SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
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|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-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 the Registrant)
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[LETTERHEAD OF CONNECTICUT BANCSHARES, INC.]
April 2, 2001
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 14, 2001, 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, as well as a representative of Arthur
Andersen LLP, the Company's independent auditors, will be present to respond to
appropriate questions of stockholders. We are not asking stockholders to take
any action at the meeting in connection with our pending acquisition of First
Federal Savings and Loan Association of East Hartford.
It is important that your shares are represented at this meeting, whether
or not you attend the meeting in person and regardless of the number of shares
you own. To make sure your shares are represented, we urge you to complete and
mail the enclosed proxy card promptly. If you attend the meeting, you may vote
in person even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Richard P. Meduski
Richard P. Meduski
President and Chief Executive Officer
CONNECTICUT BANCSHARES, INC.
923 Main Street
Manchester, Connecticut 06040
(860) 646-1700
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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Connecticut Bancshares, Inc. (the "Company") will hold its annual meeting
of stockholders at The Colony, 51 Hartford Turnpike, Route 83, Vernon,
Connecticut, on Monday, May 14, 2001, at 2:00 p.m., local time, for the
following purposes:
1. To elect three (3) directors to serve for a term of three years;
2. To ratify amendments to the Connecticut Bancshares, Inc. 2000
Stock-Based Incentive Plan;
3. To ratify the appointment of Arthur Andersen LLP as independent
auditors for the Company for the year ending December 31, 2001; and
4. To transact any other business that may properly come before the
meeting.
Note: The Board of Directors is not aware of any other business to come
before the meeting.
Only stockholders of record at the close of business on March 22, 2001 are
entitled to receive notice of the meeting and to vote at the meeting and any
adjournment or postponement of the meeting.
Please complete and sign the enclosed form of proxy, which is solicited by
the Board of Directors, and mail it promptly in the enclosed envelope. The proxy
will not be used if you attend the meeting and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Carole L. Yungk
Carole L. Yungk
Corporate Secretary
Manchester, Connecticut
April 2, 2001
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 Monday, May 14, 2001 at 2:00 p.m., local time. This
proxy statement and the enclosed proxy card are being first mailed to
shareholders of record on or about April 2, 2001.
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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 22,
2001. As of the close of business on that date, a total of 11,232,000 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
in respect of the 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
in respect of the shares held in excess of the 5% limit, unless the beneficial
owner owns, holds or controls such shares in the ordinary course of business and
not with the purpose or effect of changing or influencing the control of the
Company.
Attending the Meeting
If you are a beneficial owner of Company common stock held by a broker,
bank or other nominee (i.e., in "street name"), you will need proof of ownership
to be admitted to the meeting. A recent brokerage statement or letter from your
bank or broker are examples of proof of ownership. If you want to vote your
shares of Company common stock held in street name in person at the meeting, you
will have to get a written proxy in your name from the broker, bank or other
nominee who holds your shares.
Vote Required
The annual meeting will be held only if there is a quorum. A majority of
the outstanding shares of common stock entitled to vote and represented at the
meeting constitutes a quorum. If you return valid proxy instructions or attend
the meeting in person, your shares will be counted for purposes of determining
whether there is a quorum, even if you abstain from voting. Broker non-votes
also will be counted for purposes of determining the existence of a quorum. A
broker non-vote occurs when a broker, bank or other nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not
have discretionary voting power with respect to that item and has not received
voting instructions from the beneficial owner.
In voting on the election of directors, you may vote in favor of all
nominees, withhold votes as to all nominees or withhold votes as to specific
nominees. There is no cumulative voting for the election of directors. Directors
are elected by a plurality of the votes cast. This means that the nominees
receiving the greatest number of votes will be elected. Votes that are withheld
and broker non-votes will have no effect on the outcome of the election. In
voting on the ratification of amendments to the Connecticut Bancshares, Inc.
2000 Stock-Based Incentive Plan (the "Incentive Plan") and the ratification of
the appointment of Arthur Andersen LLP as independent auditors, you may vote in
favor of the proposal, vote against the proposal or abstain from voting. These
matters will be decided by the affirmative vote of a majority of the votes cast
on each 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.
All shares of Company common stock represented at the meeting by properly
executed proxies will be voted according to the instructions indicated on the
proxy card. If you sign, date and return a proxy card without giving voting
instructions, your shares will be voted as recommended by the Company's Board of
Directors. The Board of Directors recommends a vote "FOR" each of the nominees,
"FOR" ratification of amendments to the Incentive Plan and "FOR" ratification of
Arthur Andersen 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 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.
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Participants in the Bank's ESOP and Savings Plan
If you participate in the Bank's Employee Stock Ownership Plan (the
"ESOP"), or if you hold shares of Company common stock through the Bank's
Savings Plan, you will receive with this proxy statement a voting instruction
form for each plan that reflects all shares you may vote under the plan. Under
the terms of the ESOP, all shares held by the ESOP are voted by the ESOP
trustee, but each participant in the ESOP may direct the trustee how to vote the
shares of Company common stock allocated to the participant's plan account.
Subject to the exercise of its fiduciary duties, the ESOP trustee will vote all
unallocated shares of common stock held by the ESOP and allocated shares for
which no timely voting instructions are received in the same proportion as
shares for which it has received timely voting instructions. Under the terms of
the Savings Plan, a participant is entitled to direct the trustee as to the
shares credited to his or her account. The trustee will vote all shares for
which no directions are given or for which timely instructions were not received
in the same proportion as shares for which the trustee received timely voting
instructions. The deadline for returning your voting instructions to each of the
plan's trustees is May 7, 2001.
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STOCK OWNERSHIP
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The following table provides information as of March 22, 2001, 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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Wellington Management Company, LLP 1,111,900(1) 9.9%
75 State Street
Boston, MA 02109
The Savings Bank of Manchester 898,560(2) 8.0%
Employee Stock Ownership Plan
923 Main Street
Manchester, CT 06040
SBM Charitable Foundation, Inc.
923 Main Street 832,000(3) 7.4%
Manchester, CT 06040
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(1) Based on information disclosed in a Schedule 13G filed with the Securities
and Exchange Commission on February 13, 2001.
(2) Under the terms of the ESOP, the ESOP trustee will vote shares allocated
to participants' accounts in the manner directed by the participants. As
of March 22, 2001, 59,904 shares had been allocated under the ESOP and
838,656 shares remain unallocated. The ESOP trustee, subject to its
fiduciary responsibilities, will vote unallocated shares and allocated
shares for which no timely voting instructions are received in the same
proportion as shares for which the trustee has received timely voting
instructions from participants.
(3) SBM Charitable Foundation, Inc. was established and funded in connection
with the Bank's conversion to the stock holding company form of
organization on March 1, 2000. The terms of the gift instrument require
that all shares of common stock held by the SBM Charitable Foundation,
Inc. must be voted in the same ratio as all other shares of the Company's
common stock on all proposals considered by stockholders of the Company.
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The following table provides information as of March 22, 2001 about the
shares of Company common stock that may be considered to be owned by each
director or nominee for director of the Company, by the executive officers named
in the Summary Compensation Table and by all directors and executive officers of
the Company as a group. A person may be considered to beneficially own any
shares of common stock over which he or she has, directly or indirectly, sole or
shared voting or investment power. Unless otherwise indicated, each of the named
individuals has sole voting and investment power with respect to the shares
shown.
Percent of
Common
Number of Stock
Shares Owned Outstanding
Name (1)(2)(3)(4) (5)
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Richard P. Meduski ............................... 132,659(6) 1.2%
A. Paul Berte .................................... 14,323 *
Timothy J. Devanney .............................. 18,882(7)(8) *
M. Adler Dobkin .................................. 21,232 *
Sheila B. Flanagan ............................... 36,232(9) *
John D. LaBelle, Jr. ............................. 17,232(10) *
Eric A. Marziali ................................. 36,232 *
Jon L. Norris .................................... 13,732 *
William D. O'Neill ............................... 40,232(8) *
Laurence P. Rubinow .............................. 36,232(11) *
John G. Sommers .................................. 36,232(12) *
Thomas E. Toomey ................................. 14,232(13) *
Gregory S. Wolff ................................. 31,232(14) *
Charles L. Pike .................................. 90,647 *
Douglas K. Anderson .............................. 78,800(15) *
Roger A. Somerville .............................. 43,301(16) *
All Directors and Executive Officers as a Group
(17 persons) ................................... 659,559(8) 5.9%
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*Less than 1.0% of shares outstanding.
