate, as it sees fit.
6. NON-STATUTORY STOCK OPTIONS.
---------------------------
The Committee may, subject to the limitations of the Plan and the
availability of shares of Common Stock reserved but not previously awarded under
the Plan, grant Non-Statutory Stock Options to eligible individuals upon such
terms and conditions as it may determine to the extent such terms and conditions
are consistent with the following provisions:
(a) Exercise Price. The Committee shall determine the Exercise Price of
each Non-Statutory Stock Option. However, the Exercise Price shall not be less
than 100% of the Fair Market Value of the Common Stock on the Date of Grant.
(b) Terms of Non-Statutory Stock Options. The Committee shall determine
the term during which a Participant may exercise a Non-Statutory Stock Option,
but in no event may a Participant exercise a Non-Statutory Stock Option, in
whole or in part, more than ten (10) years from the Date of Grant. The Committee
shall also determine the date on which each Non-Statutory Stock Option, or any
part thereof, first becomes exercisable and any terms or conditions a
Participant must satisfy in order to exercise each Non-Statutory Stock Option.
The shares of Common Stock underlying each Non-Statutory Stock Option may be
purchased in whole or in part by the Participant at any time during the term of
such Non-Statutory Stock Option, or any portion thereof, once the Non-Statutory
Stock Option becomes exercisable.
(c) Non-Transferability. Unless otherwise determined by the Committee
in accordance with this Section 6(c), a Participant may not transfer, assign,
hypothecate, or dispose of in any manner, other than by will or the laws of
intestate succession, a Non-Statutory Stock Option. The Committee may, however,
in its sole discretion, permit transferability or assignment of a Non-Statutory
Stock Option if such transfer or assignment is, in its sole determination, for
valid estate planning purposes and such transfer or assignment is permitted
under the Code and Rule 16b-3 under the Exchange Act. For purposes of this
Section 6(c), a transfer for valid estate planning purposes includes, but is not
limited to: (a) a transfer to a revocable intervivos trust as to which the
Participant is both the settlor and trustee, (b) a transfer for no consideration
to: (i) any member of the Participant's Immediate Family, (ii) any trust solely
for the benefit of members of the Participant's Immediate Family, (iii) any
partnership whose only partners are members of the Participant's Immediate
Family, and (iv) any limited liability corporation or corporate entity whose
only members or equity owners are members of the Participant's Immediate Family;
or (c) a transfer to the SBM Charitable Foundation, Inc. For purposes of this
Section 6(c), "Immediate Family" includes, but is not necessarily limited to, a
Participant's parents, grandparents, spouse, children, grandchildren, siblings
(including half brothers and sisters), and individuals who are family members by
adoption. Nothing contained in this Section 6(c) shall be construed to require
the Committee to give its approval to any transfer or assignment of any
Non-Statutory Stock Option or portion thereof, and approval to transfer or
assign any Non-Statutory Stock Option or portion thereof does not mean that such
approval will be given with respect to any other Non-Statutory Stock Option or
portion thereof. The transferee or assignee of any Non-Statutory Stock Option
shall be subject to all of the terms and conditions applicable to such
Non-Statutory Stock Option immediately prior to the transfer or assignment and
shall be subject to any other conditions prescribed by the Committee with
respect to such Non-Statutory Stock Option.
A-5
(d) Termination of Employment or Service (General). Unless otherwise
determined by the Committee, upon the termination of a Participant's employment
or other service for any reason other than Retirement, Disability or death, a
Change in Control, or Termination for Cause, the Participant may exercise only
those Non-Statutory Stock Options that were immediately exercisable by the
Participant at the date of such termination and only for a period of three (3)
months following the date of such termination, or, if sooner, until the
expiration of the term of the Option.
(e) Termination of Employment or Service (Retirement). Unless otherwise
determined by the Committee, in the event of a Participant's Retirement, the
Participant may exercise only those Non-Statutory Stock Options that were
immediately exercisable by the Participant at the date of Retirement and only
for a period of one (1) year following the date of Retirement, or, if sooner,
until the expiration of the term of the Non-Statutory Stock Option.
(f) Termination of Employment or Service (Disability or Death). Unless
otherwise determined by the Committee, in the event of the termination of a
Participant's employment or other service due to Disability or death, all
Non-Statutory Stock Options held by such Participant shall immediately become
exercisable and remain exercisable for a period of one (1) year following the
date of such termination, or, if sooner, until the expiration of the term of the
Option.
