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)
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(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:
N/A
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(2) Form, schedule or registration statement no.:
N/A
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(3) Filing party:
N/A
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(4) Date filed:
N/A
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Connecticut[Logo]
Bancshares, Inc.
923 Main Street
P.O. Box 231
Manchester, CT 06045
860-646-1700
April 4, 2003
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 Monday, May 12, 2003, 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
Deloitte & Touche LLP, the Company's independent auditors, is 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 vote by
completing and mailing the enclosed proxy card or by voting on the Internet or
by telephone. If you attend the meeting, you may vote in person even if you have
previously mailed a proxy card or voted on the Internet or by telephone.
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 12, 2003, at 2:00 p.m., local time, for the following
purposes:
1. To elect five (5) directors to serve for a term of three years;
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the Company for the year ending December 31, 2003; and
3. 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, 2003
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, or
vote by proxy on the Internet or by telephone. A 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 4, 2003
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 12, 2003, at 2:00 p.m., local time. This proxy
statement and the enclosed proxy card are being first mailed on or about April
4, 2003 to stockholders of record.
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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, 2003. As of the close of business on that date, a total of 11,087,327 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 annual 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 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. This matter 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, 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.
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 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
2
vote the shares of Company common stock allocated to the participant's ESOP
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 the trustees of the plans is May 2, 2003.
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STOCK OWNERSHIP
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The following table provides information as of March 25, 2003, 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
NUMBER OF SHARES COMMON STOCK
NAME AND ADDRESS OWNED OUTSTANDING
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The Savings Bank of Manchester 895,670(1) 8.08%
Employee Stock Ownership Plan
923 Main Street
Manchester, CT 06040
Private Capital Management, L.P. 864,375(2) 7.80%
Bruce S. Sherman
Gregg J. Powers
8889 Pelican Bay Boulevard
Naples, FL 34108
SBM Charitable Foundation, Inc. 748,000(3) 6.75%
923 Main Street
Manchester, CT 06040
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(1) 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, 2003, 176,822 shares had been allocated under the ESOP and
718,848 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.
(2) Based on information disclosed in a Schedule 13G filed with the Securities
and Exchange Commission on February 14, 2003.
(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.
3
The following table provides information as of March 25, 2003 about the
shares of Company common stock that may be considered to be beneficially 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 PERCENT OF
NUMBER OF WITHIN 60 DAYS COMMON STOCK
SHARES OWNED BY EXERCISING OUTSTANDING
NAME (1)(2)(3)(4) OPTIONS (5)
- ------ ------------ --------------- ---------------
Douglas K. Anderson.............................................. 98,178(6)(7) 35,943 *
A. Paul Berte.................................................... 20,747 8,424 *
Timothy J. Devanney.............................................. 22,498(8)(9) 11,232 *
Sheila B. Flanagan............................................... 39,848(10) 11,232 *
Michael J. Hartl................................................. 10,904 5,000 *
John D. LaBelle, Jr.............................................. 20,848(11) 11,232 *
Eric A. Marziali................................................. 45,464 5,616 *
Richard P. Meduski............................................... 166,968(12) 89,856 2.30%
Timothy J. Moynihan.............................................. 6,616(13) *
Jon L. Norris.................................................... 20,960 7,020 *
William D. O'Neill............................................... 43,848(9) 11,232 *
Charles L. Pike.................................................. 82,941 44,928 *
Laurence P. Rubinow.............................................. 34,348(14) 10,232 *
Roger A. Somerville.............................................. 46,218(15) 10,000 *
John G. Sommers.................................................. 39,848(16) 11,232 *
Thomas E. Toomey................................................. 23,464(17) 5,616 *
Gregory S. Wolff................................................. 40,807(18) 5,616 *
All Directors and Executive Officers as a Group (20 persons)..... 790,962 287,411 9.48%
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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, 10,354; Mr. Meduski, 102,488
shares; Mr. Moynihan, 3,616 shares; Mr. Pike, 60,934 shares; Mr. Anderson,
52,847 shares; Mr. Somerville, 22,869 shares; and Mr. Hartl, 7,700 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
Plan as to which each individual has investment and voting power as
follows: Mr. Meduski, 25,865 shares; Mr. Pike, 11,132 shares; Mr.
Anderson, 17,113 shares; Mr. Somerville, 12,014 shares; and Mr. Hartl,
1,278 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 March 25, 2003 as to which each individual has voting but not
investment power as follows: Mr. Meduski, 2,172 shares; Mr. Anderson,
2,172 shares; Mr. Pike, 2,172 shares; Mr. Somerville, 2,170 shares; and
Mr. Hartl, 1,440 shares.
(5) Based on 11,087,327 shares of Company common stock outstanding and
entitled to vote as of March 25, 2003, plus the number of shares that may
be acquired through the exercise of stock options exercisable within 60
days of March 25, 2003.
