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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] 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 18, 2004
10:00 A.M.
----------------------
Notice is hereby given that the Annual Meeting of Shareholders ("2004
Annual Meeting") of Southern Connecticut Bancorp, Inc. ("Bancorp" or "Company")
will be held at The Quinnipiack Club, 221 Church Street, New Haven, Connecticut
06510 at 10:00 A.M. on Tuesday, May 18, 2004 for the following purposes:
(1) To elect two directors each for a three-year term;
(2) To increase the number of authorized shares for issuance under
the 2002 Stock Option Plan from 275,000 shares to 365,000
shares.
(3) To ratify the appointment of McGladrey & Pullen, LLP as
independent accountants for the year ending December 31, 2004;
and
(4) To transact such other business as properly may be brought
before the 2004 Annual Meeting.
The close of business on April 7, 2004 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the 2004 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
Joseph V. Ciaburri
Chairman and Chief Executive Officer
New Haven, Connecticut
April 20, 2004
SOUTHERN CONNECTICUT BANCORP, INC.
215 Church Street
New Haven, Connecticut 06510
-------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 2004
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 ("Common Stock"), to be voted at the
Annual Meeting of Shareholders to be held on May 18, 2004 ("2004 Annual
Meeting") and at any adjournments thereof. The 2004 Annual Meeting will take
place at 10:00 a.m. at The Quinnipiack Club, 221 Church Street, New Haven,
Connecticut 06510. The approximate date on which this Proxy Statement and the
enclosed proxy are first being sent or given to shareholders is April 20, 2004.
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 thereof. 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 2004 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 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, the proxy will be voted at the 2004 Annual Meeting,
and unless authorization to vote for the election of directors or for any
particular nominee is withheld, the shares represented by such proxy will be
voted FOR the nominees set forth in this Proxy Statement. If authorization to
vote for any nominee or nominees is withheld in a proxy, the votes of the shares
represented thereby will be distributed among the remaining nominees in the
manner determined by the persons named in the proxy, unless contrary
instructions are given. Other than for the election of directors, where a
plurality of the votes cast shall suffice for election, or as otherwise required
by law or regulation, the Certificate of Incorporation of Bancorp provides that
all matters requiring shareholder action must be approved by shareholders by a
majority of the votes cast. Any abstentions or broker non-votes will be counted
for purposes of determining whether a quorum is present but will not be counted
as votes cast.
The record date for determining shareholders entitled to notice of and
to vote at the 2004 Annual Meeting and any adjournments thereof has been set as
April 7, 2004 ("Record Date"). As of the Record Date, there were 1,068,920
shares of Common Stock outstanding and entitled to vote at the 2004 Annual
Meeting. Each share of Common Stock is entitled to one vote multiplied by the
number of directors to be elected with respect to the election of directors and
to one vote on each other matter submitted to the 2004 Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
security ownership as of January 31, 2004 of the nominees for election to the
Board described in this Proxy Statement. (The nominees will be Class III
directors. Messrs. J. Ciaburri and E. Laydon currently are serving as Class III
directors of Bancorp and as directors of the Bank.)
2
Amount and Nature
Name and Address of Beneficial Owner of Beneficial Ownership(1) Percent of Class
------------------------------------ -------------------------------- ----------------
Joseph V. Ciaburri, Chairman and 71,500 (2) 6.3%
Chief Executive Officer of Bancorp
and the Bank
Director of Bancorp and the Bank
215 Church Street
New Haven, CT 06510
Elmer F. Laydon, Vice Chairman and 92,728 (3) 8.2%
Director of Bancorp and the Bank
Elmer F. Laydon Construction Corp.
69 Wheeler Street
New Haven, CT 06512
The following table sets forth certain information concerning the
security ownership as of January 31, 2004 of Bancorp's (other than the nominees
described above) and the Bank's directors and named executive officers:
Amount and Nature
Name and Address of Beneficial Owner of Beneficial Ownership(1) Percent of Class
------------------------------------ -------------------------------- ----------------
Bancorp Directors (All Bancorp directors are also directors of the Bank)
-----------------
Class I (Expires 2005)
Carl R. Borrelli 40,140 (4) 3.5%
All Brite Electric, Inc.
4 Industry Drive Ext.
P.O. Box 26004
West Haven, CT 06516
Juan Jose Alvarez de Lugo 58,161 5.1%
20 Huntington Drive
Branford, CT 06405
--------------------------------
1 Amount of shares is stock unless otherwise footnoted.
2 Includes 33,000 shares of stock and 38,500 exercisable options.
3 Includes 82,702 shares of stock and 10,026 exercisable warrants.
4 Includes 34,325 shares of stock and 5,815 exercisable warrants.
3
Alphonse F. Spadaro, Jr. 19,917 (5) 1.8%
Managing Principal
Levitsky & Berney, PC
100 Bradley Road
Woodbridge, CT 06525
Class II (Expires 2006)
Michael M. Ciaburri, President, Chief 6,600 0.6%
Operating Officer and a Director of
Bancorp and the Bank
215 Church Street
New Haven, CT 06510
West Haven, CT 06516
G. Leon Jacobs 3,878 (6) 0.3%
Tribal Manager, Mashantucket
Pequot Tribal Nation
Director of Bancorp and the Bank
198 Masons Island Road
Mystic, CT 06355
Joshua H. Sandman 16,157 (7) 1.4%
Director of Bancorp and the Bank
Vice President
Deitsch Plastic Co., Inc.