(g) Termination of Employment or Service (Termination for Cause).
Unless otherwise determined by the Committee, in the event of a Participant's
Termination for Cause, all rights with respect to the Participant's
Non-Statutory Stock Options shall expire immediately upon the effective date of
such Termination for Cause.
(h) Acceleration Upon a Change in Control. In the event of a Change in
Control, all Non-Statutory Stock Options held by a Participant as of the date of
the Change in Control shall immediately become exercisable and shall remain
exercisable until the expiration of the term of the Non-Statutory Stock Option
regardless of termination of employment or service.
(i) Payment. Payment due to a Participant upon the exercise of a
Non-Statutory Stock Option shall be made in the form of shares of Common Stock.
7. INCENTIVE STOCK OPTIONS.
-----------------------
The Committee may, subject to the limitations of the Plan and the
availability of shares of Common Stock reserved but unawarded under this Plan,
grant Incentive Stock Options to an Employee upon such terms and conditions as
it may determine to the extent such terms and conditions are consistent with the
following provisions:
(a) Exercise Price. The Committee shall determine the Exercise Price of
each Incentive Stock Option. However, the Exercise Price shall not be less than
100% of the Fair Market Value of the Common Stock on the Date of Grant;
provided, however, that if at the time an Incentive Stock Option is granted, the
Employee owns or is treated as owning, for purposes of Section 422 of the Code,
Common Stock representing more than 10% of the total combined voting securities
of the Holding Company ("10% Owner"), the Exercise Price shall not be less than
110% of the Fair Market Value of the Common Stock on the Date of Grant.
(b) Amounts of Incentive Stock Options. To the extent the aggregate
Fair Market Value of shares of Common Stock with respect to which Incentive
Stock Options that are exercisable for the first time by an Employee during any
calendar year under the Plan and any other stock option plan of the Holding
A-6
Company or an Affiliate exceeds $100,000, or such higher value as may be
permitted under Section 422 of the Code, such Options in excess of such limit
shall be treated as Non-Statutory Stock Options. Fair Market Value shall be
determined as of the Date of Grant with respect to each such Incentive Stock
Option.
(c) Terms of Incentive Stock Options. The Committee shall determine the
term during which a Participant may exercise an Incentive Stock Option, but in
no event may a Participant exercise an Incentive Stock Option, in whole or in
part, more than ten (10) years from the Date of Grant; provided, however, that
if at the time an Incentive Stock Option is granted to an Employee who is a 10%
Owner, the Incentive Stock Option granted to such Employee shall not be
exercisable after the expiration of five (5) years from the Date of Grant. The
Committee shall also determine the date on which each Incentive Stock Option, or
any part thereof, first becomes exercisable and any terms or conditions a
Participant must satisfy in order to exercise each Incentive Stock Option. The
shares of Common Stock underlying each Incentive Stock Option may be purchased
in whole or in part at any time during the term of such Incentive Stock Option
after such Option becomes exercisable.
(d) Non-Transferability. No Incentive Stock Option shall be
transferable except by will or the laws of descent and distribution and is
exercisable, during his or her lifetime, only by the Employee to whom the
Committee grants the Incentive Stock Option. The designation of a beneficiary
does not constitute a transfer of an Incentive Stock Option.
(e) Termination of Employment (General). Unless otherwise determined by
the Committee, upon the termination of a Participant's employment or other
service for any reason other than Retirement, Disability or death, a Change in
Control, or Termination for Cause, the Participant may exercise only those
Incentive Stock Options that were immediately exercisable by the Participant at
the date of such termination and only for a period of three (3) months following
the date of such termination, or, if sooner, until the expiration of the term of
the Option.
(f) Termination of Employment (Retirement). Unless otherwise determined
by the Committee, in the event of a Participant's Retirement, the Participant
may exercise only those Incentive Stock Options that were immediately
exercisable by the Participant at the date of Retirement and only for a period
of one (1) year following the date of Retirement, or, if sooner, until the
expiration of the term of the Incentive Stock Option. Any Option originally
designated as an Incentive Stock Option shall be treated as a Non-Statutory
Stock Option to the extent the Participant exercises such Option more than three
(3) months following the Participant's cessation of employment.