(6) Includes 100 shares held by Mr. Anderson's spouse.
(7) Includes 268 shares held in trust by The Savings Bank of Manchester
Supplemental Executive Retirement Plan as to which Mr. Anderson has voting
power.
(8) 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.
4
(9) 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.
(10) Includes 18,000 shares held by Ms. Flanagan's spouse's individual
retirement account.
(11) 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.
(12) Includes 1,090 shares held by Mr. Meduski's spouse.
(13) Includes 3,000 shares held by Mr. Moynihan's individual retirement
account.
(14) Includes 6,000 shares held by Mr. Rubinow's spouse.
(15) Includes 900 shares held by Mr. Somerville's spouse's individual
retirement account.
(16) Includes 10,000 shares representing Mr. Sommers' beneficial interest in
shares owned by Allied Printing Services, Inc.
(17) Includes 1,000 shares held by Mr. Toomey's spouse.
(18) Includes 12,842 shares held by Mr. Wolff's individual retirement account.
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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 A. Paul
Berte, John D. LaBelle, Jr., Jon L. Norris, Laurence P. Rubinow and Gregory S.
Wolff, 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, 2002. Unless otherwise noted, 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
A. Paul Berte is a self-employed attorney in Manchester, Connecticut. Mr.
Berte is 61 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 53 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 61 years old and has been a director since 1996.
5
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
of the Bank. Mr. Rubinow is 58 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 51
years old and has been a director since 1997.
DIRECTORS CONTINUING IN OFFICE
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 57 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
47 years old and has been a director since 1993.
Thomas E. Toomey is President of T.E. Toomey Construction. Prior to being
President of T.E. Toomey Construction, 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 69 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 Savings and Loan Association of
East Hartford, Connecticut, which was acquired by the Company in August, 2001.
Mr. Moynihan is 61 years old and has been a director of the Company only since
2001.
The following directors have a term ending in 2005:
Timothy J. Devanney is the President of Highland Park Market of
Manchester, Inc. and Highland Park Market of Glastonbury, Inc. and a Member of
Highland Park Market of Farmington L.L.C., all of which are retail grocery
businesses. Mr. Devanney is 50 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 serves as Executive Director of SBM
Charitable Foundation, Inc. Ms. Flanagan is 62 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 44 years old and has been a director since
1999.
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
6
headquarters in Manchester, Connecticut and offices in Massachusetts, Rhode
Island and Vermont. Mr. O'Neill is 64 years old and has been a director since
1998.
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 52 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 59 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 58 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 61 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 2002, the Board of Directors of the Company held ten meetings and
the Board of Directors of the Bank held 14 meetings. No director attended fewer
than 75% of the total meetings of the Board of Directors and Committees on which
such director served during 2002. 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 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 nine times in 2002.
COMPENSATION COMMITTEE. The Compensation Committee consists of Messrs.
Marziali, Berte, Devanney, Moynihan 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 12 times in 2002.
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
7
the Company's Annual Meeting of Stockholders. The Company's Bylaws provide for
stockholder nominations for directors. See "Stockholder Proposals and
Nominations." The Nominating Committee met 5 times in 2002 and also on January
13, 2003.
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 as
sole compensation an annual retainer of $105,000.
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. 2002 Equity
Compensation Plan, which was approved by the Company's stockholders on May 16,
2002, each non-employee director of the Company or the Bank received
non-statutory stock options to purchase 14,464 shares of Company common stock at
an exercise price of $37.50 per share, the fair market value of the common stock
on October 21, 2002, the date the options were granted. Additionally, on October
21, 2002, each non-employee director was granted stock awards for 3,616 shares.
Both the awards and options vest equally over a five-year period beginning on
October 21, 2003, the first anniversary of the effective date of the grants and
awards.
8
- --------------------------------------------------------------------------------
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, 2002.
ANNUAL
COMPENSATION(1) LONG-TERM COMPENSATION
------------------- ------------------------
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
NAME AND STOCK OPTIONS/SARS COMPENSATION
POSITION YEAR SALARY BONUS(2) AWARDS (#) (5)(6)(7)(8)
- ------------ -------- ---------- ---------- ------------ -------------- ------------
Richard P. Meduski........................ 2002 $445,000 $245,000 $1,462,500(3) 150,000 $188,676
Chief Executive Officer and 2001 350,000 195,000 1,931,106(4) -- 110,913
Treasurer 2000 330,750 125,000 -- 224,640 77,823
Douglas K. Anderson....................... 2002 218,000 105,000 825,000(3) 75,000 85,367
President 2001 192,600 86,700 938,287(4) -- 35,807
2000 180,000 46,800 -- 89,856 20,144
Charles L. Pike........................... 2002 246,999 118,000 825,000(3) 75,000 98,299
First Executive Vice President 2001 232,447 83,700 1,184,279(4) -- 41,925
2000 220,329 50,700 -- 112,320 24,893
Roger A. Somerville....................... 2002 157,000 62,000 150,000(3) 15,000 34,852
Senior Vice President 2001 147,459 33,300 573,944(4) -- 23,812
2000 140,437 25,300 -- 25,000 18,329
Michael J. Hartl (9)...................... 2002 160,000 63,000 243,750(3) 20,000 36,143
Senior Vice President and 2001 147,700 53,250 36,500(4) -- 24,455
Chief Financial Officer 2000 68,077 19,600 -- 10,000 --
- -------------------------------
(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) Represents board awarded discretionary cash bonus.