14 Farwell Street
West Haven, CT 06516
Bank Directors
--------------
James S. Brownstein, Esq. 5,555 (8) 0.5%
Kantrovitz & Brownstein, P.C.
One Bradley Road, Suite 305
P.O. Box 3557
Woodbridge, CT 06525
Janette J. Parker 775 (9) 0.1%
13 Hughes Place
New Haven, CT 06511
--------------------------------
5 Include 16,868 shares of stock and 3,049 exercisable warrants.
6 Include 3,300 shares of stock and 578 exercisable warrants.
7 Include 11,825 shares of stock and 4,332 exercisable warrants.
8 Include 4,400 shares of stock and 1,155 exercisable warrants.
9 Include 660 shares of stock and 115 exercisable warrants.
4
W. Martyn Philpot, Jr., Esq. 4,308 (10) 0.4%
Law Offices of W. Martyn Philpot, Jr.
409 Orange Street
New Haven, CT 06511
Alfred J. Ranieri, Jr., MD 38,322 (11) 3.4%
1455 Chapel Street
New Haven, CT 06511
J. Daniel Sagarin, Esq. 9,566 (12) 0.8%
Hurwitz & Sagarin, LLC
147 North Broad Street
P.O. Box 112 Milford, CT 06460
Executive Officer - non-director
William F. Weaver 950 0.1%
Vice President & Chief Financial Officer
of Bancorp and the Bank
Southern Connecticut Bancorp, Inc.
215 Church Street
New Haven, Ct. 06510
All directors and executive officers as a
group 368,557 (13) 32.5%
--------------------------------
10 Include 3,666 shares of stock and 642 exercisable warrants.
11 Include 33,990 shares of stock and 4,332 exercisable warrants.
12 Include 8,042 shares of stock and 1,524 exercisable warrants.
13 Include 298,489 shares of stock, 31,568 exercisable warrants and
38,500 exercisable options.
5
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
Name and Address of Beneficial Owner of Beneficial Ownership Percent of Class
------------------------------------ -------------------------------- ----------------
Saugatuck Partners, L.P. and certain 88,660 8.3%
affiliates 14
1 Gorham Island
Westport, CT 06880
Elmer F. Laydon 92,728 8.2%
President
Elmer F. Laydon Const. Corp.
69 Wheeler Street
New Haven, CT 06512
Joseph V. Ciaburri, Chairman and 71,500 6.3%
Chief Executive Officer of Bancorp
and the Bank
Director of Bancorp and the Bank
215 Church Street
New Haven, CT 06510
Juan Jose Alvarez de Lugo 58,161 5.1%
20 Huntington Drive
Branford, CT 06405
PROPOSAL 1.
ELECTION OF DIRECTORS
Nominees
Two directors are to be elected at the 2004 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 initial
term of office of Class I directors expired at the annual meeting of
shareholders in 2002; that of Class II directors expired at the 2003 Annual
Meeting; and that of Class III directors shall expire at the annual meeting of
shareholders in 2004. 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
-------------------------------
14 The following Saugatuck affiliates are listed as owning Bancorp
Common Stock: Saugatuck Asset Management, LLC; Saugatuck Management Company,
L.P.; and Richard J. Galley, with respect to the shares of Common Stock directly
owned by Saugatuck Partners, L.P. and Saugatuck International, Ltd.
6
to serve as a director if elected. Director nominees Joseph V. Ciaburri and
Elmer F. Laydon currently are directors of Bancorp and the Bank. Each of
Bancorp's other directors also serves as a director of the Bank.
The persons named in the form of proxy to represent shareholders at the
2004 Annual Meeting are Alphonse F. Spadaro, Jr. and Janette J. Parker. It is
the intention of the persons named in the proxy to vote FOR the election of the
nominees named herein unless authority to vote is withheld with respect to one
or more nominees. 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.
NOMINEES FOR ELECTION
(TO BE CLASS III DIRECTORS)
Name Age Position And Offices With Bancorp or the Bank Director
and Principal Occupation and Employment During Since
the Past Five Years
---------------------------------------------------------------------------------------------------
Joseph V. Ciaburri 74 Chairman, Chief Executive Officer and 2000
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 was
employed in commercial banking in the New
Haven area for over forty 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 and the 2000
Bank; President, Elmer F. Laydon Construction
Corp. (building contractor); former Chairman
of the Board of Directors of Shoreline Bank
and Trust Company
7
DIRECTORS CONTINUING IN OFFICE
Position And Offices With Bancorp or the Bank
and Principal Occupation and Employment During Director
Name Age the Past Five Years Since
---------------------------------------------------------------------------------------------------
Class I
Carl R. Borrelli 67 Director of Bancorp and the Bank; Treasurer, 2000. To serve
All Brite Electric, Inc. until 2005.
Juan Jose Alvarez de 44 Director of Bancorp and the Bank; Director, 2001. To serve
Lugo Arquin Decoraciones until 2005.
Alphonse F. Spadaro, Jr. 62 Director of Bancorp and the Bank; managing 2001. To serve
principal of Levitsky & Berney, P.C. (public until 2005.
accounting firm)
Class II
---------
Michael M. Ciaburri 43 President, Chief Operating Officer and a 2003. To serve
director of Bancorp and the Bank; founder and until 2006.