(g) Termination of Employment (Disability or Death). Unless otherwise
determined by the Committee, in the event of the termination of a Participant's
employment or other service due to Disability or death, all Incentive Stock
Options held by such Participant shall immediately become exercisable and remain
exercisable for a period one (1) year following the date of such termination,
or, if sooner, until the expiration of the term of the Option.
(h) Termination of Employment (Termination for Cause). Unless otherwise
determined by the Committee, in the event of an Employee's Termination for
Cause, all rights under such Employee's Incentive Stock Options shall expire
immediately upon the effective date of such Termination for Cause.
(i) Acceleration Upon a Change in Control. In the event of a Change in
Control all Incentive Stock Options held by a Participant as of the date of the
Change in Control shall immediately become exercisable and shall remain
exercisable until the expiration of the term of the Incentive Stock Option
regardless of termination of employment. Any Option originally designated as an
Incentive Stock Option
A-7
shall be treated as a Non-Statutory Stock Option to the extent the Participant
exercises such Stock Options more than (3) months from the Participant's
cessation of employment.
(j) Payment. Payment due to a Participant upon the exercise of an
Incentive Stock Option shall be made in the form of shares of Common Stock.
(k) Disqualifying Dispositions. Each Award Agreement with respect to an
Incentive Stock Option shall require the Participant to notify the Committee of
any disposition of shares of Common Stock issued pursuant to the exercise of
such Option under the circumstances described in Section 421(b) of the Code
(relating to certain disqualifying dispositions) within 10 days of such
disposition.
8. STOCK AWARDS.
------------
The Committee may make grants of Stock Awards, which shall consist of
the grant of some number of shares of Common Stock, to a Participant upon such
terms and conditions as it may determine to the extent such terms and conditions
are consistent with the following provisions:
(a) Grants of the Stock Awards. Stock Awards may only be made in whole
shares of Common Stock. Stock Awards may only be granted from shares reserved
under the Plan and available for award at the time the Stock Award is made to
the Participant.
(b) Terms of the Stock Awards. The Committee shall determine the dates
on which Stock Awards granted to a Participant shall vest and any terms or
conditions which must be satisfied prior to the vesting of any Stock Award or
portion thereof. Any such terms or conditions shall be determined by the
Committee as of the Date of Grant.
(c) Termination of Employment or Service (General). Unless otherwise
determined by the Committee, upon the termination of a Participant's employment
or service for any reason other than Retirement, Disability or death, a Change
in Control, or Termination for Cause, any Stock Awards in which the Participant
has not become vested as of the date of such termination shall be forfeited and
any rights the Participant had to such Stock Awards shall become null and void.
(d) Termination of Employment or Service (Retirement). Unless otherwise
determined by the Committee, in the event of a Participant's Retirement, any
Stock Awards in which the Participant has not become vested as of the date of
Retirement shall be forfeited and any rights the Participant had to such
unvested Stock Awards shall become null and void.
(e) Termination of Employment or Service (Disability or Death). Unless
otherwise determined by the Committee, in the event of a termination of the
Participant's service due to Disability or death all unvested Stock Awards held
by such Participant shall immediately vest as of the date of such termination.
(f) Termination of Employment or Service (Termination for Cause).
Unless otherwise determined by the Committee, in the event of the Participant's
Termination for Cause, all Stock Awards in which the Participant had not become
vested as of the effective date of such Termination for Cause shall be forfeited
and any rights such Participant had to such unvested Stock Awards shall become
null and void.
(g) Acceleration Upon a Change in Control. In the event of a Change in
Control all unvested Stock Awards held by a Participant shall immediately vest.
A-8
(h) Issuance of Certificates. Unless otherwise held in Trust and
registered in the name of the Trustee, reasonably promptly after the Date of
Grant with respect to shares of Common Stock pursuant to a Stock Award, the
Holding Company shall cause to be issued a stock certificate, registered in the
name of the Participant to whom such Stock Award was granted, evidencing such
shares; provided, that the Holding Company shall not cause such a stock
certificate to be issued unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall bear the
following legend:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions,
terms and conditions (including forfeiture provisions and
restrictions against transfer) contained in the Connecticut
Bancshares, Inc. 2002 Equity Compensation Plan and Award
Agreement entered into between the registered owner of such
shares and Connecticut Bancshares, Inc. or its Affiliates. A
copy of the Plan and Award Agreement is on file in the office
of the Corporate Secretary of Connecticut Bancshares, Inc.,
923 Main Street, Manchester, Connecticut 06040."
Such legend shall not be removed until the Participant becomes vested in such
shares pursuant to the terms of the Plan and Award Agreement. Each certificate
issued pursuant to this Section 8(h), in connection with a Stock Award, shall be
held by the Holding Company or its Affiliates, unless the Committee determines
otherwise.