(3) Includes stock awards of 39,000, 22,000, 22,000, 4,000, and 6,500 shares
granted to Messrs. Meduski, Anderson, Pike, Somerville and Hartl,
respectively, under the Connecticut Bancshares, Inc. 2002 Equity
Compensation Plan. The dollar amounts set forth in the table represent the
market value on the date of the grant. The awards will begin vesting in
five equal annual installments on October 21, 2003, 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, 2002, the market value of the stock awards held by Messrs. Meduski,
Anderson, Pike, Somerville and Hartl was $1,499,550, $845,900, $845,900,
$153,800 and $249,925, respectively.
(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
9
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, 2002, the market value of the stock awards held by Messrs. Meduski,
Anderson, Pike, Somerville and Hartl was $4,068,548, $1,976,830,
$2,495,097, $1,209,214 and $76,900, respectively.
(5) For 2002, consists of employer contributions to the Bank's 401(k) plan of
$6,000, $6,000, $6,000, $5,500 and $5,500 and ESOP allocations with a
market value of $26,607, $26,607, $26,607, $26,607 and $26,607, for
Messrs. Meduski, Anderson, Pike, Somerville, and Hartl respectively.
(6) For 2002, includes employer contributions of $9,090, $3,500, $7,327,
$2,745 and $4,036 to Messrs. Meduski, Anderson, Pike, Somerville and
Hartl, respectively, pursuant to the Bank's supplemental income
agreements. These payments are made to pay premiums on split-dollar life
insurance policies the Bank purchased on the lives of Messrs. Meduski,
Anderson, Pike, Somerville and Hartl in connection with the supplemental
income agreements. Upon the death of Messrs. Meduski, Anderson, Pike,
Somerville and Hartl, the Bank expects to retain proceeds from the
insurance policies sufficient to cover all prior contributions made to the
supplemental income agreements.
(7) For 2002, includes employer contributions of $26,400, $6,004 and $7,348
credited under the Bank's 401(k) supplemental executive retirement plan
for Messrs. Meduski, Anderson and Pike, respectively.
(8) For 2002, includes employer contributions of $120,579, $43,256 and $55,599
credited under the Bank's ESOP supplemental executive retirement plan for
Messrs. Meduski, Anderson and Pike, respectively.
(9) Mr. Hartl began his employment with the Company in April, 2000.
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 $456,500, $225,000, $253,000 and $163,300,
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.
10
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 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.
11
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
were limited to $160,000 and annual compensation for calculation purposes was
limited to $200,000 for the 2002 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, 2003,
Messrs. Meduski, Pike, Anderson, Somerville and Hartl had 19, 19, 16, 18 and 2
years of service with the Bank, respectively, for purposes of the pension plan.
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. These agreements were amended in 2002 to exclude stock-option
related income from the benefit calculation and to limit the supplemental
benefits available to each executive based on the benefits they would receive if
they retire at a specified age (Mr. Meduski, 60; and Mr. Pike, 62) without
regard to their actual age at retirement. However, these modifications do not
apply in the event the executives retire after a change in control (as defined
in the plan). 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 cash
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.
12
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.
OPTION GRANTS IN LAST FISCAL YEAR
The following table lists all grants of options under the Connecticut
Bancshares, Inc. 2000 Stock-Based Incentive Plan and 2002 Equity Compensation
Plan to Messrs. Meduski, Anderson, Pike, Somerville and Hartl for the year ended
December 31, 2002.