President of Ciaburri Bank Strategies, a bank
management consulting firm. 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. Mr.
Ciaburri was employed as a commercial banker
for over 10 years
G. Leon Jacobs 65 Director of Bancorp and the Bank; Tribal 2001. To serve
Manager, Mashantucket Pequot Tribal Nation until 2006.
Joshua H. Sandman 61 Director of Bancorp and the Bank; Vice 2000. To serve
President, Deitsch Plastics (plastic until 2006.
fabricating) and Professor, University of New
Haven; former Director of The Bank of New Haven
8
NON-DIRECTOR EXECUTIVE OFFICER
SIGNIFICANT EMPLOYEE
Position And Offices With Bancorp or the Bank and Principal
Name Age Occupation and Employment During the Past Five Years
----------------------------------------------------------------------------------------------------
William F. Weaver 52 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 Bank at Brown
University. Mr. Weaver has been employed in banking for 29
years.
11
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 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, following the
departure, effective December 31, 2002, of Gary D. Mullin, the Bank's former
President and Chief Operating Officer. 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. The functions of the Nominating Committee include
recommending qualified candidates for director positions and evaluating the
performance of directors. All but one of the members of the Nominating Committee
is independent as that term is defined in Rule 4200 of the NASDAQ Marketplace
Rules. The Nominating Committee does not have a charter or a formal policy
regarding the consideration of director candidates recommended by Shareholders.
However, the Committee will consider any director candidates recommended by
Shareholders. 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
Joseph V. Ciaburri (Chair), Elmer F. Laydon and Joshua H. Sandman. Joseph V.
Ciaburri is not independent as that term is defined in the NASDAQ Rule. The
Nominating Committee met once in 2003.
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. 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 9 times during 2003. Effective February 10, 2004, the Audit
Committee has adopted a new written charter, which is attached hereto as
Appendix A.
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. The current members
of the
9
Compensation Committee of Bancorp are Elmer F. Laydon (Chair), Joshua Sandman
and Alphonse F. Spadaro. The Compensation Committee met seven times in 2003.
The Board met eighteen (18) times in 2003. Director Alvarez de Lugo and
Director Jacobs attended fewer than 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 (during the periods that each
has served as a director). The Board elects the directors of the Bank following
Bancorp's annual meeting.
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 relatively small 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). 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 one reporting person, Elmer F. Laydon, failed to file on a
timely basis reports required by Section 16(a) of the Exchange Act during the
most recent fiscal year or prior fiscal years. Mr. Laydon failed to disclose on
a Form 4 his acquisition of Bancorp Common Stock on six separate occasions (a
total of nine transactions) during 2003. Mr. Laydon has since disclosed those
transactions on a Form 4.
Code of Ethics
Bancorp has adopted a Code of Ethics that applies to all employees,
officers and directors. Bancorp will supply a copy of the Code of Ethics upon
written or oral request. To obtain a copy please write to us at Southern
Connecticut Bancorp, Inc., 215 Church Street, New Haven, Connecticut 06510 or
call Bancorp at (203) 782-1100.
10
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Awards Compensation
Name and Year Other Annual
-------- ---- -------------
Principal Position Ended Salary ($) Bonus ($) Compensation ($) Stock Options (#)
------------------ ----- ---------- --------- ---------------- -----------------
Joseph V. Ciaburri 2003 162,087 5,750 826 (1) 55,000
Chairman and CEO and
Director of Bancorp 2002 151,587 5,000 2,566 (2) -
and the Bank 2001 89,246 (3) - 42,029 (4) 55,000
Michael M. Ciaburri 2003 109,000 (5) 10,750 1,943 (6) 55,000
President and COO and - - -
Director of Bancorp
and the Bank
William F. Weaver 2003 4,03821 250 - 22,000
Vice President and
Chief Financial Officer
of Bancorp and the Bank
--------------------------------
1 Represents the value of the personal usage of the automobile provided
by Bancorp, including insurance and taxes paid thereon.
2 Represents the value of the personal usage of the automobile provided
by Bancorp, including insurance and taxes paid thereon.
3 Represents Mr. Joseph Ciaburri's salary from May 2001 through
December 2001.
4 The amount includes $33,332 paid to Mr. Joseph Ciaburri for
consulting fees, at two-thirds salary, prior to the commencement of operations,
$6,384 for his automobile lease payments and property taxes and insurance for
his vehicle, and $2,313 for club dues.
5 This Amount represents salary paid to Mr. Michael Ciaburri from
February 12, 2003 to December 31, 2003.
6 Represents the value of the personal usage of the automobile provided
by Bancorp, including insurance and taxes paid thereon.
7 Mr. Weaver joined the company on December 1, 2003. This 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)
--------------------------------------------------------------------------------------------------------------------------------
Name Number of
Securities Percent of Total
Underlying Options / SARs
Options / Granted to Exercise
SAR's Granted Employees in or Base Expiration
(#) Fiscal Year Price Date
--------------------------------------------------- ---------------- -------------------- ------------ -------------
Joseph V. Ciaburri, Chairman and Chief Executive 55,000 19.3% $ 7.27 6/10/13
Officer of Bancorp and the Bank 215 Church Street
New Haven, CT 06510
Michael M. Ciaburri, President, Chief Operating
Officer and a director of Bancorp and the Bank
215 Church Street 22,000 7.7% $ 7.27 2/08/13
New Haven, CT 06510 33,000 11.6% $ 7.96 12/9/13
William F. Weaver, Vice President & Chief
Financial Officer of Bancorp and the Bank
215 Church Street
New Haven, CT 06510 22,000 7.7% $ 8.18 11/12/13
--------------------------------------------------------------------------------------------------------------------------------
12
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
$180,000 (effective October 1, 2003) 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.