(i) Non-Transferability. Except to the extent permitted by the Code,
the rules promulgated under Section 16(b) of the Exchange Act or any successor
statutes or rules:
(i) The recipient of a Stock Award shall not sell,
transfer, assign, pledge, or otherwise encumber
shares subject to the Stock Award until full vesting
of such shares has occurred. For purposes of this
section, the separation of beneficial ownership and
legal title through the use of any "swap" transaction
is deemed to be a prohibited encumbrance.
(ii) Unless determined otherwise by the Committee and
except in the event of the Participant's death or
pursuant to a domestic relations order, a Stock Award
is not transferable and may be earned in his or her
lifetime only by the Participant to whom it is
granted. Upon the death of a Participant, a Stock
Award is transferable by will or the laws of descent
and distribution. The designation of a beneficiary
shall not constitute a transfer.
(iii) If a recipient of a Stock Award is subject to the
provisions of Section 16 of the Exchange Act, shares
of Common Stock subject to such Stock Award may not,
without the written consent of the Committee (which
consent may be given in the Award Agreement), be sold
or otherwise disposed of within six (6) months
following the date of grant of the Stock Award.
(j) Treatment of Dividends. Whenever shares of Common Stock underlying
a Stock Award are distributed to a Participant or beneficiary thereof under the
Plan (or at such other time as the Committee may determine with respect to a
Participant), such Participant or beneficiary shall also be entitled to receive,
with respect to each such share awarded, a payment equal to any cash dividends
or other distributions and the number of shares of Common Stock equal to any
stock dividends, declared and paid with respect to a share of the Common Stock
if the record date for determining shareholders entitled to receive such
dividends or
A-9
other distributions falls on or after the date a Stock Award is granted. There
shall also be distributed an appropriate amount of net earnings, if any, of the
Trust with respect to any dividends paid out on the shares related to the Stock
Award.
(k) Voting of Stock Awards. After a Stock Award has been granted but
for which the shares covered by such Stock Award have not yet been vested,
earned and distributed to the Participant pursuant to the Plan, the Participant
shall be entitled to vote or to direct the Trustee to vote, as the case may be,
such shares of Common Stock which the Stock Award covers subject to the rules
and procedures adopted by the Committee for this purpose and in a manner
consistent with the Trust agreement.
(l) Payment. Payment due to a Participant upon the redemption of a
Stock Award shall be made in the form of shares of Common Stock.
9. DEFERRED PAYMENTS.
-----------------
The Committee, in its discretion, may permit a Participant to elect to
defer receipt of all or any part of any payment under the Plan otherwise due
upon exercise of an Option. The Committee shall determine the terms and
conditions of any such deferral, including the period of deferral, the manner of
deferral, and the method for measuring appreciation on deferred amounts until
their payout.
10. METHOD OF EXERCISE OF OPTIONS.
-----------------------------
Subject to any applicable Award Agreement, any Option may be exercised
by the Participant in whole or in part at such time or times, and the
Participant may make payment of the Exercise Price in such form or forms
permitted by the Committee, including, without limitation, payment by delivery
of cash, Common Stock or other consideration (including, where permitted by law
and the Committee, Awards) having a Fair Market Value on the day immediately
preceding the exercise date equal to the total Exercise Price, or by any
combination of cash, shares of Common Stock and other consideration, including
exercise by means of a cashless exercise arrangement with a qualifying
broker-dealer, as the Committee may specify in the applicable Award Agreement.
11. RIGHTS OF PARTICIPANTS.
----------------------
No Participant shall have any rights as a shareholder with respect to
any shares of Common Stock covered by an Option until the date of issuance of a
stock certificate for such Common Stock. Nothing contained herein or in any
Award Agreement confers on any person any right to continue in the employ or
service of the Holding Company or an Affiliate or interferes in any way with the
right of the Holding Company or an Affiliate to terminate a Participant's
services.
