UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under ss. 240.14a-12
SOUTHERN CONNECTICUT BANCORP, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
SOUTHERN CONNECTICUT BANCORP, INC.
215 Church Street
New Haven, Connecticut 06510
____________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
To Be Held on May 3, 2005
10:00 A.M.
______________________
Notice is hereby given that the Annual Meeting of Shareholders ("2005
Annual Meeting") of Southern Connecticut Bancorp, Inc. ("Bancorp" or "Company")
will be held at The Quinnipiack Club, 221 Church Street, New Haven, Connecticut
at 10:00 A.M. on Tuesday, May 3, 2005 for the following purposes:
(1) To elect four directors, three for a three-year term and one
for a two-year term;
(2) To approve the Southern Connecticut Bancorp, Inc. 2005 Stock
Option and Award Plan and to authorize 150,000 shares of
Bancorp's common stock for issuance under such plan;
(3) To ratify the appointment of McGladrey & Pullen, LLP as
independent accountants for the year ending December 31, 2005;
and
(4) To transact such other business as properly may be brought
before the 2005 Annual Meeting.
The close of business on March 22, 2005 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the 2005 Annual Meeting and at any adjournments thereof.
Whether or not you expect to be present at the meeting, please mark,
date, sign and return the enclosed form of proxy in the stamped and addressed
envelope provided. No postage is required. If you desire to vote your shares in
person at the meeting, your proxy will not be voted.
By Order of the Board of Directors
/s/ Joseph V. Ciaburri
----------------------
Joseph V. Ciaburri
Chairman and Chief Executive Officer
New Haven, Connecticut
April 5, 2005
SOUTHERN CONNECTICUT BANCORP, INC.
215 Church Street
New Haven, Connecticut 06510
_____________
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 2005
10:00 A.M.
_____________________
INTRODUCTION
This Proxy Statement ("Proxy Statement") is being furnished by Southern
Connecticut Bancorp, Inc. ("Bancorp" or "Company") in connection with the
solicitation by Bancorp's Board of Directors ("Board") of proxies from holders
of Bancorp's common stock, $0.01 par value per share ("Common Stock"), to be
voted at the Annual Meeting of Shareholders to be held on Tuesday, May 3, 2005
("2005 Annual Meeting") and at any adjournments thereof. The 2005 Annual Meeting
will take place at 10:00 a.m. at The Quinnipiack Club, 221 Church Street, New
Haven, Connecticut. The approximate date on which this Proxy Statement and the
enclosed proxy are first being sent or given to shareholders is April 5, 2005.
In addition to solicitation by mail, directors, officers and certain management
employees of Bancorp or its subsidiary, The Bank of Southern Connecticut
("Bank"), may solicit by telephone or in person the return of signed proxies
from shareholders without additional remuneration therefor. All expenses
associated with the solicitation of proxies will be borne by Bancorp.
Any proxy given by a shareholder may be revoked at any time before its
exercise, and any shareholder who executes and returns a proxy and who attends
the 2005 Annual Meeting may withdraw the proxy at any time before it is voted
and vote his or her shares in person. A proxy may be revoked by giving notice to
the Corporate Secretary of Bancorp in writing (at Bancorp's address indicated
above) or in open meeting prior to the taking of a vote.
Unless so revoked, your proxy will be voted in accordance with your
instructions. If you do not specify a choice, your proxy will be voted in favor
of the matters set forth in the accompanying Notice of Meeting.
The record date for determining shareholders entitled to notice of and
to vote at the 2005 Annual Meeting and any adjournments thereof has been set as
March 22, 2005 ("Record Date"). As of the Record Date, there were 2,797,711
shares of Common Stock outstanding and entitled to vote at the 2005 Annual
Meeting. Each share of Common Stock is entitled to one vote on each matter
submitted to the 2005 Annual Meeting. There is no cumulative voting.
The holders of a majority of the shares of Common Stock outstanding and
entitled to vote shall constitute a quorum for the transaction of business at
the 2005 Annual Meeting. Shares of Common Stock present in person or represented
by proxy (including shares which abstain or do not vote with respect to one or
more of the matters presented for shareholder approval) will be counted for
purposes of determining whether a quorum exists at the 2005 Annual Meeting.
Directors are elected by a plurality of votes cast, which means that the four
nominees for director with the most votes will be elected whether or not such
nominees receive a majority of the votes cast. The approval of the 2005 Stock
Option and Award Plan and the ratification of the selection of the independent
accountants both require that the votes cast "for" such matter exceed the votes
cast "against" such matter.
Abstentions are not counted as votes "cast" for the purpose of the election
of Directors, approval of the 2005 Stock Option and Award Plan or the
ratification of the selection of the independent accountants and thus have no
effect on any of such agenda items. Shares held in "street name" by brokers or
nominees who indicate on their proxies that they do not have discretionary
authority to vote such shares as to a particular matter and that they have not
received voting instructions from the beneficial holder of such shares, are
referred to as "Broker Non-Votes." Because brokers have discretion under the
rules of the American Stock Exchange to vote on the election of directors
1
and the ratification of the independent accountants without the receipt of
instructions from the beneficial owners, there will be no Broker Non-Votes for
these two items. Brokers do not have discretionary authority to vote without the
receipt of instructions from the beneficial owners with respect to the 2005
Stock Option and Award Plan, but because any resulting Broker Non-Votes do not
count as a vote cast on such matter, they will have no effect on the outcome of
such matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
security ownership as of January 31, 2005 of the nominees for election to the
Board described in this Proxy Statement and of Bancorp's and the Bank's
directors and named executive officers. Except as otherwise indicated, all
shares are owned directly, and the named person possesses sole voting and sole
investment power with respect to all such shares. Shares not outstanding but
deemed beneficially owned because a person or member of a group has a right to
acquire them within 60 days after January 31, 2005 are treated as outstanding
only when determining the amount and percent owned by such person or group.
Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Ownership (1)
------------------------------------------ --------------------------------- -----------------------------
Bancorp Director Nominees
-------------------------
Class I
Carl R. Borrelli 49,464 (2) 1.76%
Treasurer
All Brite Electric, Inc.
4 Industry Drive Ext.
P.O. Box 26004
West Haven, CT 06516
Juan Miguel Salas-Romer 83,508 (3) 2.98%
President
Sunrise Financial Group, LLC
205 Church Street
New Haven , CT 06510
Alphonse F. Spadaro, Jr. 23,815 (4) *
Managing Principal
Levitsky & Berney, PC
100 Bradley Road
Woodbridge, CT 06525
Class III
Louis A. Lubrano 7,150 *
Senior Vice President
Gilford Securities, Inc.
850 Third Avenue
New York, NY 10280
2
Bancorp Incumbent Directors
---------------------------
(All Bancorp directors are also directors of the Bank)
Class II
Michael M. Ciaburri, President, Chief
Operating Officer of Bancorp and the Bank 39,640 (5) 1.40%
215 Church Street
New Haven, CT 06510
James S. Brownstein, Esq.
Kantrovitz & Brownstein, P.C.
One Bradley Road, Suite 305 10,222 (6) *
P.O. Box 3557
Woodbridge, CT 06525
Joshua H. Sandman, Ph.D.
Vice President
Deitsch Plastic Co., Inc. 21,456 (7) *
14 Farwell Street
West Haven, CT 06516
Class III
Joseph V. Ciaburri, Chairman and Chief 114,501 (8) 3.98%
Executive Officer of Bancorp and the Bank
215 Church Street
New Haven, CT 06510
Elmer F. Laydon, Vice Chairman of 125,805 (9) 4.46%
Bancorp and the Bank
President
Elmer F. Laydon Construction Corp.
69 Wheeler Street
New Haven, CT 06512
Bank Directors
--------------
Claire Gaudiani, Ph.D. 600 *
Professor
The George H. Heyman, Jr. Center
for Philanthropy and Fundraising
New York University
New York, NY 10011
Janette J. Parker 1,457 (10) *
227 Church Street
New Haven, CT 06510
3
W. Martyn Philpot, Jr., Esq. 5,820 (11) *
Law Offices of W. Martyn Philpot,
Jr.
409 Orange Street
New Haven, CT 06511
Alfred J. Ranieri, Jr., MD 46,332 (12) 1.65%
1455 Chapel Street
New Haven, CT 06511
Non-Director Executive Officer of Bancorp and the Bank
------------------------------------------------------
William F. Weaver
Vice President & Chief Financial Officer
of Bancorp and the Bank 11,100 (13) *
215 Church Street
New Haven, CT 06510
All Bancorp directors, director nominees
and the executive officer, as a group
(10 persons) 486,661 (14) 16.42%
____________________________
* Less than 1%.
(1) Percentages are based on total of 2,797,711 shares of Common Stock
outstanding on January 31, 2005. For holders of options and warrants exercisable
within 60 days after January 31, 2005, the number of shares so exercisable by
each holder has been added to the denominator for purposes of calculating such
shareholder's percentage ownership.
(2) Includes 5,683 shares of stock held by Mr. Borrelli's spouse, 110 shares
held by Mr. Borrelli's daughter, 5,182 shares held by one of Mr. Borrelli's
sons, 1,650 shares held by another of Mr. Borrelli's sons, and 5,503 shares held
by certain of Mr. Borrelli's grandchildren. Includes 2,762 shares that may be
acquired within 60 days by the exercise of warrants and 4,833 shares that may be
acquired within 60 days by the exercise of options.
(3) Includes 83,508 shares of stock held of record by a closely-held limited
liability company of which a family trust holds an 86% controlling interest. Mr.
Salas-Romer is the trustee of the family trust and one of three directors of the
limited liability company, and accordingly, Mr. Salas-Romer shares voting power
and investment power with respect to such shares.
(4) Includes 4,355 shares of stock that may be acquired within 60 days by the
exercise of warrants and 2,592 shares that may be acquired within 60 days by the
exercise of options.
(5) Includes 28,600 shares of stock that may be acquired within 60 days by the
exercise of options.
(6) Includes 1,150 shares of stock held by one of Mr. Brownstein's daughters,
1,150 shares of stock held by another of Mr. Brownstein's daughters, and 1,150
shares of stock held in trust by Mr. Brownstein's spouse for the benefit of a
minor child. Includes 1,650 shares that may be acquired within 60 days by the
exercise of warrants and 1,222 shares that may be acquired within 60 days by the
exercise of options.
(7) Includes an aggregate of 7,750 shares of stock held by Mr. Sandman's
children, as well as 4,070 shares of stock held by the Sandman Family Trust,
LLC, of which Mr. Sandman and his spouse are principals. Includes 6,188
4
shares that may be acquired within 60 days by the exercise of warrants and 3,443
shares that may be acquired within 60 days by the exercise of options.
(8) Includes 77,000 shares of stock that may be acquired within 60 days by the
exercise of options.
(9) Includes 14,323 shares of stock that may be acquired within 60 days by the
exercise of warrants and 10,186 shares that may be acquired within 60 days by
the exercise of options.
(10) Includes 165 shares of stock that may be acquired within 60 days by the
exercise of warrants and 632 shares that may be acquired within 60 days by the
exercise of options.
(11) Includes 917 shares of stock that may be acquired within 60 days by the
exercise of warrants and 737 shares that may be acquired within 60 days by the
exercise of options.
(12) Includes 6,188 shares of stock that may be acquired within 60 days by the
exercise of warrants and 6,154 shares that may be acquired within 60 days by the
exercise of options.
(13) Includes 8,800 shares of stock that may be acquired within 60 days by the
exercise of options.
(14) Includes 29,278 shares of stock that may be acquired within 60 days by the
exercise of warrants and 136,676 shares that may be acquired within 60 days by
the exercise of options.
The following table sets forth certain information concerning those
persons known to Bancorp who own more than five percent of Bancorp's Common
Stock:
Amount and Nature of Beneficial Percent of Class
Name and Address of Beneficial Owner Ownership (1)
------------------------------------------------------ --------------------------------- ----------------------
Wellington Management Company, LLP 250,000 (2) 8.94%
75 State Street
Boston, MA 02109
SuNOVA Capital, L.P.
780 Third Avenue 182,500 (3) 6.52%
New York, New York 10017
____________________________
(1) Percent of class beneficially owned is based on an aggregate of 2,797,711
shares of Bancorp's Common Stock outstanding as of January 31, 2005.