(1) Includes shares of unvested restricted stock awarded as follows: each of
Messrs. Berte, Devanney, Dobkin, LaBelle, Marziali, Norris, O'Neill,
Rubinow, Sommers, Toomey and Wolff and Ms. Flanagan, 11,232 shares; Mr.
Meduski, 105,814 shares; Mr. Pike, 64,892 shares; Mr. Anderson, 51,413
shares; and Mr. Somerville, 31,449 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 power as follows: Mr.
Meduski, 25,024 shares; Mr. Pike, 25,024 shares; Mr. Anderson, 16,056
shares; and Mr. Somerville, 10,824 shares.
(3) Includes shares held in a separate trust in which Guarantee Trust Company
serves as a trustee as follows: Ms. Flanagan, 7,000 shares; Mr. LaBelle,
1,500 shares; and Mr. Anderson, 8,500 shares.
(4) Includes shares allocated to the account of individuals under the ESOP as
of December 31, 2000 as to which each individual has voting but not
investment power as follows: Mr. Meduski, 731 shares; Mr. Anderson, 731
shares; Mr. Pike, 731 shares; and Mr. Somerville, 728 shares.
(5) Based on 11,232,000 shares of Company common stock outstanding and
entitled to vote as of March 22, 2001.
(6) Includes 1,090 shares held by Mr. Meduski's spouse.
(7) Includes 450 shares held by Mr. Devanney's children, 200 shares held by
Mr. Devanney as custodian for his children under the Connecticut UGMA and
2,000 shares represents Mr. Devanney's beneficial interest of shares owned
by Highland Park Market of Glastonbury, Inc. and by Highland Park Market,
Inc.
(8) Includes 4,000 shares owned by the St. James School Foundation, Inc.
Messrs. Devanney and O'Neill serve as trustees of the foundation and share
voting control with others with respect to the shares owned by the
foundation.
(9) Includes 18,000 shares held by Ms. Flanagan's spouse's individual
retirement account.
(10) Includes 1,000 shares held by Mr. LaBelle's spouse, 1,500 shares held by
Mr. LaBelle's spouse as custodian for their children and 1,000 shares held
in a separate trust through the LaBelle, LaBelle, Naas & Horvath, P.C.
Profit Sharing Plan.
(11) Includes 5,000 shares held by Mr. Rubinow's son and 7,500 shares held by
Mr. Rubinow's spouse.
(12) Includes 10,000 shares representing Mr. Sommers' beneficial interest of
shares owned by Allied Printing Services, Inc.
(13) Includes 1,000 shares held by Mr. Toomey's spouse.
(14) Includes 12,499 shares held by Mr. Wolff's individual retirement account.
(15) Includes 2,000 shares held by Mr. Anderson's children and 100 shares held
by Mr. Anderson's spouse.
(16) Includes 300 shares held by Mr. Somerville's spouse's individual
retirement account.
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INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
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The three nominees for election as director were unanimously nominated by
the Nominating Committee of the Board of Directors. None of the nominees were
nominated according to any agreement or understanding between any of them and
the Company.
Certain amendments to the Connecticut Bancshares, Inc. 2000 Stock-Based
Incentive Plan are being presented to stockholders for ratification. See
Proposal 2 for more information. Directors, officers and employees of the
Company and the Bank were granted stock awards and options under the Incentive
Plan.
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PROPOSAL 1 -- ELECTION OF DIRECTORS
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The Company's Board of Directors consists of thirteen members, twelve of
whom are not employees of the Company or the Bank. The Board is divided into
three classes with three-year staggered terms, with approximately one-third of
the directors elected each year. The nominees for election this year are Richard
P. Meduski, John G. Sommers and Thomas E. Toomey, 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, 2000. 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
Richard P. Meduski has served as the President and Treasurer of the Bank
since 1988 and the President and Chief Executive Officer of the Company since
its formation in 1999. Mr. Meduski is 55 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
45 years old and has been a director since 1993.
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Thomas E. Toomey is retired. Prior to his retirement, Mr. Toomey was the
Executive Vice President of Marketing Specialists, Inc., a marketing firm. Until
1997, he was the President of Toomey DeLong Food Brokers, a wholesale grocer,
which no longer operates. Mr. Toomey is 67 years old and has been a director
since 1981.
Directors Continuing in Office
The following directors have a term ending in 2002:
Timothy J. Devanney is the President of Highland Park Market of Manchester
and Highland Park Market of Glastonbury, and a Member of Highland Park Market of
Farmington L.L.C., all of which are retail grocery businesses. Mr. Devanney is
48 years old and has been a director since 1999.
M. Adler Dobkin is Vice President of Rayco, Inc., a metal finishing
facility. He was previously its President. Mr. Dobkin is 69 years old and has
been a director since 1976.
Sheila B. Flanagan is a retired attorney and acted as a consultant between
1996 and 1999. Before 1996, she served as in-house counsel to the Massachusetts
Mutual Life Insurance Company. Ms. Flanagan is 60 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 42 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 headquarters in Manchester, Connecticut and offices in Massachusetts, Rhode
Island and Vermont. Mr. O'Neill is 62 years old and has been a director since
1998.
The following directors have a term ending in 2003:
A. Paul Berte is a self-employed attorney in Manchester, Connecticut. Mr.
Berte is 59 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 51 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 59 years old and has been a director since 1996.
Laurence P. Rubinow has served as Chairman of the Board of the Bank and
the Company since 2000. He is the President and Chief Executive Officer of the
law firm of Woodhouse, Rubinow & Macht, P.C., located in Manchester,
Connecticut. Mr. Rubinow is the son of Eleanor S. Rubinow, a Director Emeritus.
Mr. Rubinow is 56 years old and has been a director since 1996.
6
Gregory S. Wolff is the Chairman of Wolff-Zackin & Associates Inc., an
insurance agency located in Vernon, Connecticut. Mr. Wolff is 49 years old and
has been a director since 1997.
Executive Officers Who Are Not Directors
Charles L. Pike joined the Bank in 1983 and serves as the First Executive
Vice President and Senior Loan Officer. Mr. Pike is also First Executive Vice
President of the Company. Mr. Pike is 57 years of age.
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
Executive Vice President of the Bank and the Company and a director of Open
Solutions, Inc. Mr. Anderson is 50 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 56 years of age.
Michael J. Hartl joined the Bank in 2000 and has been Senior Vice
President since 2000 and was appointed Chief Financial Officer of the Bank and
Company in November 2000. Mr. Hartl is 59 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 2000, the Board of Directors of the Company held 13 meetings and
the Board of Directors of the Bank held 16 meetings. No director attended fewer
than 75% of the total meetings of the Board of Directors and Committees on which
such director served during 2000. The Board of Directors of the Company
maintains the following committees, the nature and composition of which are
described below:
Audit Committee. The Audit Committee consists of Messrs. Norris, Berte,
Devanney, LaBelle, O'Neill 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 Bank's Audit Committee met six times in 2000.
Compensation Committee. The Compensation Committee consists of Messrs.
Sommers, Berte, Dobkin, Marziali, 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 Bank's Compensation
Committee met 11 times in 2000.
Nominating Committee. The Company's Nominating Committee, consisting of
Messrs. Dobkin, LaBelle, Marziali and Sommers, considers and recommends the
nominees for director to stand for election
7
at the Company's Annual Meeting of Shareholders. The Company's Bylaws provide
for shareholder nominations for directors. See "Stockholders Proposals." The
Nominating Committee met five times in 2000 and also on February 26, 2001.
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. Non-employee directors of the Company receive an annual
retainer of $15,000. The Chairman of the Board of the Company receives an annual
retainer of $90,000 in lieu of these amounts. In 2000, Mr. Rubinow's retainer
was prorated for the time he served as Chairman of the Board.