12. DESIGNATION OF BENEFICIARY.
--------------------------
A Participant may, with the consent of the Committee, designate a
person or persons to receive, in the event of death, any Award to which the
Participant would then be entitled. Such designation will be made upon forms
supplied by and delivered to the Holding Company and may be revoked in writing.
If a Participant fails effectively to designate a beneficiary, then the
Participant's estate will be deemed to be the beneficiary.
A-10
13. DILUTION AND OTHER ADJUSTMENTS.
------------------------------
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other similar
corporate change, or other increase or decrease in such shares without receipt
or payment of consideration by the Holding Company, or in the event an
extraordinary capital distribution is made, the Committee may make such
adjustments to previously granted Awards, to prevent dilution, diminution, or
enlargement of the rights of the Participant, including any or all of the
following:
(a) adjustments in the aggregate number or kind of shares of
Common Stock or other securities that may underlie future
Awards under the Plan;
(b) adjustments in the aggregate number or kind of shares of
Common Stock or other securities underlying Awards already
made under the Plan;
(c) adjustments in the Exercise Price of outstanding Incentive
and/or Non-Statutory Stock Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award. All Awards under
this Plan shall be binding upon any successors or assigns of the Holding
Company.
14. TAXES.
-----
(a) Whenever under this Plan, cash or shares of Common Stock are to be
delivered upon exercise or payment of an Award or any other event with respect
to rights and benefits hereunder, the Committee shall be entitled to require as
a condition of delivery (i) that the Participant remit an amount sufficient to
satisfy all federal, state, and local withholding tax requirements related
thereto, (ii) that the withholding of such sums come from compensation otherwise
due to the Participant or from any shares of Common Stock due to the Participant
under this Plan or (iii) any combination of the foregoing; provided, however,
that no amount shall be withheld from any cash payment or shares of Common Stock
relating to an Award which was transferred by the Participant in accordance with
this Plan. Furthermore, Participants may direct the Committee to instruct the
Trustee to sell shares of Common Stock to be delivered upon the payment of an
Award to satisfy tax obligations.
(b) If any disqualifying disposition described in Section 7(k) is made
with respect to shares of Common Stock acquired under an Incentive Stock Option
granted pursuant to this Plan, or any transfer described in Section 6(c) is
made, or any election described in Section 16 is made, then the person making
such disqualifying disposition, transfer, or election shall remit to the Holding
Company or its Affiliates an amount sufficient to satisfy all federal, state,
and local withholding taxes thereby incurred; provided that, in lieu of or in
addition to the foregoing, the Holding Company or its Affiliates shall have the
right to withhold such sums from compensation otherwise due to the Participant,
or, except in the case of any transfer pursuant to Section 6(c), from any shares
of Common Stock due to the Participant under this Plan.
15. NOTIFICATION UNDER SECTION 83(b).
--------------------------------
The Committee may, on the Date of Grant or any later date, prohibit a
Participant from making the election described below. If the Committee has not
prohibited such Participant from making such election, and the Participant
shall, in connection with the exercise of any Option, or the grant of any Stock
Award, make the election permitted under Section 83(b) of the Code, such
Participant shall notify the Committee
A-11
of such election within 10 days of filing notice of the election with the
Internal Revenue Service, in addition to any filing and notification required
pursuant to regulations issued under the authority of Section 83(b) of the Code.
16. AMENDMENT OF THE PLAN AND AWARDS.
--------------------------------
(a) Except as provided in paragraph (c) of this Section 16, the Board
of Directors may at any time, and from time to time, modify or amend the Plan in
any respect, prospectively or retroactively; provided, however, that provisions
governing grants of Incentive Stock Options shall be submitted for shareholder
approval to the extent required by law, regulation or otherwise. Failure to
ratify or approve amendments or modifications by shareholders shall be effective
only as to the specific amendment or modification requiring such ratification or
approval. Other provisions of this Plan will remain in full force and effect. No
such termination, modification or amendment may adversely affect the rights of a
Participant under an outstanding Award without the written permission of such
Participant.
(b) Except as provided in paragraph (c) of this Section 16, the
Committee may amend any Award Agreement, prospectively or retroactively;
provided, however, that no such amendment shall adversely affect the rights of
any Participant under an outstanding Award without the written consent of such
Participant.