(2) Information with respect to Wellington Management Company, LLP is derived
from the Schedule 13G/A dated December 31, 2004 filed by Wellington Management
Company, LLP ("Wellington") with the SEC on February 14, 2005. Wellington is an
investment advisor which may be deemed to beneficially own the 250,000 shares of
Bancorp's Common Stock held of record by clients of Wellington, which clients
are entitled to receive or have the power to direct the receipt of dividends
from or the proceeds from the sale of such shares. Wellington has shared voting
power over 135,500 shares and has shared investment power over 250,000 shares.
(3) Information with respect to SuNOVA Capital LP ("SuNOVA Capital") and the
below-named affiliates is derived from the Schedule 13G/A filed jointly by
SuNOVA Capital and its affiliates named therein with the SEC on February 14,
2005. Includes 57,500 shares held by SuNOVA Partners, L.P., of which SuNOVA
Partners, L.P. shares voting and investment powers with SuNOVA Holdings, LLC.
Includes 18,000 shares held by SuNOVA Long-Term Opportunity Fund, L.P., with
respect to which SuNOVA Long-Term Opportunity Fund, L.P. shares
5
voting and investment powers with SuNOVA Holdings, LLC. Includes 107,000 shares
held by SuNOVA Offshore Ltd. over which SuNOVA Capital has investment power,
with respect to which SuNOVA Capital shares voting power and SuNOVA Offshore
Ltd. shares investment power with SuNOVA, LLC. Mr. Matthew Byrnes and Ms. Felice
Gelman have an indirect beneficial interest in and share voting and investment
control over 182,500 shares directly held, in the aggregate, by SuNOVA Partners,
L.P., SuNOVA Long-Term Opportunity Fund, L.P., and SuNOVA Offshore Ltd.
DISCUSSION OF PROPOSALS
PROPOSAL 1.
ELECTION OF DIRECTORS
Nominees
Four directors are to be elected at the 2005 Annual Meeting. The Board
is divided into three classes designated as Class I, Class II and Class III,
with each class containing approximately the same percentage of the total, as
near as may be. The term of office of one class of directors expires at each
annual meeting of Bancorp's shareholders. Directors serve for a term of three
years and until his or her successor is elected and qualified, or until his or
her earlier resignation, removal from office, death or disability. The term of
office of Class I directors who are being elected at this Annual Meeting expires
at the annual meeting of shareholders in 2008; that of Class II directors will
expire at the 2006 Annual Meeting; and that of Class III directors will expire
at the annual meeting of shareholders in 2007. A plurality of votes shall
suffice for the election of directors. Each of the nominees has consented to
being named in this Proxy Statement and to serve as a director if elected.
Director nominees Carl R. Borrelli, Juan Miguel Salas-Romer and Alphonse F.
Spadaro, Jr. currently are Class I directors of Bancorp and are directors of the
Bank. Each of Bancorp's other directors also serves as a director of the Bank.
Louis A. Lubrano is nominated to be a Class III director of Bancorp and has been
appointed to the board of directors of The Bank of Southeastern Connecticut, In
Organization.
In the event that any nominee for director should become unavailable
for election for any reason, the persons named in the proxy will consult with
Bancorp's management and use their discretion in deciding whether and how to
vote the shares represented by such proxies.
Position And Offices With Bancorp or
the Bank and Principal Occupation and Director
Name Age Employment During the Past Five Years Since
-------------------------- ------ ---------------------------------------- ------------------------------------
NOMINEES FOR ELECTION
(TO BE CLASS I AND CLASS III DIRECTORS)
Class I
--------
Carl R. Borrelli 68 Director of Bancorp and the Bank; 2000. To serve until 2008.
Treasurer, All Brite Electric, Inc.
Juan Miguel Salas-Romer 33 Director of Bancorp and the Bank; 2004. To serve until 2008.
President, Sunrise Financial Group,
LLC.
Alphonse F. Spadaro, Jr. 63 Director of Bancorp and the Bank; 2001. To serve until 2008.
managing principal of Levitsky &
Berney, P.C. (public accounting firm).
6
Class III
---------
Louis A. Lubrano 71 Director of Bancorp. Senior Vice Initial term. To serve until
President, Gilford Securities, Inc., 2007.
since 2001. Previously employed by
Herzog, Heine, Geduld, Inc., an NYSE
member firm.
DIRECTORS CONTINUING IN OFFICE
Class II
--------
Michael M. Ciaburri 44 President, Chief Operating Officer and 2003. To serve until 2006.
a director of Bancorp and the Bank
since February 2003; founder and
President of Ciaburri and Company, an
investment banking boutique, from 1992
to February 2003. Mr. Ciaburri also
consulted to Bancorp from May 2001
through 2003. Mr. Ciaburri was
trained in banking in New York City
and London. He is a graduate of the
Stonier Graduate School of Banking at
Georgetown University and the School
of Bank Administration at the
University of Wisconsin, each
three-year banking programs.
James S. Brownstein, Esq. 57 Director of Bancorp and the Bank; 2001. To serve until 2006.
Partner, Kantrovitz & Brownstein, LLC
(law firm).
Joshua H. Sandman, Ph.D. 62 Director of Bancorp and the Bank; Vice 2000. To serve until 2006.
President, Deitsch Plastics (plastic
fabricating) and Professor,
University of New Haven; former
Director of The Bank of New Haven.
7
Class III
---------
Joseph V. Ciaburri 75 Chairman, Chief Executive Officer and 2000. To serve until 2007
President of Bancorp and a director of
Bancorp and the Bank; involved in
organization of the Bank since 1999;
Director of Development of Southern
Connecticut State University from July
1993 to August 1999. Mr. Ciaburri has
been employed in commercial banking in
the New Haven area for 45 years,
including as President and Chief
Executive Officer of two area
banks for a total of 16 years.
Elmer F. Laydon 68 Director and Vice Chairman of Bancorp 2000. To serve until 2007.
and the Bank; President, Elmer F.
Laydon Construction Corp. (building
contractor); former Chairman of the
Board of Directors of Shoreline Bank
and Trust Company.
NON-DIRECTOR EXECUTIVE OFFICER
SIGNIFICANT EMPLOYEE
William F. Weaver 53 Chief Financial Officer of Bancorp and
the Bank; Chief Financial Officer,
InsurBanc, Farmington, Connecticut;
President, Clarity bank.com, Uvalde,
Texas and Executive Vice President,
Clarity Holdings, Inc., Purchase, New
York; President and Chief Executive
Officer, Advest Bank & Trust Company,
Hartford, Connecticut. He is a 1979
graduate of the Graduate School of
Savings Banking at Brown University.
Mr. Weaver has been employed in
banking for 30 years.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION
OF THE DIRECTOR NOMINEES NOTED ABOVE.
Independence
All of our directors except Messrs. J. Ciaburri, the Chairman and Chief
Executive Officer, M. Ciaburri, the President and Chief Operating Officer, and
Brownstein are "independent directors" as defined in Section 121A of the
American Stock Exchange Listed Company Guide.
8
Family Relationships
Michael M. Ciaburri, the President and Chief Operating Officer and a
director of Bancorp and the Bank, is the son of Joseph V. Ciaburri, the Chairman
and Chief Executive Officer of Bancorp and the Bank and is a director of Bancorp
and the Bank. Michael M. Ciaburri was unanimously elected to those positions by
the directors of Bancorp and the Bank on February 11, 2003. Joseph V. Ciaburri
served as the interim President of the Bank from January 14, 2003 until February
11, 2003.
Meetings and Committees of the Board
Bancorp has established standing nominating, audit and compensation
committees of the Board of Directors.
Nominating Committee. The functions of the Nominating Committee include
recommending qualified candidates for director positions and evaluating the
performance of directors. All of the members of the Nominating Committee are
independent as that term is defined in Section 121A of the American Stock
Exchange Listed Company Guide. The Nominating Committee does not have a charter
or a formal policy regarding the consideration of director candidates
recommended by shareholders but, in accordance with Sections 804(c) and 809 of
the American Stock Exchange Listed Company Guide, will adopt a charter of the
Nominating Committee before July 31, 2005. However, the Committee will consider
any director candidates recommended by shareholders in accordance with the
procedures described on page 23 under the heading "Shareholder Nominations and
Proposals for 2006 Annual Meeting." The Nominating Committee seeks candidates
who have demonstrated a commitment to Bancorp's success and growth and who offer
Bancorp skills and experience that are presently not represented on the Board or
which augment those skills and talents that the Committee believes should be
further developed. The current nominees were recommended by the Committee.
Bancorp does not utilize any third party to identify or evaluate or assist in
identifying or evaluating potential nominees. The members of the Nominating
Committee are Carl R. Borrelli, Elmer F. Laydon (Chair), Joshua H. Sandman, and
Alphonse F. Spadaro. The Nominating Committee met twice in 2004.
Audit Committee. Bancorp's Audit Committee oversees all internal and
external audit and compliance functions. Both the internal auditor and the
external auditor report directly to the Audit Committee. In performing its
functions, the Audit Committee coordinates its activities with those of the
Audit Committee of the Bank. All of the members of the Audit Committee are
independent as that term is defined in Section 121A of the American Stock
Exchange Listed Company Guide and Rule 10A-3 under the Securities Exchange Act
of 1934, as amended ("Exchange Act"). The Board of Directors has determined that
Alphonse F. Spadaro, Jr. is an audit committee financial expert under the rules
of the Securities and Exchange Commission. The Audit Committee acts under a
written charter adopted by the Board of Directors, a copy of which was included
as Appendix A to the Proxy Statement for Bancorp's 2004 Annual Meeting of
Shareholders and is available on Bancorp's website at www.scbancorp.com. The
report of the Audit Committee required by the rules of the Securities and
Exchange Commission is included in this Proxy Statement on page 15. The current
members of Bancorp's Audit Committee are Alphonse F. Spadaro, Jr. (Chair), Elmer
F. Laydon, Carl R. Borrelli and Joshua H. Sandman. The Audit Committee met
thirteen times during 2004.
Compensation Committee. Bancorp's Compensation Committee is responsible
for determining the compensation, including salaries, bonuses and other
benefits, of Bancorp's and the Bank's senior management. The Compensation
Committee also is responsible for determining compensation and benefits policies
for the Bank. All of the members of the Compensation Committee are independent
as that term is defined in Section 121A of the American Stock Exchange Listed
Company Guide. The current members of the Compensation Committee of Bancorp are
Carl R. Borrelli, Elmer F. Laydon (Chair), Joshua Sandman and Alphonse F.
Spadaro, Jr. The Compensation Committee met six times in 2004.
9
Bancorp's Board of Directors met fifteen times in 2004. All current
directors attended at least seventy-five percent (75%) of the aggregate of the
total number of Board meetings and the total number of meetings held by all
committees of the Board on which they served.
Bancorp's Board of Directors elects the directors of the Bank following
Bancorp's annual meeting.
Attendance at the Annual Meeting. The Board of Directors encourages
directors to attend the annual meeting of shareholders. All of Bancorp's
directors attended the 2004 Annual Meeting of Shareholders.
Meetings of Non-Management Independent Directors. Members of the Board
of Directors who are independent, as that term is defined in Section 121A of the
American Stock Exchange Listed Company Guide, periodically conduct meetings in
executive session, without members of management or non-independent members of
the Board being present, immediately following the regularly-scheduled meetings
of the full Board of Directors. Mr. Laydon, as Vice-Chairman, serves as the
presiding director of such meetings.
Shareholder Communications
Bancorp does not have a formal process in place for shareholder
communication to the Board. Informally, however, it is understood that any
communication from a shareholder to the Board received by management or an
individual director shall be forwarded to the Board. The Board believes this
approach is reasonable in light of the number of shareholders of Bancorp at this
time.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Bancorp's officers and directors, and persons who own more than ten
percent (10%) of Bancorp's Common Stock, to file reports of ownership and
changes in ownership of Bancorp's Common Stock with the Securities and Exchange
Commission ("SEC"). Officers, directors and greater than ten percent (10%)
beneficial owners are required by applicable regulations to furnish Bancorp with
copies of all forms they file pursuant to Section 16(a). Although Director
Laydon provided information to Bancorp to submit the timely filing of two
reports of changes in ownership and Director Salas-Romer provided information to
Bancorp to submit the timely filing of one report of ownership one time during
the year ended December 31, 2004 on behalf of the reporting directors, Bancorp
made the required filings late. Based solely upon a review of the copies of the
forms furnished to Bancorp, and written representations from certain reporting
persons that no Forms 5 were required, Bancorp believes that no other reporting
person failed to file on a timely basis reports required by Section 16(a) of the
Exchange Act during the year ended December 31, 2004.