Directors' Consultation Plan. The Bank maintains a post-retirement
consultation program for incumbent non-employee directors to ensure the
continued availability of its retired directors as consultants to management
because of their significant knowledge of and involvement in the Bank's
operations. A director who retires at age 70 with at least 10 years of service
receives an annual benefit equal to 50% of the average cash board compensation
(retainers and meeting fees) received by the director over the three years
preceding retirement. The benefit increases by 5% for each additional year of
service with a maximum benefit equal to 100% of final average board compensation
payable after 20 years of service. The benefit is payable until the earlier to
occur of the tenth anniversary of the director's retirement or the director's
death. A director with at least 10 years of service may elect to retire before
age 70 but after age 65 with a corresponding reduction in the benefit equal to
5% for each year the director's age is less than age 70. The plan provides that
each married retired director is guaranteed at least five annual payments. If a
retired director dies before the receipt of at least five annual payments, any
remaining payments will be made to the retired director's surviving spouse to
ensure that a minimum of five payments are made. The plan also provides that the
surviving spouse of an active director with at least 10 years of service who
dies before age 65 receives a benefit payable for five years equal to 50% of the
benefit the director would have been eligible to receive had the director
attained age 70 before his death, and that the surviving spouse of an active
director with at least 10 years of service who dies after attaining age 65
receives a benefit payable for five years equal to 100% of what that director
would have received. In the event of a change in control (as defined in the
plan), each incumbent director will be deemed retired for purposes of the plan
and will receive a lump sum benefit equal to the present value of the normal
retirement benefit with each director assumed to have at least 10 years of
service.
Incentive Plan. Under the Connecticut Bancshares, Inc. 2000 Stock-Based
Incentive Plan which was adopted by the Company's stockholders on October 2,
2000, each non-employee director of the Company or the Bank received
non-statutory stock options to purchase 28,080 shares of common stock at an
exercise price of $17.625, the fair market value of the common stock on December
15, 2000, the date the option was granted. Additionally, on January 2, 2001,
non-employee directors were granted stock awards for 11,232 shares. Both the
awards and options vest equally over a five-year period. The Board of Directors
has amended the Incentive Plan to provide for acceleration of vesting of the
options and stock awards upon a change in control of the Company or Bank or, at
the discretion of the committee administering the Incentive Plan, upon an
optionee's retirement. See Proposal 2 for more information.
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, 2000 ("Named Executive Officers").
Long-Term
Annual Compensation(1) Compensation
---------------------------- ----------------------
Securities All Other
Underlying Compensation(4)
Name and Position Year(2) Salary Bonus(3) Options/SARs(#) (5)
- ------------------------ --------- ------------- ------------- ---------------------- ----------------
Richard P. Meduski ............... 2000 $330,750 $125,000 224,640 $77,823
Chief Executive Officer, 1999 294,000 110,000 -- 41,135
President and Treasurer
Charles L. Pike .................. 2000 220,329 50,700 112,320 24,893
First Executive Vice 1999 195,848 37,300 -- 4,800
President
Douglas K. Anderson .............. 2000 180,000 46,800 89,856 20,144
Executive Vice President 1999 73,302 15,200 -- 3,199
Roger A. Somerville .............. 2000 140,437 25,300 25,000 18,329
Senior Vice President 1999 124,883 27,500 -- 4,339
Nicholas Mason ................... 2000(6) 138,275 -- -- 4,708
Senior Vice President and 1999 122,911 16,000 -- 4,455
Chief Financial Officer
- ----------
(1) Does not include the aggregate amount of perquisites and other personal
benefits, which was less than 10% of the total annual salary and bonus
reported.
(2) Information for the year ended December 31, 1998 has been omitted because
the Company was neither a public company nor a subsidiary of a public
company at the time.
(3) Represents board awarded discretionary cash bonus.
(4) Consists of employer contributions to the Bank's 401(k) plan of $5,250,
$5,250, $5,250 and $5,038 and ESOP allocations with a market value of
$13,333, $13,333, $13,333 and $13,291, for Messrs. Meduski, Pike, Anderson
and Somerville, respectively, and also includes employer contributions to
the Bank's 401(k) plan of $4,708 for Mr. Mason. Also includes $36,335 paid
to Mr. Meduski for premiums on an insurance policy in connection with an
insurance-funded supplemental retirement program.
(5) Includes employer contributions under The Savings Bank of Manchester SERP
for Messrs. Meduski, Pike and Anderson of $22,905, $6,310 and $1,561,
respectively.
(6) Mr. Mason resigned from the Company and Bank in December 2000.
Employment Agreements. The Bank and the Company maintain three-year
employment agreements with Messrs. Meduski, Pike, Anderson and Somerville. Under
the employment agreements, the current salary levels for Messrs. Meduski, Pike,
Anderson and Somerville are $350,000, $232,447, $192,600 and $147,459,
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
9
of Directors. The agreements are terminable by the employers at any time, by
each executive if he is assigned duties inconsistent with his initial position,
duties, responsibilities and status, or upon the occurrence of certain events
specified by applicable regulations. If any executive's employment is terminated
without cause or upon the executive's voluntary termination following the
occurrence of an event described in the preceding sentence, the Bank or the
Company would be required to honor the terms of the agreement through the
expiration of the current term, including payment of current cash compensation
and continuation of employee benefits.
The employment agreements also provide for a severance payment and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Bank or the Company. A severance payment also
will be provided on a similar basis in connection with a voluntary termination
of employment where, after a change in control, an executive is assigned duties
inconsistent with his position, duties, responsibilities and status immediately
before such change in control.
Even though both the Bank and the Company employment agreements provide
for a severance payment if a change in control occurs, the executive would only
be entitled to receive a severance payment under one agreement. The executive
would also be entitled to receive an additional tax indemnification payment if
payments under the employment agreements or any other payments triggered
liability under the Internal Revenue Code (the "Code") as an excise tax
constituting "excess parachute payments." Under applicable law, the excise tax
is triggered by change in control-related payments which equal or exceed three
times the executive's average annual compensation over the five years preceding
the change in control. The excise tax equals 20% of the amount of the payment in
excess of one times the executive's average compensation over the preceding
five-year period.
Payments to the executive under the Bank's employment agreement are
guaranteed by the Company if payments or benefits are not paid by the Bank.
Payment under the Company's employment agreement will be made by the Company.
The employment agreements also provide that the Bank and the Company will
indemnify the executive to the fullest extent legally allowable.
The employment agreements restrict each executive from competing against
the Company or the Bank for a period of one year from the date of termination of
the agreement if the executive is terminated without cause, except if such
termination occurs after a change in control.
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
10
over the lives of the participant and spouse. If a participant dies while
employed by the Bank, a death benefit will be payable to either his or her
spouse or estate, or named beneficiary, equal to the entire amount of the
participant's accrued benefit in the plan. If a participant is terminated from
employment with a vested benefit and dies before starting to receive payments,
the benefit will be payable on his or her behalf. Married participants in the
pension plan may elect, with spousal consent where required by law, to receive
their pension benefits in the form of a 50%, 75% or 100% joint and survivor
annuity or a life only payment option.
The following table indicates the annual retirement benefits that would be
payable under the pension plan and the related supplemental executive retirement
plan (see below) upon retirement at age 65 to a participant electing to receive
his or her pension benefit in the standard form of benefit, assuming various
specified levels of plan compensation and various specified years of credited
service. Under the Code, maximum annual benefits under the pension plan are
limited to $135,000 and annual compensation for calculation purposes is limited
to $170,000 for the 2000 calendar year.