NUMBER OF PERCENT OF POTENTIAL REALIZABLE
SECURITIES TOTAL OPTIONS VALUE AT ASSUMED ANNUAL
UNDERLYING GRANTED TO EXERCISE RATES OF STOCK PRICE
OPTION EMPLOYEES IN OR BASE APPRECIATION FOR
NAME GRANTED(1) FISCAL YEAR PRICE EXPIRATION DATE OPTION TERMS(2)
- ----------- ------------ --------------- ---------- ------------------ ---------------------------
5% 10%
-------------- ------------
Richard P. Meduski........ 150,000 20.58% $37.50 October 21, 2012 $3,544,500 $8,944,500
Douglas K. Anderson....... 75,000 10.29% $37.50 October 21, 2012 1,772,250 4,472,250
Charles L. Pike........... 75,000 10.29% $37.50 October 21, 2012 1,772,250 4,472,250
Roger A. Somerville....... 15,000 2.06% $37.50 October 21, 2012 354,450 894,450
Michael J. Hartl.......... 15,000 2.06% $37.50 October 21, 2012 354,450 894,450
Michael J. Hartl.......... 5,000 0.69% $27.74 February 19, 2012 87,400 220,550
- -----------------------------------
(1) Options become exercisable in five equal annual installments commencing
on October 21, 2003, except, in the case of Mr. Hartl's grant of 5,000
options, the options become exercisable in five equal annual installments
commencing on February 19, 2003; provided, however, that options will be
immediately exercisable if the optionee dies or becomes disabled or upon
a change in control of the Company, as defined in the plan.
(2) The dollar gains under these columns result from calculations required by
the SEC's rules and are not intended to forecast future price
appreciation of Company common stock. Options have value only if the
stock price increases above the exercise price shown in the table during
the effective option period. In order for the executive to realize the
potential values set forth in the 5% and 10% columns in the table, the
price per share of the Company's common stock would be approximately
$61.13 per share and $97.13 per share, respectively, as of the expiration
date of the options, except, in the case of Mr. Hartl's grant of 5,000
options, the price per share would be approximately $45.22 per share and
$71.85 per share, respectively, as of the expiration date of the options.
13
FISCAL YEAR-END OPTION VALUES
The following table provides certain information with respect to the
number of shares of Company common stock represented by outstanding options held
by the individuals named below as of December 31, 2002. Also reported are the
values for "in-the-money" options, which represent the positive spread between
the exercise price and the year-end stock price.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FISCAL YEAR-END(#) OPTIONS AT FISCAL YEAR-END($)(1)
--------------------------------------------- ------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------- ---------------------- ---------------------- ----------------- ------------------
Richard P. Meduski............. 89,856 284,784 $1,870,802 $2,948,703
Charles L. Pike................ 44,928 142,392 935,401 1,474,351
Douglas K. Anderson............ 35,943 128,913 748,333 1,193,719
Roger A. Somerville............ 10,000 30,000 208,200 326,550
Michael J. Hartl............... 5,000 25,000 93,990 182,010
- -----------------------------------
(1) Value of unexercised in-the-money stock options equals the market value of
shares covered by in-the-money options on December 31, 2002 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.
14
STOCK PERFORMANCE GRAPH
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.
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.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
PERIOD ENDED
-----------------------------------------------------------------------
3/02/00 6/30/00 12/31/00 6/30/01 12/31/01 6/30/02 12/31/02
------- ------- -------- ------- -------- ------- --------
Connecticut Bancshares, Inc.............. $100.00 $142.68 $178.05 $256.52 $256.74 $331.03 $386.60
The Nasdaq Index (U.S. Companies)........ 100.00 84.27 51.93 45.68 41.20 31.12 28.48
SNL $1 B to $5 B Asset Thrift Index...... 100.00 104.43 135.47 178.12 193.14 252.32 247.33
15
COMMITTEE REPORTS
The Reports of the Compensation and Audit Committees 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 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 both the
Connecticut Bancshares, Inc. 2000 Stock-Based Incentive Plan and the Connecticut
Bancshares, Inc. 2002 Equity Compensation 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.
16
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. During the fiscal year
ended December 31, 2002, Mr. Meduski's base salary was $445,000. In addition, he
received a performance bonus of $245,000 and other compensation totaling
$188,676 as set forth in the Summary Compensation Table appearing earlier in
this proxy statement. This resulted in total compensation of $878,676. In
addition, Mr. Meduski received 39,000 stock awards during the fiscal year ended
December 31, 2002. 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 2002 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.
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board of Directors is composed of
five non-employee directors and operates under a written charter adopted by the
Board of Directors, a copy of which is included as Appendix A to this proxy
statement. The Board of Directors has determined that each Audit Committee
member is independent in accordance with the listing standards of the Nasdaq
Stock Market.
The Company's management is responsible for the Company's internal
controls and financial reporting process. The independent auditors are
responsible for performing an independent audit of the Company's consolidated
financial statements and issuing an opinion on the conformity of those financial
statements with generally accepted accounting principles. The Audit Committee
oversees the Company's internal controls and financial reporting process on
behalf of the Board of Directors.
In this context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial statements with
management and the independent auditors. The Audit Committee discussed with the
independent auditors matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication With Audit Committees), including the quality,
not just the acceptability, of the accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the financial
statements.