The Bank reimburses Mr. Ciaburri 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 have entered into an Amendment to the Employment
Agreement with Joseph V. Ciaburri. The amendment requires Bancorp to establish a
$500,000 life insurance policy to be owned by Mr. Ciaburri or a trust
established thereby. Bancorp shall pay 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.
The Bank of Southern Connecticut has entered into an employment
agreement with Michael M. Ciaburri that provides a base salary of $130,000
(effective date February 12, 2003) through December 31, 2003. Each year
thereafter, Michael Ciaburri will receive an increase in his base salary of at
least five percent, with the final number each year to be determined by the
Board of Directors of the Bank. Michael Ciaburri will be eligible to receive
merit bonuses at the discretion of the Bank's Board. Michael M. 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 and
club membership. In the event Michael Ciaburri's employment is terminated as a
result of a business combination, Mr. Ciaburri will receive a lump sum payment
equal to three times his base annual compensation at that time. Upon the
effective date of his employment agreement with the Bank, Michael M. Ciaburri
received options to purchase 22,000 shares of Bancorp Common Stock under the
2002 Plan.
Mr. Weaver is an employee at will. 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. Each year thereafter, Mr. Weaver would receive an
increase in his base salary in an amount determined by the Board of Directors of
the Bank. Mr. Weaver also received options to purchase 22,000 shares of Common
Stock of Bancorp under the 2002 Plan.
The 2002 Stock Option Plan
Bancorp has adopted the 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
13
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 275,00022 shares of Bancorp's
Common Stock are reserved for issuance upon the exercise of both incentive stock
options and nonqualified stock options granted Bancorp under the 2002 Plan. 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. For
incentive options granted to a person who owns more than 10% of the combined
voting power of Bancorp or any subsidiary (a "10% shareholder"), the exercise
price cannot be less than 110% of the fair market value on the date of grant.
Options under the 2002 Plan will have a term of 10 years unless
otherwise determined at the time of grant, except that incentive options granted
to any 10% shareholder will have a term of five years unless a shorter term is
fixed. Unless otherwise fixed at the time of grant, 40% of the options will
become exercisable one year from the date of grant, 30% of the options will
become exercisable two years from the date of grant, and 30% of the options will
become exercisable three years from the date of grant.
The 2001 Stock Option Plan
Bancorp adopted the 2001 Stock Option Plan (the "Option Plan"). 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 has voted to terminate the Option Plan, except for outstanding options
previously granted under that Option Plan, effective as of May 15, 2002.
Warrant Plans
Bancorp has adopted a 2001 Warrant Plan and 2001 Supplemental Warrant
Plan (collectively, "Warrant Plans"). The Warrant Plans have been approved by
the Board in order to recognize the various contributions made by the directors
and organizers in organizing and leading Bancorp and the Bank. An aggregate of
66,000 and 44,000 shares of Bancorp's Common Stock was reserved for issuance
under the 2001 Warrant Plan and the 2001 Supplemental Warrant Plan,
respectively. Several directors of Bancorp and the Bank, but none of Bancorp's
named executive officers, have been awarded warrants pursuant to the Warrant
Plans.
Director Compensation
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 meeting attended, 50 options for each committee
meeting chaired, and 40 options for each committee meeting attended. Directors
who sit on the Bancorp and Bank boards are compensated for only one meeting
where a meeting of both boards is held jointly.
--------------------------------
1 Originally, 250,000 shares were authorized for issuance under the
2002 Plan. On February 17, 2004, Bancorp issued a 10% stock dividend. Section 18
of the 2002 Plan authorizes the committee responsible for administering the 2002
Plan to make such changes to the 2002 Plan as it deems necessary in order to
preserve to optionees substantially proportionate rights in the event a stock
dividend is paid. Pursuant to that provision, the committee increased the number
of shares authorized under the 2002 Plan from 250,000 to 275,000.
14
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,
2003:
------------------------------- ---------------------------- ---------------------------- ----------------------------
Plan Category Number of securities to be Weighted-average exercise Number of securities
issued upon exercise of price of outstanding remaining available for
outstanding options, options, warrants future issuance under
warrants and rights and rights equity compensation plans
(a) (b) (excluding securities
reflected in column (a))
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plan 228,811 $8.48 21,189
approved by security holders
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not 132,481 $12.00 0 (1)
approved by security holders
------------------------------- ---------------------------- ---------------------------- ----------------------------
Total 361,292 $9.77 21,189
------------------------------- ---------------------------- ---------------------------- ----------------------------
The equity compensation plan approved by security holders referenced in
the chart, above, is the 2002 Plan. The plans not approved by security holders
are the Option Plan and the Warrant Plan.
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 NASDAQ Stock Market, 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, 2003 with
management and with McGladrey & Pullen, LLP, Bancorp's
independent auditors for 2003;
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, 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.
--------------------------------
1 The Option Plan was terminated on May 14, 2002.
15
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, 2003 for
filing with the SEC.