Average Years of Service
Annual --------------------------------------------------------------
Compensation 5 10 15 20 25 30+
- ------------- -------- ------- -------- -------- -------- ---------
$ 25,000 $ 2,500 $ 5,000 $ 7,500 $ 10,000 $ 12,500 $ 15,000
50,000 5,000 10,000 15,000 20,000 25,000 30,000
75,000 7,500 15,000 22,500 30,000 37,500 45,000
100,000 10,000 20,000 30,000 40,000 50,000 60,000
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
At December 31, 2000, which is the date of the most recent pension plan
statement, the pension plan's assets exceeded the benefit obligation by
approximately $3.2 million. The pension plan benefits listed on the table above
are not reduced for Social Security benefits or any other offset amount. As of
January 1, 2001, Messrs. Meduski, Pike, Anderson and Somerville had 17, 17, 14
and 16 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
11
and Pike to provide them with benefits that cannot be provided under the Bank's
tax-qualified defined benefit pension plan (as described above) due to certain
Code limitations. In addition, the Bank maintains a separate supplemental
executive retirement plan through which Mr. Anderson is eligible to receive an
"excess" benefit similar to those provided to Messrs. Meduski and Pike under
their individual agreements. Mr. Meduski has also been designated as a
participant under a separate provision of the supplemental executive retirement
plan which provides him with a guaranteed retirement benefit equal to 60% of his
final average cash compensation for the three years preceding retirement,
reduced by the benefits payable to him under the pension plan and his individual
supplemental agreement. The benefits available under these arrangements are
reflected in the pension plan table based on their years of service and levels
of compensation.
The Bank's supplemental executive retirement plan also provides Messrs.
Meduski, Pike and Anderson with a supplemental retirement benefit determined by
reference to the participant's average annual benefits under the Bank's ESOP and
a related ESOP excess benefit provision of the supplemental plan. At retirement,
the plan provides that a participant is entitled to receive a supplemental
benefit equal to the average annual benefits the participant would have received
with respect to the ESOP (including excess benefits) had the participant
remained employed through the repayment of any ESOP loan outstanding as of his
retirement, reduced by benefits actually accrued under the ESOP (including
excess benefits) through the date of retirement. In the event of a change in
control of the Company or the Bank (as defined in the plan), these benefits
would be available to the participant on the same basis as if the participant
had retired on the effective date of the change in control.
Incentive Plan. The Company's stockholders adopted the Incentive Plan on
October 2, 2000. It provides discretionary awards of options to purchase common
stock and awards of restricted common stock to officers, directors and employees
as determined by a committee of the Board of Directors. The following table
lists all grants of options under the Incentive Plan to the current Named
Executive Officers for fiscal year 2000 and contains certain information about
potential value of those options based upon certain assumptions as to the
appreciation of the Company's stock over the life of the option.
Option Grants in Last Fiscal Year
The following table lists all grants of options to the Named Executive
Officers for fiscal year 2000 and contains certain information about potential
value of those options based upon certain assumptions as to the appreciation of
the Company's stock over the life of the option.
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of
Securities Options Stock Price Appreciation
Underlying Granted to Exercise or for Options (2)
Options Granted Employees in Base Price Expiration -----------------------------
Name (#)(1) Fiscal Year Per Share Date 5% 10%
- ---- --------------- ------------ ------------ ------------ ------------ -----------
Richard P. Meduski ........... 224,640 33.3% $ 17.625 Dec.15, 2010 $2,490,134 $7,337,866
Charles L. Pike .............. 112,320 16.7 17.625 Dec.15, 2010 1,245,067 3,668,933
Douglas K. Anderson .......... 89,856 13.3 17.625 Dec.15, 2010 996,054 2,935,146
Roger A. Somerville .......... 25,000 3.7 17.625 Dec.15, 2010 277,125 816,625
- ----------
(1) Options become exercisable in five equal annual installments commencing on
December 15, 2001, the first anniversary of the date of grant; provided,
however, options will be immediately exercisable if the optionee dies or
becomes disabled. The Board of Directors has amended the Incentive Plan to
provide for the acceleration of vesting of the options granted upon the
change in control of the Company or Bank or, at the discretion of the
committee administering the Incentive Plan, upon an optionee's retirement.
See Proposal 2 for more information.
12
(2) The dollar gains under these columns result from calculations required by
the Securities and Exchange Commission's rules and are not intended to
forecast future price appreciation of Company common stock. It is
important to note that 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 $28.71 and $50.29,
respectively, as of the expiration date of the options.
Fiscal Year-End Option Values
The following table provides certain information with respect to the
number of shares of Company common stock represented by outstanding options held
by those individuals as of December 31, 2000. Also reported are the values for
"in-the-money" options which represent the positive spread between the exercise
price of any such existing stock options and the year-end stock price.
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at Fiscal Year-End(#) Options at Fiscal Year-End($)(1)
----------------------------------------- -----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Richard P. Meduski ........................ -- 224,640 $ -- $140,400
Charles L. Pike ........................... -- 112,320 -- 70,200
Douglas K. Anderson ....................... -- 89,856 -- 56,160
Roger A. Somerville ....................... -- 25,000 -- 15,625
- ----------
(1) Value of unexercised in-the-money stock options equals the market value of
shares covered by in-the-money options on December 31, 2000 less the
option exercise price. Options are in-the-money if the market value of
shares covered by the options is greater than the exercise price.
Committee Reports
The reports of the Compensation and Audit Committees and the stock
performance graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except as to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
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.
13
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 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 the Incentive Plan
under which executive officers received grants and awards of common stock and
options to purchase common stock of the Company. The specific grants of options
for the Named Executive Officers are reflected in the Summary Compensation
Table. The Board believes that stock ownership is a significant incentive in
building stockholder value and in aligning the interests of employees with
stockholders, since the value of this component of compensation increases as the
common stock of the Company appreciates in value.
Compensation of the Chief Executive Officer. During the fiscal year ended
December 31, 2000, Mr. Meduski's base salary was $330,750. In addition, he
received a performance bonus of $125,000 and other compensation totaling $77,823
as set forth in the Summary Compensation Table appearing earlier in this proxy
statement. This resulted in total compensation of $533,573. 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 2000 fiscal year.
Compensation Committee
John G. Sommers
A. Paul Berte
M. Adler Dobkin
Sheila B. Flanagan
Eric A. Marziali
Gregory S. Wolff
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.
14
Stock Performance Graph. The following graph compares the cumulative total
stockholder return on the Company's common stock with the cumulative total
return on the Nasdaq Index and with the SNL $1 Billion to $5 Billion Asset
Thrift Index. The graph assumes that $100 was invested at the close of business
on March 2, 2000, the initial day of trading of the Company's common stock.
Total return assumes the reinvestment of all dividends.
[LINE GRAPH APPEARS HERE]
Period Ended
-------------------------------------------------------------------
3/02/00 3/31/00 6/30/00 9/30/00 12/31/00
------- ------- ------- ------- --------
Connecticut Bancshares, Inc. ............................ $100.00 $100.55 $142.68 $184.68 $178.05
The Nasdaq Index (U.S. Companies) ....................... 100.00 96.87 84.23 77.51 51.94
SNL $1 B to $5 B Asset Thrift Index ..................... 100.00 102.63 104.43 124.57 135.47
15
Audit Committee Report
The Audit Committee of the Board of Directors is responsible for assisting
the Board of Directors in fulfilling its responsibility to the stockholders
relating to corporate accounting, reporting practices and the quality and
integrity of the financial reports of the Company. Additionally, the Audit
Committee selects the auditors and reviews their independence and their annual
audit. The Audit Committee is comprised of six directors, each of whom is
independent under National Association of Securities Dealer's listing standards.
The Audit Committee acts under a written charter adopted by the Board of
Directors, a copy of which is attached to this proxy statement as Appendix A.
The Audit Committee reviewed and discussed the annual financial statements
with management and the independent accountants. As part of this process,
management represented to the Audit Committee that the financial statements were
prepared in accordance with accounting principles generally accepted in the
United States. The Audit Committee also received and reviewed written
disclosures and a letter from the accountants concerning their independence as
required under applicable standards for auditors of public companies. The Audit
Committee discussed with the accountants the contents of such materials, the
accountant's independence and the additional matters required under Statement on
Auditing Standards No. 61. Based on such review and discussions, the Audit
Committee recommended that the Board of Directors include the Company's audited
consolidated financial statements for the year ended December 31, 2000 in the
Company's Form 10-K filing with the Securities and Exchange Commission.
