<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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 Pursuant to sec.240.14a-11(c) or sec.240.14a-12
MEDFORD BANCORP, INC.
(Name of Registrant as Specified In Its Charter)
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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 of
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:
- --------------------------------------------------------------------------------
<PAGE> 2
PRELIMINARY COPIES
MEDFORD BANCORP, INC.
29 HIGH STREET
MEDFORD, MASSACHUSETTS 02155
TELEPHONE: (781) 395-7700
March , 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Medford Bancorp, Inc. (the "Company") to be held on Monday, April 27, 1998 at
10:00 a.m., local time, at Medford Savings Bank, Five High Street, Suite 202,
Medford, Massachusetts.
The Annual Meeting has been called for the following purposes:
1. To elect three Directors of the Company for a three-year term.
2. To approve the amendment of the Company's Amended Articles of
Organization to limit certain monetary liabilities of Directors.
3. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 2, 1998, as
the record date for determining stockholders entitled to notice of and to vote
at the Annual Meeting and any adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT AT THE ANNUAL MEETING
YOU VOTE "FOR" PROPOSALS ONE AND TWO.
Very truly yours,
ARTHUR H. MEEHAN
Chairman, President and Chief
Executive Officer
IMPORTANT
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
<PAGE> 3
PRELIMINARY COPIES
MEDFORD BANCORP, INC.
29 HIGH STREET
MEDFORD, MASSACHUSETTS 02155
TELEPHONE: (781) 395-7700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 1998
Notice is Hereby Given that the Annual Meeting of Stockholders of Medford
Bancorp, Inc. (the "Company") will be held at Medford Savings Bank, Five High
Street, Suite 202, Medford, Massachusetts, on Monday, April 27, 1998, at 10:00
a.m., local time, for the following purposes:
1. To elect three Directors of the Company for a three-year term.
2. To approve the amendment of the Company's Amended Articles of
Organization to limit certain monetary liabilities of Directors.
3. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
The Board of Directors of the Company has fixed the close of business on
March 2, 1998, as the record date for determining stockholders entitled to
notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof. Only holders of record of the Company's common stock at
the close of business on that date will be entitled to notice of and to vote at
the Annual Meeting and any adjournments or postponements thereof.
In the event that there are not sufficient votes to approve the foregoing
proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned
or postponed in order to permit further solicitation of proxies by the Company.
The above matters are described in detail in the accompanying Proxy
Statement.
By Order of the Board of Directors
EUGENE R. MURRAY
Clerk
March , 1998
Medford, Massachusetts
IMPORTANT
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
<PAGE> 4
PRELIMINARY COPIES
MEDFORD BANCORP, INC.
29 HIGH STREET
MEDFORD, MASSACHUSETTS 02155
TELEPHONE: (781) 395-7700
------------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 1998
VOTING, REVOCATION AND SOLICITATION OF PROXIES
ANNUAL MEETING
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Medford Bancorp, Inc. (the "Company")
for use at its 1998 Annual Meeting of Stockholders to be held at Medford Savings
Bank, Five High Street, Suite 202, Medford, Massachusetts, on Monday, April 27,
1998, at 10:00 a.m., local time, and any adjournments or postponements thereof.
At the Annual Meeting, stockholders of the Company will be asked to
consider and vote upon the following matters:
1. To elect three Directors of the Company for a three-year term.
2. To approve the amendment of the Company's Amended Articles of
Organization to limit certain monetary liabilities of Directors.
3. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
The accompanying Notice of Meeting and this Proxy Statement are initially
being mailed on or about March , 1998 to record holders of the Company's
common stock as of March 2, 1998 (the "Record Date").
THE COMPANY
The Company is a bank holding company principally conducting business
through Medford Savings Bank (the "Bank"). On November 26, 1997, the Company and
the Bank completed a reorganization (the "Reorganization") in which the Bank
ceased to be a public company and became a wholly-owned subsidiary of the
Company, and each issued and outstanding share of common stock of the Bank was
converted into and exchanged for one share of common stock, $.50 par value per
share, of the Company (the "Common Stock"). Moreover, options formerly
exercisable for shares of the Bank's common stock are now exercisable for shares
of the Company's Common Stock.
ANNUAL REPORT
The Company's 1997 Annual Report, including the Company's Annual Report on
Form 10-K, for the year ended December 31, 1997 (the "Annual Report"), which
contains the Company's consolidated financial statements audited by its
independent certified public accountants and their report thereon, is being
delivered simultaneously with this Proxy Statement to stockholders of record of
the Company as of the Record Date. The Annual Report, however, is not part of
the Company's proxy soliciting material. ADDITIONAL COPIES OF THE ANNUAL REPORT,
AND COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, FOR THE YEAR ENDED
DECEMBER 31, 1997 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC") (WITHOUT EXHIBITS), ARE AVAILABLE UPON WRITTEN REQUEST, WITHOUT CHARGE,
FROM THE COMPANY. SUCH REQUESTS SHOULD BE DIRECTED TO: MEDFORD BANCORP, INC., 29
HIGH STREET, MEDFORD, MASSACHUSETTS 02155, ATTENTION: SHAREHOLDER RELATIONS.