17
In addition, the Audit Committee has received the written disclosures
and the letter from the independent auditors required by the Independence
Standards Board Standard No. 1 (Independence Discussions With Audit Committees)
and has discussed with the independent auditors the auditors' independence from
the Company and its management. In concluding that the auditors are independent,
the Audit Committee considered, among other factors, whether the non-audit
services provided by the auditors were compatible with its independence.
The Audit Committee discussed with the Company's independent auditors
the overall scope and plans for their audit. The Audit Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examination, their evaluation of the Company's internal
controls, and the overall quality of the Company's financial reporting.
In performing all of these functions, the Audit Committee acts only in
an oversight capacity. In its oversight role, the Audit Committee relies on the
work and assurances of the Company's management, which has the primary
responsibility for financial statements and reports, and of the independent
auditors who, in their report, express an opinion on the conformity of the
Company's financial statements to generally accepted accounting principles. The
Audit Committee's oversight does not provide it with an independent basis to
determine that management has maintained appropriate accounting and financial
reporting principles or policies, or appropriate internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions with management and the independent auditors do
not assure that the Company's financial statements are presented in accordance
with generally accepted accounting principles, that the audit of the Company's
financial statements has been carried out in accordance with generally accepted
auditing standards or that the Company's independent auditors are in fact
"independent."
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the board has approved,
that the audited consolidated financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2002 for filing with
the Securities and Exchange Commission. The Audit Committee and the Board of
Directors also have approved, subject to stockholder ratification, the selection
of the Company's independent auditors.
AUDIT COMMITTEE
Jon L. Norris, Chairman
A. Paul Berte
Timothy J. Devanney
Sheila B. Flanagan
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.
18
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
2002, each of its executive officers and directors has complied with applicable
reporting requirements for transactions in Company common stock.
- --------------------------------------------------------------------------------
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 $7.8 million at December 31, 2002, all of which
were performing according to their original terms.
OTHER TRANSACTIONS. Mr. Anderson, the Bank's President and the
Company's Executive Vice President, is a director and a significant stockholder
of Open Solutions, Inc., the Bank's computer software provider. For the year
ended December 31, 2002, the Bank paid fees of approximately $1.2 million 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 $4,669 for the year ended December 31, 2002. Payments by the Bank to Mr.
Rubinow's law firm totaled $16,986 for the year ended December 31, 2002.
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, a director of the
19
Company and the Bank, is the President of Allied Printing Services, Inc. Total
payments by the Company to Allied Printing Services, Inc. totalled $409,313 for
the year ended December 31, 2002.
- --------------------------------------------------------------------------------
PROPOSAL 2 -- RATIFICATION OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
GENERAL
The Audit Committee of the Board of Directors has appointed Deloitte &
Touche LLP to be the Company's independent auditors for the fiscal year ending
December 31, 2003, 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 Audit Committee of the Board of Directors would consider other independent
auditors. THE COMPANY 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 the fiscal years ended December 31, 2000 and December 31, 2001
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 fiscal years ended December 31, 2000 and December 31, 2001
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 did not consult with Deloitte & Touche LLP during the Company's
fiscal years ended December 31, 2000 and December 31, 2001 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.
20
AUDIT FEES
The following table sets forth the fees billed to the Company for the
fiscal year ended December 31, 2002 by Deloitte & Touche LLP:
Audit fees.................................................. $131,875
All other fees (including fees for tax
related services and employee benefit plan
audit services)........................................ 125,100
--------
$256,975
========
The Audit Committee has determined that the provision of non-audit
services to the Company by Deloitte & Touche LLP is compatible with maintaining
Deloitte & Touche LLP's independence.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The Company will pay the cost of solicitation of proxies on behalf of
its Board of Directors. Proxies may 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, 2003. 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, 2002, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE CLOSE OF
BUSINESS ON MARCH 25, 2003 UPON WRITTEN REQUEST TO CAROLE L. YUNGK, CORPORATE
SECRETARY, CONNECTICUT BANCSHARES, INC., 923 MAIN STREET, MANCHESTER,
CONNECTICUT 06040.
21
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS AND NOMINATIONS
- --------------------------------------------------------------------------------
To be considered for inclusion in the Company's proxy statement and
form of proxy relating to the 2004 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 8, 2003. If such annual meeting is held on a date more than 30 calendar
days from May 12, 2004, 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 2004 Annual Meeting of Stockholders, the Company would have to
receive notice of such business not later than February 12, 2004, assuming the
2004 Annual Meeting is held on May 12, 2004 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 4, 2003
22
APPENDIX A
CONNECTICUT BANCSHARES, INC.
AUDIT COMMITTEE CHARTER
STATEMENT OF POLICY
The Audit Committee (the "Audit Committee") of Connecticut Bancshares, Inc. (the
"Corporation") is composed solely of directors who are independent of management
and free from any significant relationships that would interfere with the
exercise of independent judgment.