Audit Committee
Jon L. Norris
A. Paul Berte
Timothy J. Devanney
Sheila B. Flanagan
John D. LaBelle, Jr.
William D. O'Neill
- --------------------------------------------------------------------------------
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 ownership and changes in ownership with the SEC. Executive officers,
directors and greater than 10% stockholders are required by regulation to
furnish the Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of the reports it has received
and written representations provided to the Company from the individuals
required to file the reports, the Company believes that during the year ended
2000, each of its executive officers and directors has complied with applicable
reporting requirements for transactions in Company common stock, except for A.
Paul Berte and Thomas E. Toomey who each filed a Form 4 late due to
administrative error.
16
- --------------------------------------------------------------------------------
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 $4.6 million at December 31, 2000, all of which
were performing according to their original terms at December 31, 2000.
Other Transactions. Mr. Anderson, the Bank's Executive Vice President, is
a director and a significant shareholder of Open Solutions, Inc., the Bank's
computer software provider. For the year ended December 31, 2000, the Bank paid
fees of $272,000 to Open Solutions, Inc.
In addition, 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. No payments were made by the Bank
to Mr. LaBelle's law firm in the year ended December 31, 2000. Total payments by
the Bank to Mr. Rubinow's law firm totalled $30,000 for the year ended December
31, 2000.
17
- --------------------------------------------------------------------------------
PROPOSAL 2 -- RATIFICATION OF AMENDMENTS TO THE CONNECTICUT
BANCSHARES, INC. 2000 STOCK-BASED INCENTIVE PLAN
- --------------------------------------------------------------------------------
The Board of Directors of the Company is presenting certain amendments to
the Connecticut Bancshares, Inc. 2000 Stock-Based Incentive Plan to stockholders
for ratification. Stockholders originally approved the Incentive Plan on October
2, 2000. The Board of Directors of the Company approved the amendments to the
Incentive Plan on March 26, 2001. The Incentive Plan was amended primarily in
two respects. First, the amendments clarify that the Company may accelerate or
modify the vesting of restricted stock awards and stock options upon a
participant's retirement at the discretion of the Incentive Plan Committee.
Second, the amendments provide for accelerated vesting of outstanding restricted
stock awards and stock options upon a change in control of the Bank or the
Company. Currently, upon retirement or a change in control, the Incentive Plan
only allows participants to exercise those stock options or receive those stock
awards that have vested.
For purposes of the Incentive Plan, a "change in control" of the Bank or
the Company generally means an event or circumstance that results in a
substantial change in ownership or control of the Bank or the Company. In the
most typical circumstance, a change in control of the Bank or the Company will
result from an acquisition or merger of the Bank or the Company with another
entity in which the Bank or the Company is not the surviving entity. Other
circumstances involving a change in control may result from a sale of
substantially all the assets of the Bank or the Company, a change in the
composition of the Board of Directors following a contested election of Board
members or an offer by a third party to purchase in excess of 20% of the
Company's outstanding stock. The Company also amended the Incentive Plan for
conforming changes. The amendments to the Incentive Plan do not increase the
number of shares available for grant under the Incentive Plan, change the
eligibility requirements for participation in the Incentive Plan, or otherwise
alter the type of grants which may be made under the Incentive Plan. The
following is a summary of all material terms of the Incentive Plan.
General
The Incentive Plan authorizes the granting of options to purchase common
stock and awards of common stock. Subject to certain adjustments to prevent
dilution of the awards, the number of shares available for awards under the
Incentive Plan is 1,572,480 shares, consisting of 1,123,200 shares reserved for
options and 449,280 shares reserved for restricted stock awards. All employees
and non-employee directors of the Company and its affiliates as well as other
advisors or consultants to whom the administering committee grants eligibility,
are eligible to receive awards under the Incentive Plan. The Incentive Plan is
administered by a committee appointed by the Board of Directors (the
"Committee"). Subject to the terms of the Incentive Plan, the Committee
interprets the Incentive Plan and is authorized to make decisions and
determinations thereunder. The Committee also determines to whom awards will be
granted, the type and amount of awards that will be granted and the terms and
conditions applicable to such awards, including conditions related to the awards
vesting or becoming exercisable. Authorized but unissued shares or shares
previously issued and reacquired by the Company may be used to satisfy awards
under the Incentive Plan. If authorized but unissued shares are used to satisfy
restricted stock awards and the exercise of stock options granted under the
Incentive Plan, it will result in an increase in the number of shares
outstanding and will have a dilutive effect on the holdings of existing
stockholders. Any shares subject to an option that expires or otherwise
terminates unexercised will again be available for issuance under the Incentive
Plan.
18
The Incentive Plan authorizes the grant of awards in the form of: (1)
options to purchase the Company's common stock intended to qualify as incentive
stock options under Section 422 of the Code (options which afford certain tax
benefits to the recipients upon compliance with certain conditions and which do
not result in tax deductions to the Company); (2) options that do not so qualify
(options which do not afford the same income tax benefits to recipients, but
which may provide tax deductions to the Company), referred to as "non-statutory
stock options"; and (3) restricted stock awards, which provide a grant of common
stock that vests over time.
Stock Options
Subject to the terms of the Incentive Plan, the Committee has the
authority to determine the amount of stock options granted to any individual and
the date or dates on which each stock option will become exercisable and any
other conditions applicable to an option. The exercise price of all options will
be determined by the Committee but will be at least 100% of the fair market
value of the underlying common stock at the time of grant (110% for a 10% owner
with respect to incentive stock options). The exercise price of any option may
be paid in cash, common stock, or any other form permitted by the Committee at
its discretion. The term of options will be determined by the Committee, but in
no event will an option be exercisable more than ten years from the date of
grant (or five years from date of grant for a 10% owner with respect to
incentive stock options). See "Payment" and "Method of Option Exercise."
All options granted under the Incentive Plan to officers and employees
may, at the discretion of the Committee, qualify as incentive stock options to
the extent permitted under Section 422 of the Internal Revenue Code. Under
certain circumstances, incentive stock options may be converted into
non-statutory stock options. In order to qualify as incentive stock options
under Section 422 of the Internal Revenue Code, the option must generally be
granted only to an employee, must not be transferable (other than by will or the
laws of descent and distribution), the exercise price must not be less than 100%
of the fair market value of the common stock on the date of grant, the term of
the option may not exceed ten years from the date of grant, and no more than
$100,000 of options may become exercisable for the first time in any calendar
year. Notwithstanding the foregoing requirements, incentive stock options
granted to any person who is the beneficial owner of more than 10% of the
outstanding voting stock of the Company may be exercised only for a period of
five years from the date of grant and the exercise price must be at least equal
to 110% of the fair market value of the underlying common stock on the date of
grant. Each non-employee director of the Company or its affiliates, as well as
employees, will be eligible to receive non-statutory stock options.
Termination of Employment or Service. Unless the Committee determines
otherwise, upon termination of an option holder's services for any reason other
than death, disability, retirement, change in control or termination for cause,
all then exercisable options will remain exercisable for three months following
termination, or if sooner, the expiration of the term of the option. If an
option holder dies or becomes disabled, all unexercisable options will become
exercisable and remain exercisable for one year, or if sooner, the expiration of
the term of the option. In the event of termination for cause, all exercisable
and unexercisable options held by the option holder will be canceled. If an
option holder retires, all unexercisable options will be canceled. However, the
Incentive Plan, as amended, provides the Committee with the discretion to
accelerate or modify the vesting of stock options upon retirement.
Under generally accepted accounting principles, compensation expense is
generally not recognized with respect to the award of stock options.
19
Acceleration Upon a Change in Control. As amended, the Incentive Plan also
now provides that in the event of a change in control of the Company or the
Bank, stock options will immediately become fully vested and shall be
exercisable for the term of the stock option, regardless of termination of
employment or service; provided that incentive stock options not exercised
within three months of an individual's termination of employment shall not be
eligible for incentive treatment for tax purposes.
Restricted Stock Awards
Subject to the terms of the Incentive Plan and applicable regulation, the
Committee has the authority to determine the amounts of restricted stock awards
granted to any individual and the dates on which stock awards granted will vest
or any other conditions which must be satisfied prior to vesting.