(c) In no event shall the Board of Directors amend the Plan or shall
the Committee amend an Award Agreement in any manner that has the effect of
allowing any Option to be granted with an Exercise Price below the Fair Market
Value of the Common Stock on the Date of Grant.
(d) Except to the extent and solely for the reasons set forth in
Section 13 of the Plan, Options granted under this Plan may not, without the
prior approval of the Company's shareholders, be repriced, replaced or regranted
either through cancellation of a previously granted Option and issuance of a new
Option or by lowering the Exercise Price of a previously granted Option.
17. EFFECTIVE DATE OF PLAN.
----------------------
The Incentive Plan shall become effective immediately upon the
affirmative vote of a majority of the votes cast at the Company's 2002 annual
meeting of shareholders.
18. TERMINATION OF THE PLAN.
-----------------------
The right to grant Awards under the Plan will terminate upon the
earlier of: (i) ten (10) years after the Effective Date; or (ii) the issuance of
a number of shares of Common Stock pursuant to the exercise of Options or the
distribution of Stock Awards is equivalent to the maximum number of shares
reserved under the Plan as set forth in Section 4 hereof. The Board of Directors
has the right to suspend or terminate the Plan at any time, provided that no
such action will, without the consent of a Participant, adversely affect a
Participant's vested rights under a previously granted Award.
19. APPLICABLE LAW.
--------------
The Plan will be administered in accordance with the laws of the State
of Delaware to the extent not pre-empted by applicable federal law.
A-12
REVOCABLE PROXY
CONNECTICUT BANCSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2002
2:00 P.M., LOCAL TIME
-------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
- ---------------
Please complete, date, sign and promptly mail this proxy in the
enclosed postage-paid envelope.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- -------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have
your control number and proxy card available when you call.
TO VOTE BY INTERNET
- -------------------
Please access the web page at "www.voteproxy.com" and follow the
on-screen instructions. Have your control number available when you access the
web page.
YOUR CONTROL NUMBER IS: [___________]
Note: Your telephone/Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your
proxy card. If you vote by telephone or Internet, DO NOT mail your
proxy.
The undersigned hereby appoints the official proxy committee of
Connecticut Bancshares, Inc. (the "Company"), consisting of A. Paul Berte, John
D. LaBelle, Jr., Richard P. Meduski, John G. Sommers, Thomas E. Toomey, Jon L.
Norris, Laurence P. Rubinow, Gregory S. Wolff and Timothy J. Moynihan, with full
power of substitution, to act as proxy for the undersigned, and to vote all
shares of common stock of the Company which the undersigned is entitled to vote
only at the Annual Meeting of Stockholders, to be held on May 16, 2002, at 2:00
p.m., Local Time, at The Colony, 51 Hartford Turnpike, Route 83, Vernon,
Connecticut, and at any and all adjournments or postponements of the meeting,
with all of the powers the undersigned would possess if personally present at
such meeting as follows:
1. The election as directors of all nominees listed (unless the
"FOR" box is marked and the instructions below are complied
with).
Timothy J. Devanney, Sheila B. Flanagan, Eric A. Marziali and William
D. O'Neill
FOR all nominees WITHHELD AUTHORITY
listed at right to vote for all nominees
(except as marked to listed at right
the contrary below)
[ ] [ ]
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR" and
write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The approval of the Connecticut Bancshares, Inc. 2002 Equity
Compensation Plan.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
3. The ratification of the appointment of Deloitte & Touche LLP
as independent auditors of Connecticut Bancshares, Inc. for
the year ending December 31, 2002.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY, PROPERLY SIGNED AND DATED, WILL BE VOTED
"FOR" EACH OF THE PROPOSALS LISTED. IF ANY OTHER BUSINESS IS PRESENTED AT THE
ANNUAL MEETING, INCLUDING WHETHER OR NOT TO ADJOURN THE MEETING, THIS PROXY WILL
BE VOTED BY THE PERSONS NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED
AT THE ANNUAL MEETING. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE
BOARD OF DIRECTORS TO VOTE WITH RESPECT TO THE ELECTION OF ANY PERSON AS
DIRECTOR WHERE THE NOMINEES ARE UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE
AND MATTERS INCIDENT TO THE CONDUCT OF THE ANNUAL MEETING.