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling the Board of Directors' oversight responsibilities by reviewing:
the integrity of financial reports and other financial information provided by
the Corporation to any government body or the public including any
certification, report, opinion, or review performed by the Corporation's
independent auditors; the Corporation's compliance with legal and regulatory
requirements; the independent auditor's qualifications and independence; the
Corporation's system of internal controls and disclosure procedures regarding
finance, accounting, legal compliance and ethics that management and the Board
of Directors have established; the performance of the Corporation's internal
auditing functions, its independent auditors and the accounting and financial
reporting process; the preparation of the report required by the Securities and
Exchange Commission (the "SEC") rules to be included in the Corporation's annual
proxy statement. Consistent with this function, the Audit Committee shall
encourage continuous improvement of and shall foster adherence to the
Corporation's policies, procedures and practices at all levels. The Audit
Committee's primary duties and responsibilities are to:
* Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
* Review and appraise the audit efforts of the Corporation's independent
auditors and internal auditing department.
* Provide an open avenue of communication among the independent auditors,
financial and senior management, the internal auditing department and the
Board of Directors.
The independent auditors are directly and ultimately accountable to the Audit
Committee.
The internal audit function shall be responsible to the Audit Committee.
A - 1
COMPOSITION
1. The Audit Committee of the Corporation shall consist of three or more
non-management members of the Corporation's Board of Directors, one
member of which shall be designated a chairperson.
2. The members of the Corporation's Audit Committee will include the
members of The Savings Bank of Manchester's Audit Committee.
3. The members of the Audit Committee shall meet the independence
requirements and at least one member shall meet the financial expert
requirements of the Nasdaq Stock Market, Section 10A(m)(3) of the
Securities and Exchange Act of 1934 and the rules and regulations of
the SEC.
4. Audit Committee members shall not simultaneously serve on the audit
committees of more than two public companies, including the
Corporation.
5. The members of the Audit Committee shall be appointed by the Board of
Directors on the recommendation of the Nominating Committee. Audit
Committee members may be replaced by the Board.
6. Committee members are encouraged to enhance their familiarity with
finance and accounting by participating in educational programs
conducted by the Chief Auditor, management or outside consultants.
MEETINGS
1. Meetings shall be held quarterly, or more frequently if necessary, or
at the request of the Board of Directors, Chief Auditor or independent
auditors or chairperson of the Audit Committee. A quorum of the Audit
Committee shall be declared when a majority of the appointed members of
the Audit Committee are in attendance.
2. The Audit Committee shall meet with the independent auditors and
management quarterly to review the Corporation's financial statements.
3. The Audit Committee may request any officer or employee of the
Corporation or the Corporation's outside counsel or independent
auditors to attend a meeting of the Audit Committee or to meet with any
members of, or consultants to, the Audit Committee.
4. Written minutes shall be kept for all meetings.
A - 2
5. In meetings attended by the Chief Auditor and/or independent auditors
or by regulatory examiners, a portion of the meeting shall be reserved
for the Audit Committee to meet in closed session with these parties.
6. Report, through its Chairman, to the Board of Directors, at the Board's
next regularly scheduled meeting following the meeting by the Audit
Committee, matters reviewed by the Audit Committee and any associated
actions taken by the Audit Committee.
COMMITTEE AUTHORITIES AND RESPONSIBILITIES
The Audit Committee shall have the sole authority to appoint or replace the
independent auditors. The Audit Committee shall be directly responsible for the
compensation and oversight of the work of the independent auditors (including
resolutions of disagreements between management and the independent auditors
regarding financial reporting) for the purpose of preparing and issuing an audit
report or related work. The independent auditors shall report directly to the
Audit Committee. Further, on an annual basis, the Audit Committee shall review
and discuss with the independent auditors all significant relationships the
auditors have with the Corporation to determine the auditors' independence.
The Audit Committee shall ensure that the independent auditors do not provide
any non-audit services to the Corporation that are prohibited by law or
regulation, including:
* bookkeeping or other services related to the accounting records or
financial statements of the Corporation;
* financial information systems design and implementation;
* appraisal or valuation services, fairness opinions, or contribution-in-
kind reports;
* actuarial services;
* internal audit outsourcing services;
* management functions or human resources;
* broker or dealer, investment advisor, or investment banking services;
* legal services and expert services unrelated to the audit; and
* any other service that is not deemed legally permissible.
The Audit Committee shall have the sole authority to approve non-audit services
provided by the independent auditors (other than those specified above).
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain independent legal, accounting or other advisors.
The Corporation shall provide for appropriate funding, as determined by the
Audit Committee, for payment of compensation to the independent auditors for the
purpose of rendering or issuing an audit report and to any advisors retained by
the Audit Committee.
A-3
The Audit Committee shall make regular reports to the Board of Directors and
reassess the adequacy of this charter annually and recommend any proposed
changes to the Board of Directors for approval.