When dividends or other distributions are paid on the common stock
underlying the stock awards, the Committee may elect to pay such dividends and
other distributions to the stock award recipients as soon as practicable or pay
the dividends and other cash distributions when the stock awards are distributed
(i.e., vest) in accordance with the terms of the Incentive Plan. Stock award
recipients are entitled to receive an amount equal to any accumulated cash and
stock dividends paid on the common stock underlying the stock award plus
earnings thereon minus any required tax withholding amounts. Stock award
recipients may direct the voting of shares of common stock granted to them and
held in the Incentive Plan Trust, regardless of vesting. Shares of common stock
held by the Incentive Plan Trust which have not been allocated or for which
voting has not been directed are voted by the Incentive Plan trustee in the same
proportion as the awarded shares are voted in accordance with the directions
given by all recipients of stock awards.
Termination of Employment or Service. Unless the Committee determines
otherwise, upon termination of the services of a holder of a stock award for any
reason other than death, disability or retirement, all the holder's rights in
unvested restricted stock awards will be canceled. If the holder of the stock
award dies or becomes disabled, all unvested restricted stock awards held by
such individual will become fully vested. If the holder of a stock award
retires, all unvested restricted stock awards held by such individual will be
canceled. However, the Incentive Plan, as amended, provides the Committee with
the discretion to accelerate or modify the vesting of stock awards upon
retirement.
Acceleration Upon a Change in Control. As amended, the Incentive Plan now
provides that all stock awards immediately vest in the event of a change in
control of the Company or the Bank.
Federal Income Tax Treatment
The following brief description of the material tax consequences of stock
option grants and awards under the Incentive Plan is based on federal income tax
laws currently in effect and does not purport to be a complete discussion of the
federal income tax consequences.
Stock Options. An option holder will generally not be deemed to have
recognized taxable income upon grant or exercise of any incentive stock option,
provided that shares transferred in connection with the exercise are not
disposed of by the optionee for at least one year after the date the shares are
transferred in connection with the exercise of the option and two years after
the date of grant of the option. If these holding periods are satisfied, upon
disposal of the shares, the aggregate difference between the per share option
exercise price and the fair market value of the common stock is recognized as
income taxable at capital gains rates. No compensation deduction may be taken by
the Company as a result of the grant or exercise of incentive stock options,
assuming these holding periods are met.
20
In the case of the exercise of a non-statutory stock option, an option
holder will be deemed to have received ordinary income upon exercise of the
option in an amount equal to the aggregate amount by which the fair market value
of the common stock exceeds the exercise price of the option on the date of
exercise. If shares received through the exercise of an incentive stock option
are disposed of before the satisfaction of the holding periods (a "disqualifying
disposition"), the exercise of the option will essentially be treated as the
exercise of a non-statutory stock option, in that the option holder will
recognize ordinary income for the year in which the disqualifying disposition
occurs. The amount of any ordinary income recognized by an optionee upon the
exercise of a non-statutory stock option or due to a disqualifying disposition
will be a deductible expense of the Company for federal income tax purposes.
Restricted Stock Awards. A participant who has been awarded restricted
stock under the Incentive Plan and does not make an election under Section 83(b)
of the Code will not recognize taxable income at the time of the award. At the
time any transfer or forfeiture restrictions applicable to the restricted stock
award lapse, the recipient will recognize ordinary income and the Company will
be entitled to a corresponding deduction equal to the excess of the fair market
value of such stock at such time over the amount paid, if any. Any dividend paid
to the recipient on the restricted stock at or prior to such time will be
ordinary compensation income to the recipient and also deductible as such by the
Company.
A recipient of a restricted stock award who, with the permission of the
Committee, makes an election under Section 83(b) of the Code will recognize
ordinary income at the time of the award and the Company will be entitled to a
corresponding deduction equal to the fair market value of such stock at such
time over the amount paid, if any. Any dividends subsequently paid to the
recipient on the restricted stock will be dividend income to the recipient and
not deductible by the Company. If the recipient makes a Section 83(b) election,
there are no federal income tax consequences either to the recipient or the
Company at the time any transfer or forfeiture restrictions applicable to the
restricted stock award lapse.
Payment
Any shares of common stock tendered in payment of an obligation arising
under the Incentive Plan or applied to any tax withholding amounts shall be
valued at the fair market value of the common stock. The Committee may use
treasury stock or authorized but unissued stock or may direct the market
purchase of shares of common stock to satisfy its obligations under the
Incentive Plan.
Method of Option Exercise
The Committee has the sole discretion to determine the form of payment for
the exercise of a stock option, including payment of cash, stock or other
property, by surrender of all or part of the option being exercised, by the
immediate sale through a broker of the number of shares being acquired to pay
the purchase price, or through some combination of these methods. The Committee
may indicate acceptable forms in each optionee's award agreement covering such
options or may reserve its decision to the time of exercise. No stock option is
to be considered exercised until payment in full is accepted by the Committee.
Amendment
The Board of Directors may generally amend the Incentive Plan in any
respect, at any time, subject to certain prohibitions established by law or the
terms of the Incentive Plan itself.
21
Non-transferability
Unless the Committee determines otherwise, awards under the plan will not
be transferable by the recipient other than by will or the laws of intestate
succession or pursuant to a domestic relations order. With the consent of the
Committee, a recipient may permit transferability or assignment for valid estate
planning purposes of a non-statutory stock option as permitted under the
Internal Revenue Code or federal securities laws and a participant may designate
a person or his or her estate as beneficiary of any award to which the recipient
would then be entitled, if the participant dies.
Adjustments
If there is any change in the outstanding shares of common stock of the
Company by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
without receipt or payment of consideration by the Company, or if an
extraordinary capital distribution is made, including the payment of an
extraordinary dividend, the Committee may make such adjustments to previously
granted awards, to prevent dilution, diminution or enlargement of the rights of
the holder. All awards under the plan will be binding upon any successors or
assigns of the Company.
Stockholder Vote
Stockholders are being requested to ratify all amendments to the Incentive
Plan. If stockholders fail to ratify Proposal 2, the Incentive Plan will remain
in full force and effect at the discretion of the Company's Board of Directors.
The affirmative vote of a majority of the votes cast by the stockholders at the
annual meeting on this proposal is required to ratify the amendments to the
Incentive Plan.
The Board of Directors recommends that you vote "FOR" ratification of the
amendments to the Connecticut Bancshares, Inc. 2000 Stock-Based Incentive Plan.
- --------------------------------------------------------------------------------
PROPOSAL 3 -- RATIFICATION OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors has appointed Arthur Andersen LLP to be its
auditors for the 2001 fiscal year, subject to the ratification by stockholders.
A representative of Arthur Andersen LLP is expected to be present at the annual
meeting to respond to appropriate questions from stockholders and will have the
opportunity to make a statement should he or she desire to do so.
If the ratification of the appointment of the auditors is not approved by
a majority of the votes cast by stockholders at the annual meeting, the Board of
Directors would consider other independent public accountants. The Board of
Directors recommends that stockholders vote "FOR" the ratification of the
appointment of independent auditors.
22
Audit Fees
The aggregate fees the Company paid to Arthur Andersen LLP for the annual
audit and for the review of the Company's quarterly reports on Forms 10-Q for
2000 totalled $148,570.
All Other Fees
The aggregate fees the Company paid to Arthur Andersen LLP for all other
non-audit services, including fees for tax-related services, during 2000
totalled $172,600. The Audit Committee has considered whether non-audit services
provided by Arthur Andersen LLP are compatible with maintaining auditor
independence.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The Company will pay the cost of solicitation of proxies on behalf of its
Board of Directors. In addition to soliciting proxies by mail, Georgeson
Shareholder Communications Inc., a proxy solicitation firm, will assist the
Company in soliciting proxies for the annual meeting and will be paid a fee of
$6,500, plus out-of-pocket expenses. Proxies may also be solicited personally or
by telephone by directors, officers and other employees of the Company and the
Bank without any additional compensation. The Company will also request persons,
firms and corporations holding shares in their names, or in the name of their
nominees, which are beneficially owned by others, to send proxy materials to,
and obtain proxies from, the beneficial owners, and will reimburse those record
holders for their reasonable expenses in doing so.