CODE OF ETHICS
Bancorp has adopted a Code of Ethics and Business Conduct that is
designed to promote the highest standards of ethical conduct by Bancorp's and
the Bank's directors, executive officers and employees. The Code of Ethics and
Business Conduct requires that Bancorp's and the Bank's directors, executive
officers and employees avoid conflicts of interest, comply with all laws and
other legal requirements, conduct business in an honest and ethical manner and
otherwise act with integrity and in Bancorp's and the Bank's best interest.
Under the terms of the Code of Ethics and Business Conduct, directors, executive
officers and employees are required to report any conduct that they believe in
good faith to be an actual or apparent violation of the Code. The Code of Ethics
is available on Bancorp's website at www.scbancorp.com. Amendments to or waivers
from the Code of Ethics will be discussed in Form 8-Ks filed by Bancorp and
accessible on Bancorp's website.
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Other Annual
Name and Year Compensation
Principal Position Ended Salary ($) Bonus ($) ($)(1) Stock Options (#)
------------------------------ ---------- ------------------ ---------------- ------------------ -------------------
Joseph V. Ciaburri 2004 186,923 12,750 21,796 (2) -
Chairman and CEO of Bancorp 2003 162,087 5,750 - 55,000
and the Bank
2002 151,587 5,000 - -
Michael M. Ciaburri 2004 145,000 12,750 - 10,000
President and COO 2003 109,000 (3) 10,750 - 55,000
of Bancorp and the Bank
William F. Weaver 2004 111,923 2,750 - 2,000
Vice President and 2003 4,038 (4) 250 - 22,000
Chief Financial Officer of
Bancorp and the Bank
____________________________
(1) Excludes such amounts to the extent that such amounts are, in the aggregate,
less than the lesser of $50,000 or 10% of the named executive officer's salary
and bonus for such year.
(2) Represents the value of the personal usage of the automobile provided by
Bancorp, including insurance and taxes paid thereon, of $2,683; group term life
insurance premium paid by the Bank of $533; and a life insurance premium, for
which policy Joseph V. Ciaburri is the beneficiary, paid by the Bank of $18,580.
(3) This amount represents salary paid to Mr. Michael Ciaburri from February 12,
2003 to December 31, 2003.
(4) Mr. Weaver joined Bancorp on December 1, 2003. The 2003 amount represents
salary paid to Mr. Weaver from December 1, 2003 to December 31, 2003.
11
OPTIONS / SAR GRANTS IN LAST FISCAL YEAR (Individual Grants)
Number of Percent of Total
Securities Options / SARs
Underlying Granted to
Options / SAR's Employees in Exercise or Expiration
Name Granted (#)(1) Fiscal Year Base Price Date
-------------------------------------- ----------------- ------------------- ------------- -------------
Joseph V. Ciaburri, Chairman and - - - -
Chief Executive Officer of Bancorp
and the Bank
215 Church Street
New Haven, CT 06510
Michael M. Ciaburri, President,
Chief Operating Officer of Bancorp
and the Bank
215 Church Street 10,000 53.9% $8.16 12/31/2014
New Haven, CT 06510
William F. Weaver, Vice President &
Chief Financial Officer of Bancorp
and the Bank
215 Church Street 2,000 10.8% $8.16 12/31/2014
New Haven, CT 06510
____________________________
(1) All options have been granted under the 2002 Stock Option Plan, pursuant to
the terms described under the heading "The 2002 Stock Option Plan" on page 13 of
this Proxy Statement.
12
AGGREGATE OPTIONS/EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR 2004 YEAR-END OPTION/VALUES
Number of Securities Value of Unexercised
Underlying Unexercised Options In-The-Money Options
at December 31, 2004 at December 31, 2004 (1)
------------------------------ ----------------------------
Shares
Acquired
on Value
Name Exercise (2) Realized Exercisable Unexercisable Exercisable Unexercisable
------------------------------ -------------- -------- ------------ ------------- ----------- ----------------
Joseph V. Ciaburri -- -- 77,000 33,000 $ 19,507 $ 29,261
Michael M. Ciaburri -- -- 22,000 43,000 10,509 15,763
William F. Weaver -- -- 8,800 15,200 -- --
____________________________
(1) Based on $8.16 per share, the adjusted last sale price of the Common Stock
as of December 31, 2004.
(2) No named executive officer exercised any options in 2004.
Employment and Change in Control Agreements
Bancorp and the Bank have entered into an employment agreement with
Joseph V. Ciaburri to serve as Chairman and Chief Executive Officer of Bancorp
and the Bank. The agreement has an initial term of five years commencing on the
opening of the Bank, but the employment agreement may be terminated by the Bank
at the end of four years upon six months' notice. At the end of the initial
five-year term and at the end of each extension, the remaining term is extended
for an additional one-year term unless either party gives the other six months'
notice of intent not to extend. Mr. Ciaburri receives an annual base salary of
$190,000 (effective January 1, 2005) with annual adjustments based on changes in
the consumer price index, and an annual bonus as determined by the Board. Mr.
Ciaburri is also entitled to such bonuses and raises as the Board may determine
and may participate in the Bank's 401(k) plan. The Bank allows Mr. Ciaburri an
allowance for the use and maintenance of his automobile. The Bank also pays for
Mr. Ciaburri's life insurance, although Bancorp is the named beneficiary under
that policy. Upon the termination of Mr. Ciaburri's employment (other than
termination for cause (as defined)), Mr. Ciaburri will continue to serve as a
director of Bancorp and the Bank with the title "Chairman Emeritus" and as a
consultant for a period of one year. Mr. Ciaburri will receive a consulting fee
of $60,000 during the consulting period.
If Mr. Ciaburri terminates his employment because his job
responsibilities are significantly reduced or because he is required to relocate
outside of New Haven or Fairfield counties or if his employment is terminated by
Bancorp and the Bank other than for cause (as defined) or his death or total
disability, Mr. Ciaburri will be entitled to continue to receive his then
current base salary for the balance of the term as then in effect. If Mr.
Ciaburri's position as Chairman of the Board and Chief Executive Officer ends or
his responsibilities are substantially reduced as a result of a business
combination (as defined), Mr. Ciaburri also would be entitled to receive a lump
sum payment equal to three times his then current base annual compensation.
Bancorp and the Bank entered into an amendment to the Employment
Agreement with Joseph V. Ciaburri which required Bancorp to establish a $500,000
life insurance policy to be owned by Mr. Ciaburri or a trust established
thereby. Bancorp pays the premiums for this policy. This obligation of Bancorp
shall continue to exist until Mr. Ciaburri's death, unless his employment is
terminated for cause. The initial contract term of five years was also extended
by one year.
13
On January 20, 2005, Bancorp entered into an employment agreement,
effective as of January 1, 2005, with Michael M. Ciaburri to replace an earlier
employment agreement with Mr. Ciaburri, the term of which expired December 31,
2004. Under the current agreement, Mr. Ciaburri's term of employment ends on
December 31, 2006 with an automatic extension through December 31, 2007, unless
Bancorp earlier terminates Mr. Ciaburri's employment under the terms of the
current agreement. Mr. Ciaburri will receive a base salary of $150,000 in the
first year of the employment term, increasing to $157,500 in the second year of
the term and $166,000 in the third year of the term, and will be eligible for
salary increases and other merit bonuses as the Board may determine. Mr.
Ciaburri will be reimbursed for expenses and will be provided with health
insurance, participation in the Bank's profit sharing or 401(k) plan, an
automobile allowance and club membership.
In the event Mr. Ciaburri's employment is terminated or his
responsibilities are significantly reduced as a result of a "Business
Combination" (as defined in the Agreement), Mr. Ciaburri will, subject to
certain conditions, be entitled to receive a lump sum payment equal to three
times his base annual compensation in effect at the time of termination plus the
amount of Mr. Ciaburri's bonus for the prior calendar year, and all of Mr.
Ciaburri's previously granted stock options shall immediately become fully
vested. Additionally, in the case of Mr. Ciaburri's termination as a result of a
Business Combination and in the event Mr. Ciaburri is otherwise terminated by
Bancorp except for cause or disability or upon death, Mr. Ciaburri will be
entitled to receive his base salary under the Agreement for the balance of the
unexpired term of his employment.
Mr. Weaver is an employee of Bancorp and The Bank. Pursuant to his
employment engagement letter dated November 5, 2003 his base salary will be at
the rate of $105,000 per annum through May 31, 2004 and at the rate of $110,000
per annum through December 31, 2004. For 2005, Mr. Weaver's annual base
compensation will be $113,500. Each year Mr. Weaver will be eligible to receive
merit bonuses and raises at the recommendation of the Chief Executive Officer
and the Chief Operating Officer to and upon the ratification of the Board.
The 2002 Stock Option Plan
Bancorp adopted the Southern Connecticut Bancorp, Inc. 2002 Stock
Option Plan (the "2002 Plan"). The purpose of the 2002 Plan is to attract and
retain the continued services of employees and directors of Bancorp and the
Bank, encourage employees and directors to obtain or increase their stock
ownership in Bancorp, and provide incentive compensation programs competitive
with those of other similarly situated companies. An aggregate of 365,000 shares
of Bancorp's Common Stock is reserved for issuance upon the exercise of both
incentive stock options and nonqualified stock options granted by Bancorp under
the 2002 Plan, which number has been adjusted to reflect a 10% stock dividend
declared in January 2004. All eligible employees and directors of Bancorp or any
subsidiary of Bancorp, including the Bank, are eligible to receive options under
the 2002 Plan. The exercise price for each share covered by an option may not be
less than the fair market value of a share of Bancorp's Common Stock on the date
of grant. Options under the 2002 Plan have a term of 10 years unless otherwise
determined at the time of grant. Unless otherwise fixed at the time of grant,
40% of the options become exercisable one year from the date of grant, 30% of
the options become exercisable two years from the date of grant, and 30% of the
options become exercisable three years from the date of grant.
The 2001 Stock Option Plan
Bancorp adopted the Southern Connecticut Bancorp, Inc. 2001 Stock
Option Plan (the "Option Plan") in 2001 and it was approved by the sole
shareholder of Bancorp in 2001. Under the Option Plan, an aggregate of 90,000
shares of Bancorp's Common Stock was reserved for issuance upon the exercise of
options granted under the Option Plan. The Compensation Committee of the Board
administers the Option Plan. The Board voted to terminate the Option Plan,
except for outstanding options previously granted under that Option Plan,
effective as of May 15, 2002.
14
Warrant Plans
Bancorp's Warrant Plans are described under the heading "Equity
Compensation Plan Information" below.
Director Compensation
Bancorp's non-employee directors receive options to acquire Bancorp's
Common Stock, rather than cash, as compensation for their service as directors.
Directors who are not employees of Bancorp or the Bank are eligible to
participate in the 2002 Plan. Directors who are employees of Bancorp or the Bank
are not paid any fees or additional compensation for service as members of the
Board of Directors or any committee of the Board. Directors of Bancorp and the
Bank who are not employees of Bancorp or the Bank receive compensation in the
form of options as follows: the Vice Chairman of the Bancorp Board receives 500
options per month; each director receives 100 options for each board meeting
attended, 50 options for each board committee meeting chaired, and 40 options
for each board committee meeting attended. Directors who sit on the Bancorp and
Bank boards and board committees are compensated for only one meeting where a
meeting of both boards or more than one committee is held jointly. The options
received by the directors pursuant to these arrangements are subject to the
terms of the 2002 Plan, vest 40% on the first anniversary of the date of grant
and 30% on each of the second and third anniversaries of the date of grant and
are granted at an exercise price equal to the fair market value of Bancorp's
Common Stock on the date of grant. In addition, all non-employee directors as of
June 10, 2003 received option grants equal to the number of then outstanding
options or warrants held by each holder, with the same terms as noted above with
respect to outside director option grants.
As of December 31, 2004, non-employee directors have received the
following options :
Name of Director Number of Options
--------------------------- -----------------
Mr. Borrelli 15,322
Mr. Brownstein, Esq. 5,254
Mr. Laydon 33,424
Mr. Sandman, Ph.D. 11,088
Mr. Spadaro 9,460
Mr. Salas-Romer 940
We maintain directors' and officers' liability insurance and our by-laws provide
for mandatory indemnification of directors and officers to the fullest extent
permitted by Connecticut law. In addition, our certificate of incorporation
limits the liability of directors to Bancorp or its shareholders for breaches of
directors' fiduciary duties to the fullest extent permitted by Connecticut law.