THE 2003 AUDIT COMMITTEE
Alphonse F. Spadaro, Jr. (Chair)
Elmer F. Laydon
Joshua H. Sandman
Audit Committee Financial Expert
Bancorp's Board of Directors has determined that Bancorp has one Audit
Committee financial expert serving on its Audit Committee. That person is
Alphonse F. Spadaro, Jr. Mr. Spadaro is "independent," as that term is used in
Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.
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 at 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, 2003, the Bank had made a
loan in the amount of $400,000 to All Brite Electric, Inc., whose treasurer is
director Carl Borrelli. Also as of December 31, 2003, the Bank had made loans in
the total amount of $283,435 to not-for-profit organizations guaranteed by
director Joshua Sandman. These loans were 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 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. E & C Investments paid $250,000 for the
participated loan assets.
For the years ended December 31, 2003 and December 31, 2002, Bancorp
paid consulting fees and expenses to Ciaburri Bank Strategies of $29,331 and
$118,155 respectively, for loan originations and the attainment of accounts. A
principal of that company is Michael M. Ciaburri, currently the President and
Chief Operating Officer of the Bank and the son of Bancorp's Chairman and Chief
Executive Officer. Michael Ciaburri was not serving as the President and Chief
Operating Officer of the Bank at the time he rendered and was paid for the
services described above. The consulting agreement under which the above
referenced payments were made was terminated as of the effective date of Michael
Ciaburri's appointment as President and Chief Operating Officer of the Bank.
During 2002, in order to secure the former Taco Bell property located
at 1475 Whalley Avenue, New Haven as a site for the Bank's Amity office, Laura
Realty, a partnership 50% owned by director Elmer F. Laydon, entered into a
contract to purchase this property for $575,000. Prior to the closing, Laura
Realty transferred its
16
rights in this contract to the Bank which then purchased the property for
$575,000. Laura Realty received no mark-up, profit or compensation from this
transaction. It was reimbursed $29,665 for actual expenses such as legal fees,
appraisal, engineering, and environmental study. All bills were submitted and
approved by Bancorp's Audit Committee Chairman. There was no mark-up or profit
on them. Elmer F. Laydon and Laura Realty did not receive any compensation for
his time.
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 2003 and 2002 the Bank purchased investment securities,
including accrued interest and fees, of approximately $10,950,000 and
$8,176,000, respectively, through an investment brokerage firm, 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
DIRECTOR NOMINEES.
PROPOSAL 2.
INCREASING THE NUMBER OF SHARES AUTHORIZED
UNDER THE 2002 STOCK OPTION PLAN
On February 10, 2004 the Board voted unanimously to increase the number
of shares authorized for distribution under the 2002 Plan by 90,000 shares, for
a total of 365,000 shares authorized for distribution.
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. Bancorp has granted options for 251,700 of the
275,000 shares currently authorized under the 2002 Plan. The increase is
proposed in order to permit Bancorp to award additional options under the 2002
Plan consistent with its purpose, as described above. Bancorp's directors and
officers would benefit from the approval of this proposal because they would be
eligible to receive additional options under the 2002 Plan. As noted elsewhere
in this Proxy Statement, Bancorp directors are being compensated for their
attendance at Board meetings in the form of additional options under the 2002
Plan.
Increasing the number of shares authorized under the 2002 Plan shall
require the affirmative vote of a plurality of the votes cast at the 2004 Annual
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" INCREASING THE NUMBER
OF SHARES AUTHORIZED UNDER THE 2002 PLAN BY 90,000, FOR A TOTAL NUMBER OF SHARES
AUTHORIZED OF 365,000.
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, 2004. This selection is being
presented to the shareholders for ratification at the 2004 Annual Meeting.
17
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 2004
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 2003, 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 2003 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, 2003:
2003 2002
Audit Fees $81,583 $74,344
----------
========== ==========
Audit Related Fees $6,235 $9,600
------------------
========== ==========
Tax Fees $7,565 $7,065
--------
========== ==========
All Other Fees NONE NONE
--------------
========================================== ========== ==========
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. 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. All audit
and non-audit services provided to Bancorp must be approved by Bancorp's audit
committee.
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 2004.
SHAREHOLDER NOMINATIONS AND
PROPOSALS FOR 2005 ANNUAL MEETING
Shareholders entitled to vote for the election of directors at the 2005
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 Secretary of Bancorp not less than 60 or more than 90 calendar
days prior to such Annual Meeting, which is expected to be held on May 17, 2005.
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
18
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 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 the 2005
annual Meeting which is not a nomination to the Board must be presented to
Bancorp in writing, and must be delivered to the Secretary of Bancorp not less
than 60 nor more than 90 calendar days prior to the 2005Annual Meeting, which is
expected to be held on May 17, 2005. Such notice shall include: (1) a brief
description of the business desired to be brought before the Annual Meeting and
the reasons for conducting such business at the 2005 Annual 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.
Nominations and proposals should be addressed to Rosemarie A. Romano,
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 2004 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
2004 Annual Meeting. If any other matters properly come before the 2004 Annual
Meeting, it is the intention of the persons named in the enclosed proxy to vote
said 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 2004 ANNUAL
MEETING A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB, FOR THE YEAR ENDED DECEMBER
31, 2002, INCLUDING THE FINANCIAL STATEMENTS AND EXHIBITS THERETO, ALONG WITH
THIS PROXY STATEMENT AND THE ENCLOSED PROXY, ON OR ABOUT APRIL 20, 2004.