The Audit Committee, to the extent deemed necessary or appropriate, shall:
A. Financial Statements and Disclosure Matters
-------------------------------------------
1. Review and discuss with management and the independent auditors the
annual audited financial statements, including disclosures made in
management's discussion and analysis and recommend to the Board of
Directors whether the audited financial statements should be included
in the Corporation's Form 10-K for filing with the SEC.
2. Review and discuss with management and the independent auditors the
Corporation's quarterly financial statements prior to the filing of its
Form 10-Q, including the results of the independent auditor's review of
the quarterly financial statements.
3. Review and discuss quarterly reports from the independent auditors on:
* All critical accounting policies and practices to be used.
* All alternative treatments of financial information within generally
accepted accounting principles ("GAAP") that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditors.
* Other written material communications between the independent auditors
and management, such as any management letter or schedule of unadjusted
differences.
4. Discuss with management the Corporation's earnings press releases,
including the use of "pro forma" or "adjusted" non-GAAP information, as
well as financial information and earnings guidance provided to
analysts and rating agencies. Such discussion may be done generally
(consisting of the types of information to be disclosed and the types
of presentations to be made).
5. Discuss with management the Corporation's major financial risk
exposures and the steps management has taken to identify, monitor and
control such exposures, including the Corporation's risk assessment and
risk management policies.
6. Discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit.
7. Review disclosures made to the Audit Committee by the Corporation's
Chief Executive
A - 4
Officer and Chief Financial Officer during their certification process
for the Form 10-K and the Form 10-Q about any significant deficiencies
in the design or operation of internal controls and disclosure
procedures or material weakness therein and any fraud involving
management or other employees who have a significant role in the
Corporation's internal controls.
B. Oversight of the Corporation's Relationship with the Independent
----------------------------------------------------------------
Auditors
--------
1. Review and evaluate the lead partner of the independent auditor's
team.
2. Obtain and review, at least annually, a report by the independent
auditors describing (A) the auditor's internal quality control
procedures, (B) any material issues raised by its most recent
internal quality control review, or peer review, of the firm or by
any inquiry or investigation by governmental or professional
authorities in the preceding five (5) years relating to an
independent audit conducted by the firm and any steps taken to deal
with such issues, and (C) all relationships between the independent
auditors and the Corporation.
3. Ensure the rotation every five fiscal years of both the lead and
concurring audit partner (partner having primary responsibility for
the audit and the audit partner responsible for reviewing the audit)
as required by law. Consider whether, in order to assure continuing
auditor independence, it is appropriate to adopt a policy of rotating
the independent auditing firm on a regular basis.
4. Set clear hiring and monitoring policies for employees or former
employees of the independent auditors who participated in any
capacity in the audit of the Corporation to ensure compliance with
the one-year cooling-off period. Approve all such hiring.
5. Meet with the independent auditors prior to the audit to discuss the
planning and staffing of the audit.
C. Oversight of the Corporation's Internal Audit Function, Including
-----------------------------------------------------------------
Outsourced Activities.
----------------------
1. Review the appointment and replacement of the senior internal
auditing executive.
2. Review the significant reports to management prepared by the internal
auditing department and management's responses.
3. Discuss with the Chief Auditor (1) the adequacy of staffing levels
and the operating and staff budget of the internal audit department,
(2) significant audit and business risks the plan addresses.
A-5
4. Determine that the program adequately addresses the areas of high
risk or areas of special attention as determined by the Audit
Committee.
5. Formally approve the internal audit program.
D. Compliance Oversight Responsibilities.
--------------------------------------
1. Establish procedures for (1) receiving complaints and anonymous tips
regarding accounting, internal accounting controls, or auditing
matters and (2) the confidential, anonymous submission by employees
of concerns regarding questionable accounting practices.
2. Discuss with the Corporation's General Counsel legal matters that may
have a material impact on the financial statements or the
Corporation's compliance policies.
3. Discuss with management and the independent auditors any
correspondence with regulators or governmental agencies and any
published reports which raise material issues regarding the
Corporation's financial statements or accounting policies.
4. Oversight of the regulatory examination process, both State and
Federal.
E. General Oversight of the Corporation's Internal and External Audit
------------------------------------------------------------------
Functions.
----------
1. Meet separately, periodically, with (A) management, (B) the internal
auditors and (C) the independent auditors.
2. Review with the independent auditors any audit problems or
difficulties and management's response.
3. Report regularly to the board of directors, which such report shall
include a review on issues relating to the quality or integrity of
the Corporation's financial statements, the Corporation's compliance
with legal or regulatory requirements, the performance of the
independent auditors, or the performance of the internal audit
function.