Equity Compensation Plan Information
The following schedule provides information with respect to the
compensation plans (including individual compensation arrangements) under which
equity securities of Bancorp are authorized for issuance as of December 31,
2004:
15
Number of securities
Weighted-average remaining available for
Number of securities to exercise price of future issuance under
be issued upon exercise outstanding equity compensation
of outstanding options, options, warrants plans (excluding
warrants and rights and rights securities reflected in
Plan Category (a) (b) column (a))
------------------------------- --------------------------- ------------------- -------------------------
Equity compensation plan 346,507 $ 8.43 83,173
approved by security holders
Equity compensation plans not
approved by security holders (1) 73,509 $ 10.91 0
Total 420,016 $ 8.86 83,173
_______________________
(1) Bancorp adopted a 2001 Warrant Plan and 2001 Supplemental Warrant Plan
(collectively, the "Warrant Plans") on April 11, 2001 and October 16, 2001.
Under the Warrant Plans, each director of Bancorp, other than Mr. Joseph V.
Ciaburri, and each director of the Bank who was not a director of Bancorp, as of
the initial public offering of Bancorp in July 2001, received a warrant to
purchase one share of Bancorp Common Stock for each four shares purchased in the
offering by such director or members of such director's immediate family. Under
the 2001 Supplemental Warrant Plan, certain organizers of Bancorp who are not
directors, officers or employees of Bancorp or the Bank but who made
contributions to Bancorp or the Bank received a warrant to purchase one share of
Bancorp Common Stock for each five shares purchased in the offering by such
person or member of such person's immediate family. The warrants have a term of
ten years. The exercise price of the warrants is $10.91, the price at which
Bancorp's Common Stock was sold in the initial public offering, as adjusted for
the January 2004 10% stock dividend. They became exercisable as to 40%, 30% and
40% of the shares covered thereby on the first, second and third anniversary of
the closing of the initial public offering of Bancorp, respectively, and are
accordingly all fully vested at this time.
REPORT BY THE AUDIT COMMITTEE
The Board, in its business judgment, has determined that each of the
members of the Audit Committee is independent, as required by the applicable
listing standards of the American Stock Exchange, Inc.
In performing its function, the Audit Committee has:
o reviewed and discussed the audited financial statements of Bancorp as
of and for the year ended December 31, 2004 with management and with
McGladrey & Pullen, LLP, Bancorp's independent auditors for the year
ended December 31, 2004;
o discussed with Bancorp's independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, as currently
in effect; and
o received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), as currently in
effect,
16
and has discussed with the independent auditors the independent
auditors' independence. The Audit Committee has considered whether the
provision of non-audit services by the independent accountants to
Bancorp is compatible with maintaining the accountants' independence
and has discussed with McGladrey & Pullen, LLP their independence.
Based on the foregoing review and discussions, the Audit Committee
recommended to the Board that Bancorp's audited financial statements be included
in its Annual Report on Form 10-KSB for the year ended December 31, 2004 for
filing with the SEC.
THE 2004 AUDIT COMMITTEE
Alphonse F. Spadaro, Jr. (Chair)
Carl R. Borrelli
Elmer F. Laydon
Joshua H. Sandman, Ph.D.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the normal course of business, the Bank may grant loans to executive
officers, directors and members of their immediate families, as defined, and to
entities in which these individuals have more than ten percent (10%) equity
ownership. Such loans are to be made in the ordinary course of business of the
Bank on substantially the same terms, including interest rates and collateral
requirements, as those then prevailing for comparable transactions with other
persons and are not to involve more than the normal risk of collectibility or
present other unfavorable features. As of December 31, 2004, the Bank had made a
loan in the amount of $400,000 to All Brite Electric, Inc., whose treasurer is
director Carl Borrelli. Mr. Borrelli also holds an equity interest in All Brite
Electric, Inc. As of December 31, 2004, the Bank had made loans in the total
amount of $316,982 to director Joshua H. Sandman, Ph.D. directly and to
not-for-profit organizations guaranteed by Mr. Sandman. Also as of December 31,
2004, the Bank had made a loan in the amount of $1,500,000 to Osprey Estates,
LLC, which loan was guaranteed by director nominee Louis Lubrano. Each of these
loans was made in the ordinary course of business at substantially the same
terms, including interest rates and collateral requirements, as those then
prevailing for comparable transactions with other persons and did not involve
more than the normal risk of collectibility or present other unfavorable
features.
On January 7, 2004, the Bank sold a $250,000 participation in a loan
relationship to E & C Investments, LLC, a joint venture of directors Carl
Borrelli and Elmer Laydon. The sale of the loan assets and the terms of the
participation agreement were made in the ordinary course of business on
substantially the same terms, including interest rates and collateral
requirements, as those then prevailing for comparable transactions with other
persons and did not involve more than the normal risk of collectibility or
present other unfavorable features. E & C Investments paid $250,000 for the
participated loan assets.
On April 28, 2004, following the sale on April 26, 2004 by the Bank of
participation interests in the underlying loan relationship to two other
financial institutions, the Bank repurchased the participation interests sold on
January 7, 2004 from E & C Investments, LLC, the joint venture of directors Carl
Borrelli and Elmer Laydon. E & C Investments received the outstanding principal
amount of the outstanding participation interest owned by E & C Investments LLC
on that day, plus accrued interest, realizing no gain or loss and no commission
or other form of compensation from the principal transaction.
17
Bancorp is a party to one five-year sublease agreement for excess
office space in its premises with Laydon and Company, LLC, the principal of
which is related to Bancorp's Vice Chairman.
During 2004 and 2003 the Bank purchased investment securities,
including accrued interest and fees, of approximately $7,975,000 and
$10,950,000, respectively, through two investment brokerage firms, an employee
of which is related to Joseph V. Ciaburri, the Chairman and Chief Executive
Officer of Bancorp and the Bank and a director of Bancorp and the Bank, and to
Michael M. Ciaburri, the President and Chief Operating Officer of Bancorp and
the Bank.
PROPOSAL 2.
APPROVAL OF THE SOUTHERN CONNECTICUT BANCORP, INC.
2005 STOCK OPTION AND AWARD PLAN
The second proposal for consideration at the Annual Meeting is to
approve the Southern Connecticut Bancorp, Inc. 2005 Stock Option and Award Plan
(the "2005 Stock Plan" or the "Plan").
The 2005 Stock Plan was adopted, subject to shareholder approval, by
Bancorp's Board of Directors on March 8, 2005.
The Board of Directors and the Compensation Committee believe that
granting stock options and common stock awards is important to attract and
retain qualified officers, directors and employees, and to motivate such persons
to produce a superior return for the shareholders of Bancorp. Such awards enable
recipients to acquire shares of common stock, thereby increasing their personal
involvement in Bancorp, offering them an opportunity to realize stock
appreciation and rewarding them for achieving a high level of financial
performance. Options and stock awards also enable Bancorp to obtain and retain
the services of, and compensate, officers, directors and employees without
depleting Bancorp's cash resources. In particular, although there are as of
March 22, 2005 approximately 75,000 shares of Common Stock remaining for grants
under the 2002 Plan, the Board of Directors and the Compensation Committee
believe that the award of restricted stock, not available under the 2002 Plan,
will be an important feature of Bancorp's incentive program in the future, in
light of changes to the accounting treatment of stock options which make
restricted stock an attractive alternative.
Summary Description of the 2005 Stock Plan
The principal terms of the 2005 Stock Plan are summarized below. The
following summary is qualified in its entirety by the full text of the 2005
Stock Plan, which appears as Appendix A to this Proxy Statement.
Purpose of the 2005 Stock Plan. The purpose of the 2005 Stock Plan is
to provide equity-based incentives to employees, officers and directors of
Bancorp in order to attract them to, give them a proprietary interest in, and to
encourage them to remain in the employ or service of Bancorp.
Administration. The Compensation Committee will administer the 2005
Stock Plan. The Compensation Committee consists of two or more directors who are
not employed by Bancorp and who qualify as "outside directors" for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). No
member of the Compensation Committee may act as to matters under the 2005 Stock
Plan specifically relating to himself or herself. If no committee is designated
to act as the Compensation Committee for these purposes by the Board of
Directors, the Board of Directors shall have the rights and responsibilities of
the Compensation Committee under the 2005 Stock Plan.
The Compensation Committee has broad authority under the 2005 Stock
Plan with respect to awards granted under the 2005 Stock Plan, including,
without limitation, the authority to:
o authorize the granting of shares of common stock or options under the
2005 Stock Plan;
o determine and designate the employees and directors of Bancorp to
receive awards under the 2005 Stock Plan;
18
o determine the type, number, price, vesting requirements and other
features and conditions of individual stock awards and options under
the 2005 Stock Plan; and
o interpret the 2005 Stock Plan and the various written agreements made
in connection with grants of shares of common stock or options
thereunder.
Eligibility. Directors, officers and all employees of Bancorp and its
subsidiaries (including all of the executive officers listed in the Summary
Compensation Table in this Proxy Statement) are presently considered eligible
for awards under the 2005 Stock Plan. There are currently 12 directors of
Bancorp or the Bank, 3 executive officers (two of whom are also directors) and
32 additional employees of Bancorp or the Bank.
Authorized Shares; Limits on Awards. The maximum number of shares of
Bancorp's Common Stock that may be delivered pursuant to awards or options under
the 2005 Stock Plan is 150,000 shares. Shares that are subject to or underlie
awards that expire for any reason or are cancelled, terminated or forfeited,
fail to vest, or for any other reason are not paid or delivered under the 2005
Stock Plan will again be available for subsequent awards under the Plan. Shares
issued under the 2005 Stock Plan may consist, in whole or in part, of authorized
and unissued or treasury shares. No person may be granted an option or award for
more than 50,000 shares of Common Stock in any calendar year.
Types of Awards. The 2005 Stock Plan authorizes grants of stock options
and awards of shares of the Common Stock of Bancorp.
A stock option is the right to purchase, at a price and for a term
fixed by the Compensation Committee (and subject to other limitations and
restrictions in the Plan and any applicable written agreement between Bancorp
and the recipient), shares of Bancorp's Common Stock. The 2005 Stock Plan
provides for grants of incentive stock options and non-qualified stock options
described in "Federal Income Tax Treatment of Awards Under the 2005 Stock Plan"
below.
The exercise price per share for an incentive stock option may not be
less than 100% of the fair market value of a share of Bancorp's Common Stock on
the date of grant (or, in the case of certain 10% owners described in Section
422(b)(6) of the Code, 110% of the fair market value of a share of Bancorp's
Common Stock on the date of grant). Although the Plan does not prescribe a
minimum option price for non-qualified stock options, it is the current
intention of the Compensation Committee to grant non-qualified stock options at
or above fair market value of a share of Bancorp's Common Stock on the date of
grant in light, among other things, of Section 409A of the Code, described below
under "Federal Income Tax Treatment of Awards under the 2005 Stock Plan."
A stock award generally involves the immediate transfer by Bancorp of
the ownership of shares of Common Stock to a participant in consideration of the
performance of services. The participant is immediately entitled to voting,
dividend and other ownership rights in the shares of Common Stock, generally
subject to certain forfeiture provisions and restrictions. Such restrictions may
require the continued service of the participant with Bancorp, the attainment of
specified performance goals or any other conditions deemed appropriate by the
Compensation Committee.
Shares of Common Stock subject to awards containing restrictions will
generally be held in the custody of Bancorp until the applicable restrictions
have been satisfied. The participant cannot sell, transfer, pledge or assign
shares of restricted stock until the applicable restrictions are satisfied. Once
the restrictions are satisfied, the shares of Common Stock will be delivered to
the participant's account, free and clear of any restrictions.
Each option granted and each stock award made under the 2005 Stock Plan
will be evidenced by a written agreement that sets forth the terms and
conditions of each award or grant and may include additional provisions and
restrictions as determined by the Compensation Committee.
Payment. Generally, stock awards will be issued for services and no
additional cash consideration. Payment upon option exercise may be made in the
form of a certified or bank cashier's check or, if permitted by the Compensation
Committee, delivery of previously owned shares of Common Stock, withholding of
option shares
19
otherwise to be received upon exercise of the option, or other methods of
payment as may be determined by the Compensation Committee. In its discretion,
the Compensation Committee may also permit the option holder to receive on
exercise an amount of cash equal to the difference between the then current fair
market value of shares of Common Stock and the aggregate option exercise price.