The Company's Annual Report to Stockholders has been mailed to all persons
who were stockholders as of the close of business on March 22, 2001. 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, 2000, as filed with the Securities and Exchange Commission,
will be furnished without charge to stockholders as of the close of business on
March 22, 2001 upon written request to Carole L. Yungk, Corporate Secretary,
Connecticut Bancshares, Inc., 923 Main Street, Manchester, Connecticut 06040.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
To be considered for inclusion in the Company's proxy statement and form
of proxy relating to the 2002 Annual Meeting of Stockholders, a stockholder
proposal must be received by the Secretary of the Company at the address set
forth on the Notice of Annual Meeting of Stockholders not later than December 3,
2001. If such annual meeting is held on a date more than 30 calendar days from
May 14, 2002, a stockholders 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.
23
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 2002
Annual Meeting of Stockholders, the Company would have to receive notice of such
business not later than February 13, 2002 assuming the 2002 Annual Meeting is
held on May 14, 2002 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. Nothing in this paragraph shall be
deemed to require the Company to include in its proxy statement or the proxy
relating to any Annual Meeting any stockholder proposal which does not meet all
of the requirements for inclusion established by the Securities and Exchange
Commission in effect at the time such proposal is received.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Carole L. Yungk
Carole L. Yungk
Corporate Secretary
Manchester, Connecticut
April 2, 2001
24
APPENDIX A
Connecticut Bancshares, Inc.
Audit Committee Charter
STATEMENT OF POLICY
The Audit Committee of Connecticut Bancshares, Inc. (the "Corporation") which 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, serves not only as the Audit Committee of the Corporation but also of
The Savings Bank of Manchester (the "Bank") and subsidiaries.
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 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
accountants; the Corporation's system of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board of
Directors have established; and the Corporation's auditing, accounting and
financial reporting process. Consistent with this function, the Audit Committee
should encourage continuous improvement of and should 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
accountants and internal auditing department.
* Provide an open avenue of communication among the independent accountants,
financial and senior management, the internal auditing department and the
Board of Directors.
The independent accountants are directly accountable to the Audit Committee and
ultimately accountable to the Board of Directors.
COMPOSITION
1. The Audit Committee of the Corporation shall consist of three or more
non-management members of the Corporation's Board of Directors (BOD), one
member of which shall be designated a chairperson.
2. Each member shall be an independent director, free from any relationship
that, in the opinion of the BOD, would interfere with the exercise of his
or her independent judgment as a member of the Committee.
3. The members of the Corporation's Audit Committee shall constitute the
members of The Savings Bank of Manchester's (the Bank) Audit Committee.
4. All members of the Committee shall have a working familiarity with basic
finance and accounting practices (i.e. financial literacy) and at least
one member of the Committee shall have accounting or related financial
management expertise.
5. 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
accountants or chairperson of the Audit Committee.
2. The Committee should meet with the independent accountants and management
quarterly to review the Corporation's financial statements.
3. Minutes will be kept for all meetings.
4. In meetings attended by the Chief Auditor and/or independent accountants
or by regulatory examiners, a portion of the meeting will be reserved for
the Committee to meet in closed session with these parties.
5. 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 Committee.
RESPONSIBILITIES
Responsibilities of the Committee shall include, but shall not be limited to,
the following:
1. Review and update this charter, as conditions dictate but at least
annually, and recommend any proposed changes to the Board of Directors for
approval.
2. Review the regular internal audit reports to management prepared by the
internal audit department and management's response(s).
3. Ensure appropriate management action has been taken to address
recommendations made to or discussed with the Committee by the
Corporation's independent accountants, regulators, internal audit
department or others.
4. Review with management and the independent accountants the Form 10-Q and
Form 10-K prior to its filing and/or prior to the release of earnings and
recommend them to the Board of Directors for approval.
5. Review the qualifications and evaluate the performance of the independent
accountants and make recommendations to the Board regarding selection,
appointment and termination.
6. Review the independent accountants 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 accountant's engagement letter.
A-2
7. Review and recommend to the Board of Directors for approval, fees to be
paid to the independent accountants for audit and non-audit services.
8. On an annual basis, the Committee should review and discuss with the
independent accountants all significant relationships the accountants have
with the Corporation to determine the accountant's independence.
9. Discuss with the independent accountants Statement on Auditing Standards
-------------------------------
No. 61: Communication With Audit Committees matters.
-------------------------------------------
10. Retain independent counsel, accountants or others as appropriate for any
matters related to the duties and responsibilities assigned to the
Committee.
11. Review appointment, performance and replacement of the Chief Internal
Auditor.
12. Review, with the Corporation's counsel, any legal matter that could have a
significant impact on the Corporation's financial statements.
13. Oversee the internal audit program as follows:
* Review with the Chief Auditor the planned scope for the current year
including:
a) the adequacy of staffing levels and the operating and staff
budget of the internal audit department;
b) significant audit and business risks that the plan addresses.
* Determine that the program adequately addresses areas of high risk
or areas of special attention as determined by the Committee.
* Formally approve the internal audit program.
OTHER
Perform such other activities consistent with this Charter, the Corporation's
by-laws and governing law, as the Committee or BOD deems necessary or
appropriate.
A-3
REVOCABLE PROXY
CONNECTICUT BANCSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 14, 2001
2:00 p.m., Local Time
-------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
- ---------------
Please complete, date, sign and promptly mail this proxy in the enclosed
postage-paid envelope.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and proxy card available when you call.
TO VOTE BY INTERNET
- -------------------
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
----------------------
YOUR CONTROL NUMBER IS:
----------------------
Note: Your telephone/Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy
card. If you vote by telephone or Internet, DO NOT mail your proxy.
-- ---
The undersigned hereby appoints the official proxy committee of
Connecticut Bancshares, Inc. (the "Company"), consisting of A. Paul Berte,
Timothy J. Devanney, M. Adler Dobkin, Sheila B. Flanagan, John D. LaBelle, Jr.,
Eric A. Marziali, Jon L. Norris, William D. O'Neill and Gregory S. Wolff, 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 14, 2001, at 2:00
p.m. Local Time, at The Colony, 51 Hartford Turnpike, Route 83, Vernon,
Connecticut, and at any and all adjournments or postponements of the meeting,
with all of the powers the undersigned would possess if personally present at
such meeting as follows:
1. The election as directors of all nominees listed (unless the "For
All Except" box is marked and the instructions below are complied
with).
Richard P. Meduski, John G. Sommers and Thomas E. Toomey
FOR ALL
FOR VOTE WITHHELD EXCEPT
--- ------------- ------
|_| |_| |_|
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The ratification of amendments to the Connecticut Bancshares, Inc.
2000 Stock-Based Incentive Plan.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
3. The ratification of the appointment of Arthur Andersen LLP as
independent auditors of Connecticut Bancshares, Inc. for the year
ending December 31, 2001.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
This proxy is revocable and will be voted as directed, but if no
instructions are specified, this proxy, properly signed and dated, will be voted
"FOR" each of the proposals listed. If any other business is presented at the
annual meeting, including whether or not to adjourn the meeting, this proxy will
be voted by the persons named in this proxy in their best judgment. At the
present time, the Board of Directors knows of no other business to be presented
at the annual meeting. This proxy also confers discretionary authority on the
Board of Directors to vote with respect to the election of any person as
director where the nominees are unable to serve or for good cause will not serve
and matters incident to the conduct of the annual meeting.
The undersigned acknowledges receipt from the Company, before the
execution of this proxy, of a Notice of Annual Meeting of Stockholders, a Proxy
Statement dated April 2, 2001 and an Annual Report to Stockholders.