The undersigned acknowledges receipt from the Company, before the
execution of this proxy, of a Notice of Annual Meeting of Stockholders, a Proxy
Statement dated April 9, 2002 and an Annual Report to Stockholders.
Dated:_ _ _ _ _ _ _ _ _ _ _ , 2002
----------------------------------
SIGNATURE OF SHAREHOLDER
-----------------------------------
SIGNATURE OF CO-HOLDER (IF ANY)
Note: Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
Dear ESOP Participant:
On behalf of the Board of Directors of Connecticut Bancshares, Inc.
(the "Company"), I am forwarding you the attached YELLOW vote authorization form
provided for the purpose of conveying your voting instructions to Eastern Bank
and Trust Company (the "ESOP Trustee") on the proposals to be presented at the
Annual Meeting of Stockholders of Connecticut Bancshares, Inc. to be held on May
16, 2002. Also enclosed is a Notice and Proxy Statement for the Annual Meeting
of Connecticut Bancshares, Inc. Stockholders and a copy of the Company's Annual
Report to Stockholders.
As a participant in The Savings Bank of Manchester Employee Stock
Ownership Plan (the "ESOP"), you are entitled to vote all shares of Company
common stock allocated to your account as of March 25, 2002. All allocated
shares of Company common stock will be voted as directed by participants, as
long as participants' instructions are received by the ESOP Trustee by May 9,
2002. If you do not direct the ESOP Trustee as to how to vote the shares of
Company common stock allocated to your ESOP account, the ESOP Trustee will vote
your shares in a manner calculated to most accurately reflect the instructions
it receives from other participants, subject to its fiduciary duties.
In order to direct the voting of the shares of Company common stock
allocated to your account under the ESOP, please complete and sign the attached
YELLOW vote authorization form and return it in the enclosed postage-paid
envelope no later than May 9, 2002. Your vote will not be revealed, directly or
indirectly, to any officer, employee or director of the Company or The Savings
Bank of Manchester.
Sincerely,
Name:_ _ _ _ _ _ _ _ _ _ _
Shares:_ _ _ _ _ _ _ _ _ _
VOTE AUTHORIZATION FORM
-----------------------
I understand that Eastern Bank & Trust Company, the ESOP Trustee, is
the holder of record and custodian of all shares allocated to me of Connecticut
Bancshares, Inc. (the "Company") common stock under The Savings Bank of
Manchester Employee Stock Ownership Plan. I understand that my voting
instructions are solicited on behalf of the Company's Board of Directors for the
Annual Meeting of Stockholders to be held on May 16, 2002.
Accordingly, you are to vote my shares as follows:
1. The election as directors of all nominees listed (unless the
"FOR" box is marked and the instructions below are complied
with).
Timothy J. Devanney, Sheila B. Flanagan, Eric A. Marziali and
William D. O'Neill
FOR all nominees WITHHOLD AUTHORITY
listed above (except to vote for all nominees
as marked to the listed above
contrary below)
[ ] [ ]
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR" and
write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The approval of the Connecticut Bancshares, Inc. 2002 Equity
Compensation Plan.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
3. The ratification of the appointment of Deloitte & Touche LLP
as independent auditors of Connecticut Bancshares, Inc. for
the year ending December 31, 2002.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
The ESOP Trustee is hereby authorized to vote any shares allocated to
me in its trust capacity as indicated above.
- --------------------------------- ------------------------------------
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID ENVELOPE BY
NO LATER THAN MAY 9, 2002.
Dear Savings Plan Participant:
On behalf of the Board of Directors, I am forwarding to you the
attached GREEN vote authorization form for the purpose of conveying your voting
instructions to Eastern Bank and Trust Company (the "Employer Stock Fund
Trustee") on the proposals presented at the Annual Meeting of Stockholders of
Connecticut Bancshares, Inc. (the "Company") on May 16, 2002. Also enclosed is a
Notice and Proxy Statement for the Company's Annual Meeting of Stockholders and
the Connecticut Bancshares, Inc. Annual Report to Stockholders.
As an investor in the Connecticut Bancshares, Inc. Stock Fund (the
"Employer Stock Fund") you are entitled to vote all shares of Company common
stock credited to your account in The Savings Bank of Manchester Savings Plan
(the "Savings Plan"). The Employer Stock Fund Trustee will vote the Company
common stock credited to your account as directed by you if your instructions
are received by May 9, 2002.