Effect of Termination of Service on Awards. Under the Plan, the term of
an incentive stock option or non-qualified stock option may not exceed ten years
after the date of grant (five years in the case of an incentive stock option
granted to a participant who owns more than 10% of Bancorp's outstanding Common
Stock). The terms of particular stock awards and options granted under the 2005
Stock Plan may provide that the options terminate and that all or a portion of
the stock award be forfeited, among other reasons, upon the recipient's
termination of employment or other status with Bancorp, upon a specified date,
upon the recipient's death or disability, or upon the occurrence of a change in
control of Bancorp. Unless otherwise provided in the applicable option
agreement, an option will terminate:
o immediately, if termination is by Bancorp for cause (as defined in the
2005 Stock Plan) or upon the voluntary termination of an employee who
is neither a director nor an executive officer (as defined in the 2005
Stock Plan);
o with respect to directors and executive officers, two years after
termination, if termination is for death or the option holder retires;
o with respect to directors and executive officers, one year after
termination, if the option holder voluntarily terminates employment or
service as a director or if termination is due to disability;
o with respect to employees who are neither directors nor executive
officers, one year after termination, if termination is for death or
disability or the option holder retires; and
o three months after termination, if termination is for any other
reason.
Additionally, if Bancorp's capital falls below the minimum level mandated
by its primary federal regulator or the existence of options impairs Bancorp's
ability to raise capital, Bancorp may be directed to require recipients to
exercise or forfeit their options.
In general, options and common stock awards to employees will contain
vesting features or be exercisable in installments over time.
Change of Control. In case Bancorp is merged or consolidated with
another corporation, substantially all of the property or stock of Bancorp is
acquired by any other corporation, or Bancorp is reorganized or liquidated, the
Compensation Committee may (i) provide that all unexercised options granted
under the 2005 Stock Plan must be exercised within a specified number of days or
such options will be terminated; (ii) provide that Bancorp (or the merged,
consolidated or otherwise reorganized corporation) shall have the right to
purchase all options unexercised as of that date for an amount equal to (x) the
aggregate fair market value of the Common Stock on such date less (y) the
aggregate exercise price of the options, to be paid in cash or in shares of the
merged, consolidated or otherwise reorganized corporation; (iii) substitute, on
an equitable basis, stock of Bancorp or the successor entity upon subsequent
exercise of the options; and (iv) accelerate options, in full or in part. In any
such event, the Compensation Committee shall have discretion to take action with
respect to stock awards to, among other things, accelerate vesting provisions,
terminate forfeiture provisions, substitute on an equitable basis appropriate
stock of the successor in the transaction or notify the recipient of the award
that such award shall terminate as to unvested shares as of the date specified
in the notice. Additionally, in the event of a change in control, any option or
award previously granted to a director or executive officer of Bancorp shall
automatically vest in full and become immediately exercisable in full.
20
Adjustments. The 2005 Stock Plan provides for adjustment in the maximum
number of shares of Common Stock that may be issued under the Plan and in the
number and kind of shares subject to unexercised options or common stock awards
in the event of any change in the outstanding shares of Common Stock by reason
of stock split, stock dividend, combination or reclassification of shares,
recapitalization or similar event.
Transfer Restrictions. Awards under the 2005 Stock Plan are not
transferable by the recipient other than by will or the laws of descent and
distribution of the state where the award recipient is domiciled at the time or
his or her death. An option may be exercised by a recipient's permitted
successors.
Amendment or Termination of the 2005 Stock Plan. The Compensation
Committee may make such changes to the 2005 Stock Plan as may be necessary or
appropriate to comply with the rules and regulations of any government authority
or to obtain tax benefits applicable to stock options. The Board of Directors
may amend or terminate the 2005 Stock Plan, as it shall deem advisable, except
that no amendment may adversely affect a recipient with respect to awards or
options previously granted unless such amendments are in connection with
compliance with applicable law. Shareholder approval of an amendment to the 2005
Stock Plan will be required only to the extent then required by applicable law
or regulation, the purposes and intent of the 2005 Stock Plan, or to take into
account the provisions of Section 162(m) of the Code or other applicable tax,
securities or corporate laws. Unless terminated earlier by the Board, the 2005
Stock Plan shall terminate on May 3, 2015.
Federal Income Tax Treatment of Awards Under the 2005 Stock Plan
The income tax consequences of the 2005 Stock Plan under current
federal law, which is subject to change, are summarized below. This summary is
not intended to be exhaustive and, among other considerations, does not describe
state or local tax consequences.
Bancorp is generally entitled to deduct, and the optionee recognizes
taxable income in an amount equal to, the amount that the Compensation Committee
deems necessary to satisfy Bancorp's obligation to withhold federal, state or
local income or other taxes incurred by reason of an exercise of options granted
under the 2005 Stock Plan. Where the exercise of an option does not give rise to
an obligation by Bancorp to withhold federal, state or local income or other
taxes on the date of exercise, but may give rise to such an obligation in the
future, the Committee may, in its discretion, make such arrangements and impose
such requirements as it deems necessary or appropriate.
In general: (i) no income will be recognized by an optionee at the time
a non-qualified stock option is granted; (ii) at the time of exercise of a
non-qualified stock option, ordinary income will be recognized by the optionee
in an amount equal to the difference between the fair market value of the shares
at that time and the option price paid for the shares if they are non-restricted
on the date of exercise; and (iii) at the time of sale of shares acquired
pursuant to the exercise of a non-qualified stock option, any appreciation (or
depreciation) in the value of the shares after the date of exercise will be
treated as either short-term or long-term capital gain (or loss) depending on
how long the shares have been held.
Incentive stock options ("ISOs") granted under the Plan will be subject
to the applicable provisions of the Code, including Code Section 422. If shares
of Common Stock are issued to an optionee upon the exercise of an ISO, and if no
"disqualifying disposition" of such shares is made by the optionee within one
year after the exercise of the ISO or within two years after the date the ISO is
granted, then (i) no income will be recognized by the optionee at the time of
the grant of the ISO; (ii) no income, for regular income tax purposes, will be
realized by the optionee at the date of exercise; (iii) upon sale of the shares
of Common Stock acquired by exercise of the ISO, any amount realized in excess
of the option price will be taxed to the optionee, for regular income tax
purposes, as a capital gain (at varying rates depending upon the optionee's
holding period in the shares and income level) and any loss sustained will be a
capital loss; and (iv) no deduction will be allowed to Bancorp for federal
income tax purposes. However, the excess of the fair market value of the shares
on the date of exercise over the exercise price is includible for purposes of
determining an optionee's alternative minimum tax liability.
If an optionee disposes of shares of Common Stock acquired upon
exercise of an ISO within two years of the date of grant or one year of the date
of exercise (i.e., a "disqualifying disposition"), the optionee will recognize
21
ordinary income, and Bancorp will be entitled to a deduction, equal to the
excess of the fair market value of the shares on the date of exercise over the
exercise price (limited generally to the gain on the sale). The balance of any
gain or loss will be treated as a capital gain or loss to the optionee.
The aggregate fair market value of shares of Bancorp's Common Stock as
to which any ISO first becomes exercisable in any calendar year, determined as
of the date of the grant, may not exceed $100,000. If ISOs held by an optionee
covering more than $100,000 worth of Bancorp Common Stock first become
exercisable in any one calendar year, the excess will be non-qualified options.
Generally, the recipient of a restricted stock award recognizes
ordinary income, and Bancorp is entitled to a corresponding deduction, equal to
the fair market value of the shares at the time any transfer or forfeiture
restrictions applicable to the restricted stock award lapse. A restricted stock
award recipient who makes an election under Section 83(b) of the Internal
Revenue Code, however, recognizes ordinary income equal to the fair market value
of the shares at the time of grant, and Bancorp is entitled to a corresponding
deduction at that time. If the recipient makes a Section 83(b) election, there
are no further federal income tax consequences to either the recipient or
Bancorp upon the lapse of any applicable transfer or forfeiture restrictions. If
no Section 83(b) election is made, then upon the sale of the shares after the
forfeiture period has expired, the holding period to determine whether the
recipient has long-term or short-term capital gain or loss begins when the
restriction period expires, and the tax basis will be equal to the fair market
value of the shares when the restricted period expires. However, if the
recipient timely elects under Section 83(b) to be taxed as of the date of grant,
the holding period commences on the date of the grant and the tax basis will be
equal to the fair market value of the shares on date of the grant as if the
shares were then unrestricted and could be sold immediately. If the shares
subject to such election are forfeited, the recipient will not be entitled to
any deduction, refund or loss for tax purposes.
Code Section 162(m) precludes a public company from claiming a
compensation deduction for compensation in excess of $1.0 million paid to the
chief executive officer or any of the four most highly compensated officers
other than the chief executive officer. This limitation does not apply, however,
to "qualified performance-based compensation." Because stock options granted
under the Plan to the executives named in the Summary Compensation Table are
expected to have an exercise price equal at least to fair market value at the
date of grant and because the Plan limits the number of shares that may be the
subject of awards granted to any participant during any calendar year,
compensation from the exercise of stock options should be treated as "qualified
performance-based compensation" for Code Section 162(m) purposes.
A new section, Section 409A, was added to the Code at the end of 2004
by the American Job Creation Act of 2004. Section 409A makes significant changes
to the tax treatment of certain types of deferred compensation. Failure to
comply with the requirements of Section 409A may result in inclusion in current
income of amounts deferred, along with interest and significant tax penalties.
Certain types of equity-based compensation are exempt from Section 409A. In
particular, non-qualified stock options granted at an exercise price that is
below the then fair market value of the Common Stock would not be exempt from
Section 409A. Bancorp intends to operate the 2005 Stock Plan so that all option
grants under the 2005 Stock Plan are exempt from Section 409A. The tax
discussion above assumes that the 2005 Stock Plan is in fact operating in this
manner.
Specific Benefits Under the 2005 Stock Plan
Because awards under the 2005 Stock Plan are discretionary, no awards
are determinable at this time. See the table entitled "Options/SAR Grants in
Last Fiscal Year" on page 11 for information about equity awards under the 2002
Plan made during 2004 to the named executive officers. During 2004, non-employee
directors of Bancorp were granted an aggregate of 26,920 stock options, all
granted at the fair market value of the Common Stock at the time of grant.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE SOUTHERN CONNECTICUT BANCORP, INC. 2005 STOCK OPTION AND AWARD PLAN.
22
PROPOSAL 3.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board has selected its current independent
accountants, McGladrey & Pullen, LLP, to audit the books, records and accounts
of Bancorp for the year ending December 31, 2005. This selection is being
presented to the shareholders for ratification at the 2005 Annual Meeting.
The firm of McGladrey & Pullen, LLP has served as Bancorp's independent
accountants since its organization and is considered to be well-qualified.
Bancorp has been advised by McGladrey & Pullen, LLP that it has neither direct
financial interest nor any material indirect financial interest in Bancorp other
than that arising from the firm's employment as independent accountants.
If the shareholders do not ratify the selection of McGladrey & Pullen,
LLP, the selection of independent accountants will be reconsidered by the Audit
Committee.
Representatives of McGladrey & Pullen, LLP will be present at the 2005
Annual Meeting and will be provided the opportunity to make a statement and to
respond to appropriate questions which may be asked by shareholders.
McGladrey & Pullen, LLP performs both audit and non-audit professional
services for and on behalf of Bancorp. During 2004, the audit services included
an audit of the consolidated financial statements of Bancorp and a review of
certain filings with the SEC. All professional services rendered by McGladrey &
Pullen, LLP during 2004 were furnished at customary rates and terms.
The following table sets forth information regarding the aggregate fees
for services rendered by McGladrey & Pullen, LLP for the fiscal year ended
December 31, 2004:
2004 2003
---------------- ------------------
Audit Fees $ 187,885 $81,583
Audit Related Fees 2,500 6,235
Tax Fees 8,065 7,565
All Other Fees 0 0
---------------- ------------------
Total $ 198,450 $95,383
================ ==================
Audit fees consist of fees for professional services rendered for the
audit of the consolidated financial statements, review of financial statements
included in quarterly reports included on Form 10-QSB, and services connected
with statutory and regulatory filings or engagements including fees in
connection with the 2004 registration statement filed on Form SB-2. Audit
related fees are principally for consultations on various accounting and
reporting matters. Tax service fees consist of fees for tax return preparation
for Bancorp.