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.
19
By Order of the Board of Directors
Joseph V. Ciaburri
Chairman and Chief Executive Officer
New Haven, Connecticut
April 20, 2004
20
Appendix A
----------
CHARTER OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
OF
SOUTHERN CONNECTICUT BANCORP, INC.
AND
THE BANK OF SOUTHERN CONNECTICUT
(Revised February 10, 2004)
Purpose and Composition
-----------------------
This Charter governs the operations of the Audit Committee. The purpose
of the Audit Committee shall be to (i) oversee Southern Connecticut Bancorp
Inc.'s ("Bancorp") and the Bank of Southern Connecticut `s ("the Bank")
accounting and financial reporting principles and policies and controls and
procedures; (ii) assess the completeness and fairness of the presentation of
Bancorp's and the Bank's financial statements and periodic financial reports to
shareholders and regulators, (iii) implement and monitor the internal audit
program which incorporates an assessment of business, control and fraud risk;
and (iv) select Bancorp's and the Bank's outside auditors and evaluate their
independence and the scope of their work. Bancorp and the Bank shall each
constitute an Audit Committee. The Audit Committees shall consist of three or
more independent directors as determined by the Board of Directors of Bancorp
and the Bank respectively. In making the determination as to whether a
particular director is independent of management, the Board of Directors of
Bancorp and the Bank shall consider all relevant information. In order to be
considered to be independent, an Audit Committee member may not have a
relationship which, in the opinion of Bancorp's and the Bank's Board of
Directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director An Audit Committee member may not:
o have been an employee of Bancorp or the Bank or any of its affiliates in the
current year or in any of the past three years; o have received any payments
from Bancorp or the Bank or any of its affiliates in excess of $60,000 (except
for Board service,
benefits under a tax qualifying retirement plan, or non-discriminatory
compensation) in the current or any of the past three fiscal years (the
same prohibition applies to immediate family24 members);
o be a member of the immediate family of an executive officer of
Bancorp or the Bank or any of its affiliates in the current or
in the past three years;
--------------------------------
1 "Immediate family" means a persons spouse, parents, children,
siblings, mother-in-law, father-in law, brother-in-law, sister-in-law,
son-in-law, daughter-in-law, and anyone who resides in such person's home.
NASDAQ Marketplace Rules Section 4200(14)(C).
1
o be an executive officer, partner or controlling shareholder of
a business (including a not-for-profit business) that conducts
business with Bancorp or the Bank where Bancorp or the Bank
received payments from or made payments to that business in
excess of 5% of Bancorp's or the Bank's or that business's
gross revenues for that year, or $200,000, whichever is
greater, in the current or any of the past three years;
o be employed as an executive of another entity where any of
Bancorp's or the Bank's executives serve on that entity's
compensation committee; or
o be a former partner or employee of Bancorp's or the Bank's
independent auditor who worked on Bancorp's or the Bank's
audit engagement until three years after such person's
relationship with the audit firm ended. (1)
All Audit Committee members shall be able to read and understand
financial statements of Bancorp and its operating subsidiaries, including the
balance sheet, income statement and statement of cash flows, or will become able
to do so within a reasonable period of time after appointment to the Audit
Committee. The Audit Committee shall have at least one member that has past
employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer, or other senior
officer with financial responsibilities. At least one member shall be a
"financial expert". To be considered a "financial expert", a person must have,
through education and experience,
o an understanding of generally accepted accounting principles
and financial statements;
o the ability to assess the general application of such
principles in connection with the accounting for estimates,
accruals, and reserves;
o experience preparing, auditing, analyzing or evaluating
financial statements that present a breadth and level of
complexity of accounting issues that are generally comparable
to the breadth and complexity of issues that can reasonably be
expected to be raised by Bancorp's or the Bank's financial
statements, or experience actively supervising one or more
persons engaged in such activities;
o an understanding of internal control over financial reporting;
and
o an understanding of audit committee functions.
No member of the Audit Committee shall be a "large customer" of the
Bank or represent a "large customer". A "large customer" is defined as an
individual or entity which, in the determination of the Board of Directors, has
such significant direct or indirect credit or other relationships with the Bank
that the termination of the same would likely materially and adversely impact
the Bank's financial condition or the results of its operations. (2)
--------------------------------
1 Based on Section 4200(14) of the NASDAQ Marketplace Rules. 26 12
C.F.R. Part 363, Appendix A(33).
2 The review of the impact of significant events is required by
Statement of Accounting Standards 90.
2
The members of the Audit Committee shall be elected by the Board of
Directors annually and shall serve until their successors are duly elected and
qualified. Unless a Chair is elected by the full Board of Directors, the members
of the Audit Committee may designate a Chair by majority vote of the full Audit
Committee membership.
Statement of Policy
-------------------
The Audit Committee shall provide assistance to the Board of Directors
in overseeing the financial reporting process, the systems of internal
accounting and financial controls, the performance and independence of the
external and internal auditors, and the annual independent audit of Bancorp's or
the Bank's financial statements.