At this time, in order to direct the voting of shares of Company common
stock credited to your account in the Savings Plan, please complete and sign the
attached GREEN voting instruction card and return it in the enclosed
postage-paid envelope. The Employer Stock Fund Trustee must receive your
instructions by May 9, 2002. Your vote will not be revealed, directly or
indirectly, to any officer, employee or director of the Company or The Savings
Bank of Manchester.
Sincerely,
Name:_ _ _ _ _ _ _ _ _ _ _
Shares:_ _ _ _ _ _ _ _ _ _
VOTE AUTHORIZATION FORM
-----------------------
I understand that my voting instructions are solicited on behalf of the
Company's Board of Directors for the Annual Meeting of Stockholders to be held
on May 16, 2002.
Accordingly, the Employer Stock Fund Trustee is to vote my shares of
Common Stock as follows:
1. The election as directors of all nominees listed (unless the
"FOR" box is marked and the instructions below are complied
with).
Timothy J. Devanney, Sheila B. Flanagan, Eric A. Marziali and William
D. O'Neill
FOR all nominees WITHHOLD AUTHORITY
listed above (except to vote for all nominees
as marked to the listed above
contrary below)
[ ] [ ]
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR" and
write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The approval of the Connecticut Bancshares, Inc. 2002 Equity
Compensation Plan.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
3. The ratification of the appointment of Deloitte & Touche LLP
as independent auditors of Connecticut Bancshares, Inc. for
the year ending December 31, 2002.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
The Employer Stock Fund Trustee is hereby authorized to vote any shares
credited to me in its trust capacity as indicated above.
- --------------------------------- ------------------------------------
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID ENVELOPE BY
NO LATER THAN MAY 9, 2002.
Dear Stock Award Recipient:
On behalf of the Board of Directors of Connecticut Bancshares, Inc.
(the "Company"), I am forwarding you the BLUE attached vote authorization form
provided for the purpose of conveying your voting instructions to Eastern Bank
and Trust Company (the "Incentive Plan Trustee") on the proposals to be
presented at the Annual Meeting of Stockholders of Connecticut Bancshares, Inc.
to be held on May 16, 2002. Also enclosed is a Notice and Proxy Statement for
the Annual Meeting of Connecticut Bancshares, Inc. Stockholders and a copy of
the Company's Annual Report to Shareholders.
As a recipient of a Stock Award under the Connecticut Bancshares, Inc.
2000 Stock-Based Incentive Plan (the "Incentive Plan"), you are entitled to vote
all shares of restricted Company common stock awarded to you under the Incentive
Plan that are unvested as of March 25, 2002. The Incentive Plan Trustee will
vote these unvested shares of Company common stock held in the Incentive Plan
Trust in accordance with instructions it receives from you and other Stock Award
Recipients.
In order to direct the voting of the unvested shares of Company common
stock awarded to you under the Incentive Plan, you must complete and sign the
attached BLUE vote authorization form and return it in the enclosed postage-paid
envelope no later than May 9, 2002.
Sincerely,
Name:_ _ _ _ _ _ _ _ _ _ _
Shares:_ _ _ _ _ _ _ _ _ _
VOTE AUTHORIZATION FORM
-----------------------
I understand that my voting instructions are solicited on behalf of the
Company's Board of Directors for the Annual Meeting of Stockholders to be held
on May 16, 2002.
Accordingly, the Incentive Plan Trustee is to vote my shares of Common
Stock as follows:
1. The election as directors of all nominees listed (unless the
"FOR" box is marked and the instructions below are complied
with).
Timothy J. Devanney, Sheila B. Flanagan, Eric A. Marziali and
William D. O'Neill
FOR all nominees WITHHOLD AUTHORITY
listed above (except to vote for all nominees
as marked to the listed above
contrary below)
[ ] [ ]
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR" and
write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The approval of the Connecticut Bancshares, Inc. 2002 Equity
Compensation Plan.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
3. The ratification of the appointment of Deloitte & Touche LLP
as independent auditors of Connecticut Bancshares, Inc. for
the year ending December 31, 2002.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
The Incentive Plan Trustee is hereby authorized to vote any shares
awarded to me in its trust capacity as indicated above.
- ----------------------------------- ------------------------------------
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID ENVELOPE BY
NO LATER THAN MAY 9, 2002.