The Audit Committee has established policies and procedures for the
engagement of the independent auditor to provide non-audit services, including a
requirement for approval in advance of all non-audit services to be provided by
the independent auditor. To ensure that this does not restrict access to the
independent accountant by management on matters where the advice and
consultation of the independent auditor is sought by management and such advice
or consultation, in the opinion of management, cannot practically be delayed
pending preapproval by the audit committee, the committee authorizes management
to use their judgment and retain the independent accountant for such matters and
consider such services to be preapproved provided the estimated cost of such
services does not exceed 5% of the annual fees paid to the independent
accountant and such services are formally approved by the audit committee at its
next meeting.
23
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF McGLADREY & PULLEN, LLP TO BE BANCORP'S
INDEPENDENT ACCOUNTANTS FOR 2005.
SHAREHOLDER NOMINATIONS AND PROPOSALS FOR 2006 ANNUAL MEETING
It is the policy of the Nominating Committee of the Board of Directors
to consider director candidates who appear to be qualified to serve on Bancorp's
Board of Directors and who are recommended by shareholders, using the same
general criteria and in the same manner as candidates recruited by the
Nominating Committee or recommended by board members. The Nominating Committee
may choose not to consider an unsolicited recommendation if no vacancy exists on
the Board of Directors and the Nominating Committee does not perceive a need to
increase the size of the Board of Directors. To avoid the unnecessary use of the
Nominating Committee's resources, the Nominating Committee will consider only
those director candidates recommended in accordance with the procedures set
forth below.
Shareholders entitled to vote for the election of directors at
Bancorp's Annual Meeting of Shareholders for the year ending December 31, 2005
("2006 Annual Meeting") may make nominations of individuals for election to the
Board. Such nominations shall be made in writing and shall be delivered or
mailed and received by the Corporate Secretary of Bancorp not less than 60 or
more than 90 calendar days prior to Bancorp's 2006 Annual Meeting, which is
expected to be held on May 16, 2006.
Such written nominations shall contain the following information, to
the extent known to the nominating shareholder: (1) the name, age, business and
residence address of each proposed nominee; (2) the principal occupation or
employment of each proposed nominee; (3) the total number of shares of Common
Stock of Bancorp that are beneficially owned by each proposed nominee; (4) the
name and address of the nominating shareholder; (5) the total number of shares
of Common Stock of Bancorp owned by the nominating shareholder; (6) a
representation that the shareholder is a holder of record of stock of Bancorp
entitled to vote at such meeting and intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice; and (7) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholders. Nominations by beneficial owners of Bancorp Common Stock who are
not record holders must be accompanied by evidence satisfactory to the Corporate
Secretary of Bancorp showing that such nominating persons are entitled to act
with respect to such shares. Nominations that are not made in accordance with
these procedures may be disregarded by the Chairperson of the meeting, in his or
her discretion, and upon his or her instructions, the vote tellers may disregard
all votes cast for such nominee.
Any proposal intended to be presented by a shareholder at Bancorp's
2006 Annual Meeting which is not a nomination to the Board must be presented to
Bancorp in writing, and must be delivered to the Corporate Secretary of Bancorp
not less than 60 nor more than 90 calendar days prior to Bancorp's 2006 Annual
Meeting, which is expected to be held on May 16, 2006. Such notice shall
include: (1) a brief description of the business desired to be brought before
the Bancorp's 2006 Annual Meeting and the reasons for conducting such business
at such meeting; (2) the name and address, as they appear on Bancorp's records,
of the shareholder proposing such business; (3) the number of shares of Common
Stock which are beneficially owned by the shareholder; and (4) any material
interest of the shareholder in such business. Such proposals must comply with
SEC Rule 14a-8. As the rules of the SEC make clear, simply submitting a proposal
does not guarantee its inclusion.
Bancorp must receive proposals that shareholders seek to include in the
proxy statement for the 2006 Annual Meeting no later than December 20, 2005. If
the 2006 Annual Meeting is held on a date more than 30 calendar days from May
16, 2006, a shareholder proposal must be received by a reasonable time before
Bancorp begins to print and mail its proxy solicitation for such annual meeting.
Any shareholder proposals will be subject to the requirements of the proxy rules
adopted by the Securities and Exchange Commission.
24
Pursuant to Rule 14a-4(c) of the Exchange Act, if a shareholder who
intends to present a proposal at Bancorp's 2006 Annual Meeting does not notify
us of such proposal on or prior to February 20, 2006, then management proxies
would be allowed to use their discretionary voting authority to vote on the
proposal when the proposal is raised at the 2006 Annual Meeting, even though
there is no discussion of the proposal in the 2006 proxy statement.
Nominations and proposals should be addressed to Rosemarie A. Romano,
Corporate Secretary, Southern Connecticut Bancorp, Inc., 215 Church Street, New
Haven, Connecticut 06510. It is suggested that such nominations and proposals be
sent by Certified Mail-Return Receipt Requested.
OTHER MATTERS
As of the date of this Proxy Statement, the Board knows of no other
matters to be voted upon at the 2005 Annual Meeting. Because Bancorp did not
receive advance notice of any shareholder proposal in accordance with the time
limit specified in Rule 14a-4(c) under the Exchange Act, it will have
discretionary authority to vote on any shareholder proposal presented at the
2005 Annual Meeting. If any other matters properly come before the 2005 Annual
Meeting, it is the intention of the persons named in the enclosed proxy to vote
the proxy in accordance with their judgment on such matters.
ANNUAL REPORT ON FORM 10-KSB
BANCORP IS MAILING TO EACH PERSON ENTITLED TO VOTE AT THE 2005 ANNUAL
MEETING A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB, FOR THE YEAR ENDED DECEMBER
31, 2004, INCLUDING THE FINANCIAL STATEMENTS, ALONG WITH THIS PROXY STATEMENT
AND THE ENCLOSED PROXY, ON OR ABOUT APRIL 5, 2005. UPON THE REQUEST OF ANY
PERSON WHOSE PROXY IS BEING SOLICITED HEREBY IN WRITING OR BY TELEPHONE AS
INDICATED BELOW, BANCORP WILL PROVIDE COPIES OF THE EXHIBITS TO THE FORM 10-KSB.
SHAREHOLDERS SHARING AN ADDRESS WHO ARE RECEIVING MULTIPLE COPIES OF BANCORP'S
ANNUAL REPORT AND PROXY STATEMENT AND WHO WISH TO RECEIVE ONLY ONE COPY OF THESE
MATERIALS AT THEIR ADDRESS CAN SO REQUEST BY CALLING US AT (203) 782-1100 OR BY
WRITING TO US AT 215 CHURCH STREET, NEW HAVEN, CONNECTICUT 06510.
By Order of the Board of Directors
/s/ Joseph V. Ciaburri
----------------------
Joseph V. Ciaburri
Chairman and Chief Executive Officer
New Haven, Connecticut
April 5, 2005
25
Appendix A
----------
THE SOUTHERN CONNECTICUT BANCORP, INC.
2005 STOCK OPTION AND AWARD PLAN
Southern Connecticut Bancorp, Inc., a Connecticut corporation
(the "Company"), wishes to attract employees and directors to the Company and
its subsidiaries, induce employees and directors to remain with the Company and
its subsidiaries, and encourage them to increase their efforts to make the
Company's and the subsidiaries' business more successful. In furtherance
thereof, The Southern Connecticut Bancorp 2005 Stock Option and Award Plan is
designed to provide equity-based incentives to employees and directors of the
Company and its subsidiaries.
1. Definitions.
---------------
Whenever used herein, the following terms shall have the
meanings set forth below:
"Award" means a grant of Shares under the Plan.
"Board" means the Board of Directors of the Company.
"Cause" means, unless otherwise provided in the Option Award
Agreement, (i) engaging in (A) willful or gross misconduct or (B) willful or
gross neglect, (ii) repeatedly failing to adhere to the directions of superiors
or the Board or the written policies and practices of the Company, (iii) the
commission of a felony or a crime of moral turpitude, or any crime involving the
Company or involving fraud, misappropriation or embezzlement, (iv) a material
breach of the Optionee's employment agreement (if any) with the Company, (v)
engagement in misconduct, neglect, fraud, misappropriation or embezzlement in
the course of performance of the Optionee's duties, or any other act which is to
the detriment of the Company, as determined in the discretion of the Committee,
or (vi) any illegal act detrimental to the Company.
"Change in Control" shall be deemed to have occurred with
respect to Company if any "Person," as hereinafter defined, has acquired control
of the Company. A "Person" has control if:
(i) the Person, directly or indirectly, or acting through one
(1) or more other Persons, owns, controls or has power to vote twenty-five
percent (25%) or more of the voting common stock of Company;
(ii) the Company consummates a merger, consolidation, sale of
substantially all its assets, or substantially similar reorganization
transaction with such Person, excluding, however, any merger, consolidation,
sale of substantially all its assets, or substantially similar reorganization
transaction in which immediately after such transaction, the shareholders of the
Company, in their capacities as such and as a result thereof, shall own at least
fifty percent (50%) in voting power of the then outstanding securities of the
Company or of any surviving corporation or business entity pursuant to any such
transaction;
(iii) during any period of twenty-four (24) consecutive
months, individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute a majority of such
Board, unless the election, or the nomination for election of each new Director
was approved by a vote of at least two-thirds (2/3) of the Directors then still
in office who were Directors at the beginning of such period; or
(iv) the Board of Directors of the Company, by vote of a
majority of all the Directors, adopts a resolution to the effect that a
"Change-in-Control" has occurred for purposes of the Plan.
"Code" means the Internal Revenue Code of 1986, as amended.
1
"Committee" means the Committee appointed by the Board under
Section 3.
"Common Stock" means the Company's Common Stock, either
currently existing or authorized hereafter.
"Company" means Southern Connecticut Bancorp, Inc., a
Connecticut corporation.
"Company Group" means Southern Connecticut Bancorp, Inc. and
any subsidiary of Southern Connecticut Bancorp, Inc. which is a "subsidiary
corporation" within the meaning of Section 424(f) of the Internal Revenue Code.
"Disability," unless otherwise provided by the Committee in
the Optionee's Award Agreement with respect to Non-Qualified Stock Options,
shall have the meaning set forth in Section 22(e)(3) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Executive Officer" means the chief executive officer, the
president, any vice president of the Company in charge of a principal business
unit, division or function, any other officer who performs a policy making
function or any other person who performs similar policy making functions for
the Company and who is deemed an executive officer for purposes of Section 16
under the Securities Exchange Act of 1934, as amended. Executive officers of
subsidiaries of the Company may be deemed executive officers of the Company if
they perform such policy making functions for the Company and are deemed
executive officers for purposes of Section 16.
"Fair Market Value" per Share as of a particular date means
(i) if Shares are then listed on a national stock exchange, the closing sales
price per Share on the exchange for the last preceding date on which there was a
sale of Shares on such exchange, as determined by the Committee, (ii) if Shares
are not then listed on a national stock exchange but are then traded on an
over-the-counter market, the average of the closing bid and asked prices for the
Shares in such over-the-counter market for the last preceding date on which
there was a sale of such Shares in such market, as determined by the Committee,
or (iii) if Shares are not then listed on a national stock exchange or traded on
an over-the-counter market, such value as may be determined by the Committee in
its discretion or as may be determined in accordance with such methodologies,
procedures or other rules (which may provide, without limitation, that
determinations of Fair Market Value shall be made by an independent third party)
as may be established by the Committee in its discretion; provided that, where
the Shares are so listed or traded, the Committee may make discretionary
determinations, or implement such methodologies, procedures or other rules,
where the Shares have not been traded for 10 trading days.
"Incentive Stock Option" means an "incentive stock option"
within the meaning of Section 422(b) of the Code.
"Non-Qualified Stock Option" means an Option which is not an
Incentive Stock Option.
"Option" means the right to purchase, at a price and for the
term fixed by the Committee in accordance with the Plan, and subject to such
other limitations and restrictions in the Plan and the applicable Option Award
Agreement, a number of Shares determined by the Committee.
"Option Award Agreement" means a written agreement in a form
approved by the Committee to be entered into by the Company and the Optionee of
an Option, as provided in Section 4.
"Optionee" means an employee or director of the Company to
whom an Option is granted, or the Successors of the Optionee, as the context so
requires.
2
"Option Price" means the exercise price per Share.
"Person" means any individual, corporation, partnership,
company or other entity, and shall include a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934.