The independent auditor for Bancorp and the Bank and the head of the
internal audit function shall report directly to the Audit Committee. The Audit
Committee shall have direct responsibility to select, compensate, evaluate and,
where appropriate, replace the independent auditor and the head of the internal
audit function. The Audit Committee shall be responsible for the resolution of
any disputes between management and the independent auditor regarding financial
reporting.
No member of the Committee may vote on any matter in which they, directly or
indirectly, have a material interest.
Responsibility and Processes
----------------------------
The primary responsibility of the Audit Committee is to oversee the
Bank's financial reporting process on behalf of the Board of Directors and
report the results of their activities to the Board of Directors. It is not the
duty of the Audit Committee to plan or conduct audits, to determine that the
Bank's financial statements are complete and accurate and are in accordance with
generally accepted accounting principles or to assure compliance with laws.
These are the responsibilities of management, the internal auditor and the
independent auditor. In carrying out its responsibilities, the Audit Committee's
policies and procedures should remain flexible in order to react to changing
conditions and circumstances.
The following shall be the principal recurring processes of the Audit
Committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with the understanding that the Audit Committee may alter or
supplement them as appropriate.
1. Annually, the Audit Committee shall review the proposal for the
appointment of the Bank's independent auditor and the associated fees and
formally approve the appointment of the Bank's independent auditor. No
independent auditing firm may be engaged to conduct the Bank's independent audit
if a senior management official of the Bank worked for the auditor on the Bank's
audit in the one year period prior to the new independent audit.
2. The Audit Committee shall discuss with the internal auditors and the
independent auditor the overall scope and plans for their respective audit
engagements.
3
3. The Audit Committee shall ensure that the independent auditor
submits annually a formal written statement delineating all relationships
between the independent auditor and the Bank. The Audit Committee is responsible
for engaging in a dialogue with the independent auditor with respect to such
disclosed relationships that may impact the objectivity and independence of the
independent auditor and recommending that the Board of Directors take
appropriate action to satisfy itself of the independent auditor's independence.
4. The Audit Committee shall establish policies and procedures for the
engagement of the independent auditor to provide non-audit services, and shall
approve in advance 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.
5. The Audit Committee shall discuss with management, the internal
auditors and the independent auditor the adequacy and effectiveness of the
Bank's accounting and financial records and system for monitoring and managing
business risk and legal compliance programs. Further, the Audit Committee shall
meet separately with the internal auditors and the independent auditor, with and
without management present, to discuss the results of their work.
6. The Audit Committee shall establish procedures for processing
complaints, including procedures for the receipt, retention, and treatment of
complaints received by the Bank regarding accounting, internal accounting
controls, or auditing matters, and the confidential, anonymous submission by
employees of the Bank of concerns regarding questionable accounting or auditing
matters.
7. The Audit Committee shall review and discuss with management, the
internal auditor and the independent auditor the Bank's interim financial
results to be included in the Bank's quarterly reports filed with the Securities
and Exchange Commission, and the matters required to be discussed by Statement
on Auditing Standards No.61 (Communications with Audit Committees), as it may be
modified or supplemented.(1)
8. The Audit Committee shall review with management and the independent
auditor the financial statements to be included in the Bank's Annual Report on
Form 10- K or 10-KSB (or the annual report to shareholders if distributed prior
to the filing of Form 10-K or 10-KSB), as well as the auditor's judgment about
the quality, not just acceptability, of the Bank's accounting principles as
applied in its financial reporting. The review shall also include a discussion
of the
--------------------------------
1 This review should occur prior to the Bank's filing of the Form 10-Q
or Form 10-QSB and, where possible, before the release of earnings reports.
4
reasonableness of judgments and estimates made in the preparation of the
financial statements that may be viewed as critical, as well as the clarity and
transparency of financial statement disclosures. In addition, the Audit
Committee shall discuss the results of the annual audit and any other matters
required to be communicated to the Audit Committee by the independent auditor
under generally accepted auditing standards, including the matters required to
be discussed by Statement on Auditing Standards No.61 (Communications with Audit
Committees), as it may be modified or supplemented.
9. Based on its review and discussions of items 7 and 8, the Audit
Committee shall recommend to the Board of Directors whether the financial
statements should be included in the Annual Report on Form 10-K or 10-KSB (or
the annual report to shareholders if distributed prior to the filing of Form
10-K or 10-KSB).
10. As a whole, or through the Chair, the Audit Committee shall review
the impact on the financial statements of significant events, transactions, or
changes in accounting principles or estimates which potentially affect the
quality of the financial reporting with management, the internal auditor and the
independent auditor prior to the filing of the Bank's Reports on Form l0-Q or
10-QSB or 10-K or 10-KSB, or as soon as practicable if the communications cannot
be made prior to its filing.28
11. The Audit Committee shall require the independent auditor to
communicate with the Audit Committee on a timely basis:
o all critical accounting policies and practices to be used;
o any disagreements with management on accounting, auditing or
reporting matters;
o all alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with management, ramifications of the use off such
alternative disclosures and treatments, and the treatment
preferred by the independent auditors; and
o other material written communications between the independent
auditor and management, such as any management letter,
representation letters or schedule of unadjusted differences
12. The Audit Committee shall review and reassess this Charter annually
and recommend any appropriate changes to the Board of Directors.
13. The Audit Committees shall meet as and when determined by the Chair
of the Committee or at the call of a member, however not less than four times
annually. Three members of the Committee shall constitute a quorum. The Audit
Committee shall meet at least once
--------------------------------
1. The review of the impact of significant events is required by Statement of
Accounting Standards 90.