4. Review the independent auditors' planned scope for the current audit,
including coordination of their plan with that of the internal audit
department, and any subsequent significant changes thereto. Approve
the independent auditor's engagement letter.
5. Review and approve all related-party transactions.
A - 6
OTHER
The Audit Committee shall perform such other activities consistent with this
charter, the Corporation's by-laws and governing law, as the Audit Committee or
Board of Directors deems necessary or appropriate.
While the Audit Committee has the responsibilities and powers set forth in this
charter, it is not the duty of the Audit Committee to plan and conduct audits or
to determine that the Corporation's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations. These are the responsibilities
of management and the independent auditors.
Note:
- -----
Approved by the Audit Committee November 14, 2002 and the Board of Directors
November 25, 2002.
A - 7
CONNECTICUT BANCSHARES, INC.
REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 2003
2:00 P.M., LOCAL TIME
-------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY VOTING INSTRUCTIONS
MAIL
- ----
Date, sign and promptly mail your proxy card in the enclosed
postage-paid envelope.
TELEPHONE
- ---------
Call toll-free 1-800-PROXIES from any touch-tone telephone and follow
the instructions. Have your control number and proxy card available when you
call.
INTERNET
- --------
Access "www.voteproxy.com" and follow the on-screen instructions. Have
your control number available when you access the web page.
--------------------
COMPANY NUMBER
--------------------
--------------------
ACCOUNT NUMBER
--------------------
--------------------
CONTROL NUMBER
--------------------
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.
CONNECTICUT BANCSHARES, INC.
REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS
May 12, 2003
2:00 p.m., Local Time
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the official proxy committee of
Connecticut Bancshares, Inc. (the "Company"), consisting of Timothy J. Devanney,
Sheila B. Flanagan, Eric A. Marziali, Richard P. Meduski, Timothy J. Moynihan,
Jon L. Norris, William D. O'Neill, John G. Sommers and Thomas E. Toomey 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 12, 2003, 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 follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSAL 2. PLEASE SIGN, DATE, AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X].
1. The election as directors of all nominees listed
Paul Berte, John D. LaBelle, Jr., Jon L. Norris, Laurence P.
Rubinow and Gregory S. Wolff
[ ] FOR ALL [ ] WITHHOLD AUTHORITY [ ] FOR ALL EXCEPT
NOMINEES FOR ALL NOMINEES (See instructions
below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold as shown here: 0
- --------------------------------------------------------------------------------
2. The ratification of the appointment of Deloitte & Touche LLP
as independent auditors of Connecticut Bancshares, Inc. for
the year ending December 31, 2003.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
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 4, 2003 and an Annual Report to Stockholders.
Date:_____________________________
----------------------------------
SIGNATURE OF SHAREHOLDER
-----------------------------------
SIGNATURE OF CO-HOLDER
Date:_____________________________
Note: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
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 "Trustee") on the proposals to be presented at the Annual
Meeting of Stockholders of Connecticut Bancshares, Inc. to be held on May 12,
2003. 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, 2003. 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 2,
2003. 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 2, 2003. 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,
/s/Joyce Trainer
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 12, 2003.
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).
A. Paul Berte, John D. LaBelle, Jr., Jon L. Norris, Laurence P. Rubinow
and Gregory S. Wolff
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 ratification of the appointment of Deloitte & Touche LLP
as independent auditors of Connecticut Bancshares, Inc. for
the year ending December 31, 2003.
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 of Company
common stock 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 2, 2003.
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 "Trustee") on the proposals
presented at the Annual Meeting of Stockholders of Connecticut Bancshares, Inc.
(the "Company") on May 12, 2003. 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") as of March 25, 2003. 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 2, 2003.
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 2, 2003. 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,
/s/Joyce Trainer
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 12, 2003.
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).
A. Paul Berte, John D. LaBelle, Jr., Jon L. Norris, Laurence P.
Rubinow and Gregory S. Wolff
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 ratification of the appointment of Deloitte & Touche LLP
as independent auditors of Connecticut Bancshares, Inc. for
the year ending December 31, 2003.
FOR AGAINST ABSTAIN
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[ ] [ ] [ ]
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
of Company common stock 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 2, 2003.
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 "Trustee") on the proposals to be presented at the Annual
Meeting of Stockholders of Connecticut Bancshares, Inc. to be held on May 12,
2003. 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 or the Connecticut Bancshares, Inc. 2002 Equity
Compensation 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, 2003. 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 2, 2003.
Sincerely,
/s/Joyce Trainer
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 12, 2003.
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).
A. Paul Berte, John D. LaBelle, Jr., Jon L. Norris, Laurence P. Rubinow
and Gregory S. Wolff
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 ratification of the appointment of Deloitte & Touche LLP
as independent auditors of Connecticut Bancshares, Inc. for
the year ending December 31, 2003.
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 of
Company common stock 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 2, 2003.