"Plan" means The Southern Connecticut Bancorp, Inc. 2005 Stock
Option and Award Plan, as set forth herein and as the same may from time to time
be amended.
"Retirement" means, unless otherwise provided by the Committee
in the Optionee's Award Agreement, the termination (other than for Cause) of
employment or service as a director of an Optionee on or after the Optionee's
attainment of age 65 or on or after the Optionee's attainment of age 55 with
five consecutive years of service with the Company.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of Common Stock of the Company.
"Successor of the Optionee" means the legal representative of
the estate of a deceased Optionee or the person or persons who shall acquire the
right to exercise an Option by bequest or inheritance or by reason of the death
of the Optionee.
2. Effective Date and Termination of Plan.
------------------------------------------
The effective date of the Plan is June 1, 2005, subject to the
approval by the shareholders of the Company. The Plan shall terminate on, and no
Award or Option shall be granted hereunder on or after, the 10-year anniversary
of the earlier of the approval of the Plan by (i) the Board or (ii) the
shareholders of the Company; provided, however, that the Board may at any time
prior to that date terminate the Plan.
3. Administration of Plan.
--------------------------
The Plan shall be administered by the Committee appointed by
the Board. During any time that Shares are registered under the Securities Act,
the Committee shall consist of two or more individuals each of whom shall be a
"nonemployee director" as defined in Rule 16b-3 as promulgated by the Securities
and Exchange Commission ("Rule 16b-3") under the Exchange Act and shall, at such
times as the Company is subject to Section 162(m) of the Code (to the extent
relief from the limitation of Section 162(m) of the Code is sought with respect
to Options), qualify as "outside directors" for purposes of Section 162(m) of
the Code. The acts of a majority of the members present at any meeting of the
Committee at which a quorum is present, or acts approved in writing by a
majority of the entire Committee, shall be the acts of the Committee for
purposes of the Plan. If and to the extent applicable, no member of the
Committee may act as to matters under the Plan specifically relating to such
member. If no Committee is designated by the Board to act for these purposes,
the Board shall have the rights and responsibilities of the Committee hereunder.
4. Eligibility and Grant of Awards and Options; Committee
--------------------------------------------------------------
Authority.
----------
Subject to the provisions of the Plan, the Committee shall, in
its discretion as reflected by the terms of the Awards or the Option Award
Agreements: (i) authorize the granting of Shares or Options to employees and
directors of the Company Group; (ii) determine and designate from time to time
those employees and directors of the Company Group to whom Shares or Options are
to be granted and the number of Shares to be awarded or optioned to each
employee or director; (iii) determine whether to grant Incentive Stock Options,
or Non-Qualified Stock Options, or both (to the extent that any Option does not
qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option); provided that Incentive Stock Options may only be
granted to employees; (iv) determine the time or times when and the manner and
condition in which each Option shall be exercisable and the duration of the
exercise period; (v) determine or impose other conditions to the grant or
exercise of Options under the Plan as it may deem appropriate; and (vi)
determine the terms and conditions, including the
3
conditions for repurchase or forfeiture and the issue price, if any, of any
Award of Common Stock. In determining the eligibility of an employee or director
to receive an Award or Option, as well as in determining the number of Shares to
be awarded or optioned to any employee or director, the Committee may consider
the position and responsibilities of the employee or director, the nature and
value to the Company Group of the employee's or director's services and
accomplishments, the employee's or director's present and potential contribution
to the success of the Company Group and such other factors as the Committee may
deem relevant. Each Option Award Agreement and each Common Stock Award shall
contain such other terms, provisions and conditions not inconsistent herewith as
shall be determined by the Committee. An Optionee or Award recipient shall take
whatever additional actions and execute whatever additional documents the
Committee may in its reasonable judgment deem necessary or advisable in order to
carry out or effect one or more of the obligations or restrictions imposed on
the Optionee or Award recipient pursuant to the express provisions of the Plan
and the Award Agreement. The Committee shall cause each Option to be designated
as an Incentive Stock Option or a Non-Qualified Stock Option.
5. Number of Shares Subject to Awards and Options.
--------------------------------------------------
Subject to adjustment under Section 18, Awards and Options
with respect to an aggregate of no more than 150,000 Shares may be granted under
the Plan. Notwithstanding the foregoing provision of this Section 5, Shares as
to which an Option is granted under the Plan that remains unexercised at the
expiration, forfeiture or other termination of such Option may be the subject of
the grant of further Options. Shares of Common Stock issued hereunder may
consist, in whole or in part, of authorized and unissued shares or treasury
shares. The certificates for Shares issued hereunder may include any legend
which the Committee deems appropriate to reflect any rights of first refusal or
other restrictions on transfer hereunder or under the Award Agreement, or as the
Committee may otherwise deem appropriate.
Subject to adjustment under Section 18, the maximum number of
shares of Common Stock to which an Award or Option may be granted to any
participant under the Plan shall be 50,000 per calendar year. The per
participant limit described in this Section 5 shall be construed and applied
consistently with Section 162(m) of the Code.
The aggregate Fair Market Value, determined as of the date an
Option is granted, of the Common Stock for which any Optionee may be awarded
Incentive Stock Options which are first exercisable by the Optionee during any
calendar year under the Plan (or any other stock option plan required to be
taken into account under Section 422(d) of the Code) shall not exceed $100,000.
6. Option Price.
----------------
The Option Price shall be determined by the Committee on the
date the Option is granted and reflected in the Option Award Agreement, as the
same may be amended from time to time. Any particular Option Award Agreement may
provide for different exercise prices for specified amounts of Shares subject to
the Option. The Option Price with respect to each Incentive Stock Option shall
not be less than 100% (or 110%, in the case of an individual described in
Section 422(b)(6) of the Code relating to certain 10% owners) of the Fair Market
Value of a Share on the day the Incentive Stock Option is granted.
7. Period of Option and Vesting.
--------------------------------
(a) Unless earlier expired, forfeited or otherwise terminated,
each Option shall expire in its entirety upon the 10th anniversary of the date
of grant or shall have such other term as is set forth in the applicable Option
Award Agreement (except that, in the case of an individual described in Section
422(b)(6) of the Code (relating to certain 10% owners) who is granted an
Incentive Stock Option, the term of such Option shall be no more than five years
from the date of grant). The Option shall also expire, be forfeited and
terminate at such times and in such circumstances as otherwise provided
hereunder (including the forfeiture provisions of Section 9(b)) or under the
Option Award Agreement.
4
(b) Options shall vest according to the vesting schedule
determined by the Committee and as provided in the Option Award Agreement.
Unless otherwise provided in the Option Award Agreement or herein, no Option (or
portion thereof) shall ever be exercisable if the Optionee's employment or
service as a director with the Company Group has terminated before the time at
which such Option would otherwise have become exercisable, and any Option that
would otherwise become exercisable after such termination shall not become
exercisable and shall be forfeited upon such termination. Upon and after the
death of an Optionee, such Optionee's Options, if and to the extent otherwise
exercisable hereunder or under the applicable Option Award Agreement after the
Optionee's death, may be exercised by the Successors of the Optionee.
8. Exercisability Upon and After Termination of Optionee.
---------------------------------------------------------
(a) Unless otherwise provided in the Option Award Agreement,
if the Optionee is an employee of the Company Group who is neither an Executive
Officer nor a director of the Company or a subsidiary of the Company, and the
Optionee's employment with the Company Group is terminated:
(i) Other than by voluntary termination of
service by the Optionee or termination by
the Company Group for Cause and other than
by reason of death, Disability, or
Retirement, no exercise of an Option may
occur after the expiration of the 3-month
period following the termination, or if
earlier, the expiration of the term of the
Option as provided under Section 7; or
(ii) By reason of death, Disability or
Retirement, no exercise of an Option may
occur after the expiration of the 1-year
period following the termination, or if
earlier, the expiration of the term of the
Option as provided under Section 7; or
(iii) Voluntarily by the Optionee or by the
Company Group for Cause, the Optionee's
Options, to the extent then unexercised,
shall thereupon cease to be exercisable and
shall be forfeited forthwith.
(b) Unless otherwise provided in the Option Award Agreement,
if the Optionee is an Executive Officer or a director of the Company or a
subsidiary of the Company, and the Optionee's employment or service as a
director with the Company Group is terminated:
(i) Other than by voluntary termination of
service by the Optionee or termination by
the Company Group for Cause and other than
by reason of death, Disability, or
Retirement, no exercise of an Option may
occur after the expiration of the 3-month
period following the termination, or if
earlier, the expiration of the term of the
Option as provided under Section 7; or
(ii) Voluntarily by the Optionee or by reason of
Disability, no exercise of an Option may
occur after the 1-year period following the
termination, or if earlier, the expiration
of the term of the Option as provided under
Section 7; or
(iii) By reason of death or Retirement, no
exercise of an Option may occur after the
expiration of the 2-year period following
the termination, or if earlier, the
expiration of the term of the Option as
provided under Section 7; or
(iv) by the Company Group for Cause, the
Optionee's Options, to the extent then
unexercised, shall thereupon cease to be
exercisable and shall be forfeited
forthwith.
(c) Except as may otherwise be expressly set forth in this
Section 8, and except as may otherwise be expressly provided under the Option
Award Agreement, no provision of this Section 8 is intended to or
5
shall permit the exercise of the Option to the extent the Option was not
exercisable upon cessation of employment or service as a director.
9. Exercise of Options.
-----------------------
(a) Subject to vesting and other restrictions provided for
hereunder or otherwise imposed in accordance herewith, an Option may be
exercised, and payment in full of the aggregate Option Price made, by an
Optionee only by written notice (in the form prescribed by the Committee) to the
Company specifying the number of Shares to be purchased.
(b) In the event that the state or federal bank regulatory
agency that has primary authority over the Company or any bank subsidiary
determines that the regulated entity's capital has fallen below its minimum
requirements, such agency may direct the Company to notify Optionees that any
Options that are not exercised by the date specified in any such notice will
expire on such date. If any such notice is given, any Option not exercised by
such date shall terminate on such date.
(c) Without limiting the scope of the Committee's discretion
hereunder, the Committee may impose such other restrictions on the exercise of
Options (whether or not in the nature of the foregoing restrictions) as it may
deem necessary or appropriate.
(d) If Shares acquired upon exercise of an Incentive Stock
Option are disposed of in a disqualifying disposition within the meaning of
Section 422 of the Code by an Optionee prior to the expiration of either two
years from the date of grant of such Option or one year from the transfer of
Shares to the Optionee pursuant to the exercise of such Option, or in any other
disqualifying disposition within the meaning of Section 422 of the Code, such
Optionee shall notify the Company in writing as soon as practicable thereafter
of the date and terms of such disposition and, if the Company thereupon has a
tax-withholding obligation, shall pay to the Company an amount equal to any
withholding tax the Company is required to pay as a result of the disqualifying
disposition.
10. Payment.
------------
(a) The aggregate Option Price shall be paid in full upon the
exercise of the Option. Payment must be made by one of the following methods:
(i) a certified or bank cashier's check;
(ii) the proceeds of a Company loan program or third-party
sale program or a notice acceptable to the Committee given as
consideration under such a program, in each case if permitted
by the Committee in its discretion, if such a program has been
established and the Optionee is eligible to participate
therein;
(iii) if approved by the Committee in its discretion, Shares
of previously owned Common Stock having an aggregate Fair
Market Value on the date of exercise equal to the aggregate
Option Price;
(iv) if approved by the Committee in its discretion, through
the written election of the Optionee to have Shares withheld
by the Company from the Shares otherwise to be received, with
such withheld Shares having an aggregate Fair Market Value on
the date of exercise equal to the aggregate Option Price; or
(v) by any combination of such methods of payment or any other
method acceptable to the Committee in its discretion.
(b) The Committee, in its discretion, may also permit the
Optionee to elect to exercise an Option by receiving a combination of Shares and
cash, or, in the discretion of the Committee, either Shares or solely in cash,
with an aggregate Fair Market Value (or, to the extent of payment in cash, in an
amount) equal to the excess
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of the Fair Market Value of the Shares with respect to which the Option is being
exercised over the aggregate Option Price, as determined as of the day the
Option is exercised.
(c) Except in the case of Options exercised by certified or
bank cashier's check, the Committee may impose limitations and prohibitions on
the exercise of Options as it deems appropriate, including, without limitation,
any limitation or prohibition designed to avoid accounting consequences which
may result from the use of Common Stock as payment upon exercise of an Option.