5
annually separately with management, the internal auditor and the outside
auditors to discuss matters that the Audit Committee or any of these parties
believe should be discussed privately with the Committee. The Audit Committee
may request any officer or employee of Bancorp or the Bank or Corporate Counsel
or independent auditors to attend a meeting of the Audit Committee or to meet
with any members of, or consultants to, the Audit Committee. Members of the
Audit Committee may participate in a meeting of the Audit Committee by means of
a conference call or similar communications equipment by means of which all
persons participating in the meeting can hear each other. Except under
extraordinary circumstances as determined by the Committee Chair, notice shall
be delivered to all Audit Committee members at least forty-eight hours in
advance of the meeting date.
14. Any action required or permitted to be taken at a meeting of the
Committee may be taken without a meeting if consent in writing, setting forth
the action so taken, is signed by all members of the Committee.
15. At the next meeting of the Board of Directors following any meeting
of the Committee, a report of the Committee findings and action shall be
rendered by the Chairperson of the Committee.
The Audit Committee shall review with management and the independent
auditor any pending or threatened action by regulators or government agencies
and any employee complaints or published reports that raise material issues
regarding the Bank's financial statements or accounting policies. The Audit
Committee may request any officer or employee of the Bank or the Bank's counsel
or independent auditor to attend a meeting of the Audit Committee or to meet
with any members of, or consultants to, the Audit Committee. The Audit Committee
shall also have the resources and authority appropriate to discharge its
responsibilities, including the authority to engage its own counsel and other
advisors and determine the appropriate funding to compensate the Bank's
independent auditor and any advisors employed by the Audit Committee.
Reports
---------
1. The Audit Committee shall prepare or cause the preparation of the
report required by the rules of the Securities and Exchange Commission for
inclusion in the Bank's annual proxy statement.
2. The Committee shall submit any recommendation for changes to the
Audit Committee Charter to the full Board of Directors for approval.
3. The Audit Committee shall maintain minutes of its meetings and
regularly report its activities to the Board of Directors.
6
Reliance on Information Provided
--------------------------------
In adopting this Audit Committee Charter, the Board of Directors
acknowledges that the Audit Committee members are not employees of the Bank and
are not providing any expert or special assurance as to the Bank's financial
statements or any professional certification as to the independent auditor's
work or auditing standards. Each member of the Audit Committee shall be entitled
to rely on the integrity of those persons and organizations within and outside
the Bank that have provided information to the Audit Committee and the accuracy
and completeness of the financial and other information provided to the Audit
Committee by such persons or organizations absent actual knowledge to the
contrary.
7
REVOCABLE PROXY
SOUTHERN CONNECTICUT BANCORP, INC.
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD MAY 18, 2004
The undersigned hereby appoints Alphonse F. Spadaro, Jr. and Janette J. Parker
as proxies for the undersigned with full powers of substitution to vote all
shares of the Common Stock, par value $0.01 (the "Common Stock"), of Southern
Connecticut Bancorp, Inc. ("Bancorp") which the undersigned may be entitled to
vote at the Annual Meeting of Shareholders ("2004 Annual Meeting") of Bancorp to
be held at The Quinnipiack Club, 221 Church Street, New Haven, Connecticut
06510, at 10:00 A.M., on May 18, 2004, or any adjournment thereof as follows:
The undersigned acknowledges receipt of the Notice of the 2004 Annual Meeting
and Proxy Statement.
Please be sure to sign and date ---------------------------
this Proxy in the box below. | Date |
-----------------------------------------------------------------
| |
| |
--Shareholder sign above----------Co-holder (if any) sign above--
With- For All
For hold Except
1. Election of directors. Proposal to elect [ ] [ ] [ ]
Joseph V. Ciaburri and Elmer F. Laydon
INSTRUCTION: To withhold authority to vote for any individual
nominee, mark "For All Except" and write that nominee's name
in the space provided below.
------------------------------------------------------------------------
2. Proposal to increase the number
of shares authorized under the 2002 For Against Abstain
Stock Option Plan from [ ] [ ] [ ]
275,000 to 365,000 shares.
For Against Abstain
3. Proposal to ratify the appointment of [ ] [ ] [ ]
McGladrey & Pullen, LLP as independent
accountants for the year ending December
31, 2004.
In their discretion the proxies are authorized to vote upon such other business
as may properly come before the 2004 Annual Meeting, or any adjournment thereof.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND [ ]
THE MEETING.
--------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
SOUTHERN CONNECTICUT BANCORP, INC.
--------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE SHAREHOLDER. IF NO DIRECTION IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR"
THE ELECTION OF ALL NOMINEES LISTED IN PROPOSAL 1, AND PROPOSALS 2 AND 3. WITH
RESPECT TO THE ELECTION OF DIRECTORS, THE VOTES ENTITLED TO BE CAST BY THE
SHAREHOLDER WILL BE DIVIDED AMONG THE NOMINEES FOR WHOM THE PROXIES ARE
AUTHORIZED TO VOTE IN SUCH MANNER AS MAY BE DETERMINED BY THE PROXIES.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney,
executor, administrator, trustee, guardian or for a corporation, please give
your full title as such. If shares are owned jointly, both owners should sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
--------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
____________________________________________________
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