Dated:___________________________
_________________________________
SIGNATURE OF SHAREHOLDER
_________________________________
SIGNATURE OF CO-HOLDER (IF ANY)
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
[Savings Bank of Manchester Letterhead]
Dear ESOP Participant:
In connection with the Annual Meeting of Stockholders of Connecticut
Bancshares, Inc. (the "Company"), the holding company for The Savings Bank of
Manchester (the "Bank") you may direct the voting of the shares of Connecticut
Bancshares, Inc. common stock (the "Common Stock") held by the Savings Bank of
Manchester Employee Stock Ownership Plan (the "ESOP") Trust which are allocated
to your account.
On behalf of the Board of Directors, I am forwarding to you the attached
yellow vote authorization form, provided for the purpose of conveying your
voting instructions to Eastern Bank & Trust Company (the "ESOP Trustee"). Also
enclosed is a Notice and Proxy Statement for the Company's Annual Meeting of
Stockholders to be held on May 14, 2001 and a Connecticut Bancshares, Inc.
Annual Report to Stockholders.
As of the Record Date, March 22, 2001, the ESOP Trust held 898,560 shares
of Common Stock, 59,904 shares of which have been allocated to participants'
accounts in the ESOP. These allocated shares will be voted as directed by the
participants; provided timely instructions from the participants are received by
the ESOP Trustee. The unallocated shares in the ESOP Trust and the allocated
shares for which no instructions are provided, or for which no timely
instructions are received by the ESOP Trustee, will be voted by the ESOP Trustee
in a manner calculated to most accurately reflect the instructions the ESOP
Trustee has received from participants regarding the shares of Common Stock
allocated to their accounts, so long as such vote is in accordance with the
Employee Retirement Income Security Act of 1974, as amended.
At this time, in order to direct the voting of the shares allocated to
your account under the ESOP, please fill out and sign the enclosed yellow vote
authorization form and return it in the enclosed postage-paid envelope no later
than May 7, 2001. Your vote will not be revealed, directly or indirectly, to any
officer, employee or director of the Company or the Bank. The votes will be
tallied by the ESOP Trustee and the ESOP Trustee will use the voting
instructions it receives to vote the shares of Common Stock in the ESOP Trust.
Sincerely,
Name:______________________
Shares:____________________
VOTE AUTHORIZATION FORM
-----------------------
I, the undersigned, understand that Eastern Bank & Trust Company, the ESOP
Trustee, is the holder of record and custodian of all shares attributable 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 14, 2001.
Accordingly, you are to vote my shares as follows:
1. The election as directors of all nominees listed (unless the "For All
Except" box is marked and the instructions below are complied with).
Richard P. Meduski, John G. Sommers and Thomas E. Toomey
FOR ALL
FOR VOTE WITHHELD EXCEPT
--- ------------- ------
|_| |_| |_|
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The ratification of amendments to the Connecticut Bancshares, Inc. 2000
Stock-Based Incentive Plan.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
3. The ratification of the appointment of Arthur Andersen LLP as independent
auditors of Connecticut Bancshares, Inc. for the fiscal year ending
December 31, 2001.
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 attributable 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 7, 2001.
[Savings Bank of Manchester Letterhead]
Dear 401(k) Plan Participant:
In connection with the Annual Meeting of Stockholders of Connecticut
Bancshares, Inc. (the "Company") which is the parent holding company for The
Savings Bank of Manchester (the "Bank"), you may vote the shares of Company
common stock ("Common Stock") held in the Connecticut Bancshares, Inc. Stock
Fund ("Employer Stock Fund") and credited to your account under The Savings Bank
of Manchester 401(k) Plan.
On behalf of the Board of Directors, I am forwarding to you the attached
green vote authorization form, provided for the purpose of conveying your voting
instructions to Eastern Bank & Trust Company (the "Employer Stock Fund
Trustee"). Also enclosed is a Notice and Proxy Statement for the Company's
Annual Meeting of Stockholders to be held on May 14, 2001 and the Connecticut
Bancshares, Inc. Annual Report to Stockholders.
Participants investing in the Employer Stock Fund are entitled to direct
the Employer Stock Fund Trustee as to the voting of Common Stock credited to
their accounts. The Employer Stock Fund Trustee will vote all shares of Common
Stock for which no directions are given or for which timely instructions were
not received in a manner calculated to most accurately reflect the instructions
the Employer Stock Fund Trustee received from participants regarding shares of
Common Stock in their 401(k) Plan accounts.
At this time, in order to direct the voting of your shares of Common Stock
held in the Employer Stock Fund, you must fill out and sign the enclosed green
vote authorization form and return it to the Employer Stock Fund Trustee in the
accompanying postage-paid envelope by May 7, 2001. Your vote will not be
revealed, directly or indirectly, to any officer, employee or director of the
Company. The votes will be tallied by the Employer Stock Fund Trustee and the
Employer Stock Fund Trustee will use the voting instructions it receives to vote
the shares of Connecticut Bancshares, Inc. common stock held in the Employer
Stock Fund Trust.
Sincerely,
Name:____________________
Shares:__________________
VOTE AUTHORIZATION FORM
-----------------------
I understand that my voting instructions are solicited on behalf of the
Company's Board of Directors for the Annual Meeting of Stockholders to be held
on May 14, 2001.
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 All
Except" box is marked and the instructions below are complied with).
Richard P. Meduski, John G. Sommers and Thomas E. Toomey
FOR ALL
FOR VOTE WITHHELD EXCEPT
--- ------------- ------
|_| |_| |_|
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The ratification of amendments to the Connecticut Bancshares, Inc. 2000
Stock-Based Incentive Plan.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
3. The ratification of the appointment of Arthur Andersen LLP as independent
auditors of Connecticut Bancshares, Inc. for the fiscal year ending
December 31, 2001.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
The Employer Stock Fund Trustee is hereby authorized to vote any shares
attributable to me in his or her 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 7, 2001.
[Connecticut Bancshares, Inc. Letterhead]
Dear Stock Award Recipient:
The Connecticut Bancshares, Inc. 2000 Stock-Based Incentive Plan, (the
"Incentive Plan") holds 449,280 shares of Connecticut Bancshares, Inc. common
stock for the benefit of participants in the Incentive Plan. As a participant in
the Incentive Plan, you may direct the voting of the shares of restricted
Company common stock held in the Incentive Plan Trust that have been awarded to
you.
On behalf of the Board of Directors, please find enclosed a blue voting
authorization form provided for the purpose of conveying your voting
instructions to Eastern Bank and Trust Company, the trustee for the Incentive
Plan (the "Incentive Plan Trustee"). Also enclosed is an Annual Report to
Stockholders and a Notice and Proxy Statement for the Company's Annual Meeting
of Stockholders to be held on May 14, 2001.
As of the Record Date, March 22, 2001, 449,280 shares of Connecticut
Bancshares, Inc. common stock had been awarded to participants in the Incentive
Plan. The Incentive Plan Trustee will vote those shares held in the Incentive
Plan Trust in accordance with instructions of the participants.
At this time, in order to direct the voting of Company common stock
awarded to you under the Incentive Plan, you must complete and sign the enclosed
blue voting authorization form and return it in the enclosed postage-paid
envelope no later than May 7, 2001. Your vote will not be revealed, directly or
indirectly, to any officer, employee or director of the Company or the Bank. The
Incentive Plan Trustee will use the voting instructions it receives to vote the
shares of Company common stock held in the Incentive Plan Trust.
Sincerely,
Name:____________________
Shares:__________________
VOTE AUTHORIZATION FORM
-----------------------
I understand that my voting instructions are solicited on behalf of the
Company's Board of Directors for the Annual Meeting of Stockholders to be held
on May 14, 2001.
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 All
Except" box is marked and the instructions below are complied with).
Richard P. Meduski, John G. Sommers and Thomas E. Toomey
FOR ALL
FOR VOTE WITHHELD EXCEPT
--- ------------- ------
|_| |_| |_|
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The ratification of amendments to the Connecticut Bancshares, Inc. 2000
Stock-Based Incentive Plan.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
3. The ratification of the appointment of Arthur Andersen LLP as independent
auditors of Connecticut Bancshares, Inc. for the fiscal year ending
December 31, 2001.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
The Incentive Plan Trustee is hereby authorized to vote any shares
attributable to me in his or her 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 7, 2001.