Any fractional Shares resulting from an Optionee's election that is accepted by
the Company shall in the discretion of the Committee be paid in cash.
11. Tax Withholding.
--------------------
The Committee may, in its discretion, require the Optionee or
the recipient of an Award to pay to the applicable member of the Company Group
at the time of exercise of any Option or receipt of any Award the amount that
the Committee deems necessary to satisfy the Company's obligation to withhold
federal, state or local income or other taxes incurred by reason of the
exercise. Upon exercise of an Option, the Optionee may, if approved by the
Committee in its discretion, make a written election to have Shares then issued
withheld by the Company from the Shares otherwise to be received, or to deliver
previously owned Shares, in order to satisfy the liability for such withholding
taxes. In the event that the Optionee makes, and the Committee permits, such an
election, the number of Shares so withheld or delivered shall have an aggregate
Fair Market Value on the date of exercise sufficient to satisfy the applicable
withholding taxes. Where the exercise of an Option does not give rise to an
obligation by any member of the Company Group to withhold federal, state or
local income or other taxes on the date of exercise, but may give rise to such
an obligation in the future, the Committee may, in its discretion, make such
arrangements and impose such requirements as it deems necessary or appropriate.
Notwithstanding anything contained in the Plan to the contrary, the Optionee's
satisfaction of any tax-withholding requirements imposed by the Committee shall
be a condition precedent to the Company's obligation as may otherwise be
provided hereunder to provide Shares to the Optionee, and the failure of the
Optionee to satisfy such requirements with respect to the exercise of an Option
shall cause such Option to be forfeited.
12. Exercise by Successors.
---------------------------
An Option may be exercised, and payment in full of the
aggregate Option Price made, by the Successors of the Optionee only by written
notice (in the form prescribed by the Committee) to the Company specifying the
number of Shares to be purchased. Such notice shall state that the aggregate
Option Price will be paid in full, or that the Option will be exercised as
otherwise provided hereunder, in the discretion of the Company or the Committee,
if and as applicable.
13. Nontransferability of Option.
---------------------------------
Each Option granted under the Plan shall by its terms be
nontransferable by the Optionee except by will or the laws of descent and
distribution of the state wherein the Optionee is domiciled at the time of his
or her death.
14. Right of First Refusal; Right of Repurchase; Transfer
--------------------------------------------------------------
Restrictions.
-------------
(a) At the time of grant, the Committee may provide in
connection with any grant made under the Plan that Shares received in connection
with Options shall be subject to a right of first refusal pursuant to which the
Company shall be entitled to purchase such Shares in the event of a prospective
sale of the Shares, subject to such terms and conditions as the Committee may
specify at the time of grant or (if permitted by the Award Agreement)
thereafter, and to a right of repurchase, pursuant to which the Company shall be
entitled to purchase such Shares at the Fair Market Value of the Shares (unless
otherwise provided in the Award Agreement), or, otherwise at a price determined
by, or under a formula set by, the Committee at the time of grant or (if
permitted by the Option Award Agreement) thereafter, subject to such other terms
and conditions as the Committee may specify at the time of grant.
7
(b) Any Shares issued pursuant to an Option shall be subject
to such transfer restrictions as may be set forth in the Option's Award
Agreement (including, without limitation, the requirement that any Shares
acquired prior to the time such Shares are registered under the Securities Act
or an exemption therefrom is available, be assigned and subject to a voting
trust with terms determined by the Committee).
15. Regulations and Approvals.
------------------------------
(a) The obligation of the Company to sell Shares with respect
to Options granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.
(b) The Committee may make such changes to the Plan as may be
necessary or appropriate to comply with the rules and regulations of any
government authority or to obtain tax benefits applicable to stock options.
(c) Each Option is subject to the requirement that, if at any
time the Committee determines, in its discretion, that the listing, registration
or qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions in a manner acceptable to the
Committee.
(d) In the event that the disposition of stock acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act, and is not otherwise exempt from such registration,
such Shares shall be restricted against transfer to the extent required under
the Securities Act, and the Committee may require any individual receiving
Shares pursuant to the Plan, as a condition precedent to receipt of such Shares,
to represent to the Company in writing that the Shares acquired by such
individual are acquired for investment only and not with a view to distribution
and that such Shares will be disposed of only if registered for sale under the
Securities Act or if there is an available exemption for such disposition.
16. Administrative Rules; Interpretation.
-----------------------------------------
The Committee may make such rules and regulations and
establish such procedures for the administration of the Plan as it deems
appropriate. Without limiting the generality of the foregoing, the Committee may
(i) determine (A) the conditions under which an Optionee will be considered to
have retired or become disabled and (B) whether any Optionee has done so; (ii)
establish or assist in the establishment of a program (which need not be
administered in a nondiscriminatory or uniform manner) under which the Company
or a third party may make bona-fide loans on arm's-length terms to any or all
Optionees to assist such Optionees with the satisfaction of any or all of the
obligations that such Optionees may have hereunder or under which third-party
sales may be made for such purpose (including, without limitation, a loan
program under which the Company or a third party would advance the aggregate
Option Price to the Optionee and be repaid with Option stock or the proceeds
thereof and a sale program under which funds to pay for Option stock are
delivered by a third party upon the third party's receipt from the Company of
stock certificates); (iii) determine the extent, if any, to which Options or
Shares shall be forfeited (whether or not such forfeiture is expressly
contemplated hereunder); (iv) interpret the Plan, the Option Award Agreements
hereunder and the Awards of Common Stock hereunder, with such interpretations to
be conclusive and binding on all persons and otherwise accorded the maximum
deference permitted by law; and (v) take any other actions and make any other
determinations or decisions that it deems necessary or appropriate in connection
with the Plan or the administration or interpretation thereof. The Committee may
in the Option Award Agreement provide that the Optionee shall notify the Company
of the failure to meet any holding period requirement under the Code applicable
to Shares received upon the exercise of an Incentive Stock Option. Unless
otherwise
8
expressly provided hereunder, the Committee, with respect to any Option, may
exercise its discretion hereunder at the time of the award or thereafter. In the
event of any dispute or disagreement as to the interpretation of the Plan or of
any rule, regulation or procedure, or as to any question, right or obligation
arising from or related to the Plan, the decision of the Committee shall be
final and binding upon all persons.
17. Amendments.
--- -----------
The Board may amend the Plan as it shall deem advisable,
except that no amendment may adversely affect an Optionee with respect to
Options previously granted or the recipient of an Award with respect to Awards
previously granted unless such amendments are in connection with compliance with
applicable laws; provided that the Board may not make any amendment in the Plan
that would, if such amendment were not approved by the holders of the Common
Stock, cause the Plan to fail to comply with any requirement of applicable law
or regulation, unless and until the approval of the holders of such Common Stock
is obtained. Without limiting the generality of the foregoing, the Committee may
(subject to such considerations as may arise under Section 16 of the Exchange
Act, or under other corporate, securities or tax laws) take any steps it deems
appropriate, that are not inconsistent with the purposes and intent of the Plan,
or to take into account the provisions of Section 162(m) of the Code.
18. Changes in Capital Structure.
---------------------------------
In case the Company is merged or consolidated with another
corporation and the Company is not the surviving corporation, or, in case the
property or stock of the Company is acquired by any other corporation, or in
case of a reorganization or liquidation of the Company, the Committee shall, as
to outstanding Options, either (i) make appropriate provision for the protection
of any such outstanding Options by the substitution on an equitable basis of
appropriate stock of the Company or of the merged, consolidated or otherwise
reorganized corporation which will be issuable in respect of the shares of
Common Stock, provided only that the excess of the aggregate fair market value
of the shares subject to any Options immediately after such substitution over
the purchase price thereof is not more than the excess of the aggregate fair
market value of the shares subject to such Options immediately before such
substitution over the purchase price thereof, (ii) upon written notice to the
Optionees, provide that all unexercised Options must be exercised within a
specified number of days of the date of such notice or such Options will be
terminated, or (iii) upon written notice to the Optionees, provide that the
Company or the merged, consolidated or otherwise reorganized corporation shall
have the right, upon the effective date of any such merger, consolidation, sale
of assets or reorganization, to purchase all Options held by each Optionee and
unexercised as of that date at an amount equal to the aggregate fair market
value on such date of the shares subject to the Options held by such Optionee
over the aggregate purchase price therefor, such amount to be paid in cash or,
if stock of the merged, consolidated or otherwise reorganized corporation is
issuable in respect of the shares of the Common Stock, then, in the discretion
of the Committee, in stock of such merged, consolidated or otherwise reorganized
corporation equal in fair market value to the aforesaid amount. In any such case
the Committee shall, in good faith, determine fair market value and may, in its
discretion, advance the lapse of any waiting or installment periods and exercise
dates. In the event of any such transaction noted above, the Committee shall
have discretion to take any action with respect to Awards of Common Stock,
including but not limited to acceleration of any vesting provisions, termination
of repurchase rights, substitution on an equitable basis of appropriate stock of
the successor in the transaction or notification of such Award holders that such
Awards will terminate as to unvested shares as of the date specified in such
notice.
Notwithstanding any other provision hereof, unless otherwise
provided in the Award or in the Option Award Agreement, if a Change of Control
shall occur, any Option or Award previously granted to a director or Executive
Officer of the Company shall automatically vest in full and become immediately
exercisable in full .
If a Change in Control shall occur, but subject to the
immediately preceding paragraph, then the Committee as constituted immediately
before the Change in Control may make such adjustments as it, in its discretion,
determines are necessary or appropriate in light of the Change in Control
(including, without limitation,
9
the substitution of stock other than stock of the Company as the stock optioned
hereunder, and the acceleration of the exercisability of the Options and
Awards).
The judgment of the Committee with respect to any matter
referred to in this Section 18 shall be conclusive and binding upon each
Optionee without the need for any amendment to the Plan.
In the event of any stock split, reverse stock split, stock
dividend, recapitalization, combination of shares, reclassification of shares or
other similar change in capitalization, or any distribution to holders of Common
Stock other than a normal cash dividend, (i) the number and class of securities
available under this Plan, (ii) the per-participant limit set forth in Section
5, (iii) the number and class of securities and exercise price per share subject
to each outstanding Option, and (iv) the number of shares covered by and the
terms of each outstanding Award shall be appropriately adjusted by the Committee
(or substitute Awards may be made, if applicable) to the extent the Committee
shall determine, in good faith, that such an adjustment (or substitution) is
necessary and appropriate. If this paragraph applies and the first paragraph of
this Section 18 also applies to such event, the first paragraph of Section 18
shall govern.
19. Notices.
------------
All notices under the Plan shall be in writing, and if to the
Company, shall be delivered to the Board or mailed to its principal office,
addressed to the attention of the Board; and if to the Optionee, shall be
delivered personally, sent by facsimile transmission or mailed to the Optionee
at the address appearing in the records of the Company. Such addresses may be
changed at any time by written notice to the other party given in accordance
with this Section 19.
20. Rights as Shareholder.
--------------------------
Neither the Optionee nor any person entitled to exercise the
Optionee's rights in the event of death shall have any rights of a shareholder
with respect to the Shares subject to an Option, except to the extent that a
certificate for such Shares shall have been issued upon the exercise of the
Option as provided for herein.
21. Rights to Employment
------------------------
Nothing in the Plan or in any Award or Option granted pursuant
to the Plan shall confer on any individual any right to continue in the employ
of the Company or to continue as a director of the Company or interfere in any
way with the right of the Company and its shareholders to terminate the
individual's employment or service as a director at any time.
22. Exculpation and Indemnification.
------------------------------------
The Company shall indemnify and hold harmless the members of
the Board and the members of the Committee from and against any and all
liabilities, costs and expenses incurred by such persons as a result of any act
or omission to act in connection with the performance of such person's duties,
responsibilities and obligations under the Plan, to the maximum extent permitted
by law, other than such liabilities, costs and expenses as may result from the
negligence, bad faith, willful misconduct or criminal acts of such persons.
23. Captions.
-------------
The use of captions in this Plan is for convenience. The
captions are not intended to and do not provide substantive rights.
24. Severability.
-----------------
10
The invalidity or unenforceability of any provision of the
Plan shall not affect the validity or enforceability of any other provision of
the Plan, which shall remain in full force and effect.
25. Governing Law.
------------------
The Plan shall be governed by the laws of Connecticut, without
reference to principles of conflict of laws.
11