<PAGE> 5
RECORD DATE; VOTING
The Board of Directors of the Company has fixed the close of business on
March 2, 1998 as the Record Date for determining stockholders entitled to notice
of and to vote at the Annual Meeting and any adjournments or postponements
thereof. Only holders of record of Common Stock of the Company at the close of
business on the Record Date will be entitled to notice of and to vote at the
Annual Meeting and any adjournments or postponements thereof. At the close of
business on the Record Date, there were shares of Common Stock of the
Company issued and outstanding and entitled to vote at the Annual Meeting and
any adjournments or postponements thereof. As of such date, there were
approximately holders of record of the Company's Common Stock. The
holders of the Company's Common Stock outstanding as of the close of business on
the Record Date will be entitled to one vote for each share held upon each
matter properly submitted to the Annual Meeting and any adjournments or
postponements thereof.
PROXIES
Holders of the Company's Common Stock are requested to complete, date, sign
and promptly return the accompanying proxy card in the enclosed envelope. The
proxy card must be signed and dated for it to be properly executed. If the
enclosed proxy card is properly executed and returned to the Company in time to
be voted at the Annual Meeting, the shares represented thereby will, unless such
proxy has previously been revoked, be voted in accordance with the instructions
marked thereon. Executed proxies with no instruction indicated thereon will be
voted "FOR" Proposal One (the election of the three nominees of the Board of
Directors of the Company) and "FOR" Proposal Two (the amendment of the Amended
Articles of Organization). In their discretion, the persons named in the proxy
card are each authorized to vote upon such other business as may properly come
before the Annual Meeting and any adjournments or postponements thereof.
The presence of a stockholder at the Annual Meeting will not automatically
revoke the stockholder's proxy. A stockholder of record may, however, revoke a
proxy at any time prior to the voting thereof on any matter by filing with the
Clerk of the Company a written notice of revocation, by delivering to the
Company a duly executed proxy bearing a later date, or by attending the Annual
Meeting and voting in person. All written notices of revocation and other
communications with respect to revocation of proxies in connection with the
Annual Meeting should be addressed as follows: Medford Bancorp, Inc., 29 High
Street, Medford, Massachusetts 02155, Attention: Shareholder Relations.
In addition to the use of the mails, proxies may be solicited personally or
by telephone or telegraph by officers, Directors and employees of the Company
who will not be specially compensated for such solicitation activities.
Arrangements will also be made with brokerage firms and other custodians,
nominees and fiduciaries for forwarding solicitation materials to the beneficial
owners of shares held of record by such persons, and the Company will reimburse
such persons for their reasonable out-of-pocket expenses incurred in that
connection. The Company has also retained Corporate Investor Communications, a
proxy soliciting firm, to assist in the solicitation of proxies at a fee of
approximately $4,000, plus reimbursement of certain out-of-pocket costs. The
cost of soliciting proxies, including the fee of Corporate Investor
Communications, will be borne by the Company.
QUORUM AND STOCKHOLDER VOTE REQUIRED
The presence, in person or by proxy, of at least a majority of the total
number of issued and outstanding shares of Common Stock is necessary to
constitute a quorum for the transaction of business at the Annual Meeting. A
quorum being present, (i) a plurality of the votes cast at the Annual Meeting is
necessary to elect each of the nominees for Director and (ii) at least 66 2/3%
of the total votes eligible to be cast at the Annual Meeting is necessary to
amend the Company's Amended Articles of Organization.
In accordance with the By-laws of the Company and applicable state law,
abstentions, votes withheld for director nominees and broker non-votes (that is,
shares represented at the meeting which are held by a broker or other nominee
and as to which (i) instructions have not been received from the beneficial
owner or the
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<PAGE> 6
person entitled to vote and (ii) the broker or nominee does not have
discretionary voting power) shall be treated as shares that are present and
entitled to vote for the purpose of determining whether quorum is present.
Abstentions and broker non-votes will not be counted as voting at the Annual
Meeting and, therefore, (i) will have no effect on the outcome of Proposal One,
and (ii) will have the effect of negative votes for Proposal Two.
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<PAGE> 7
PROPOSAL ONE
ELECTION OF CLASS OF DIRECTORS
The Board of Directors of the Company currently consists of ten members and
is divided into three classes. One of the three classes of Directors consists of
four members and two classes consist of three members. The term of office of the
Directors in one of the classes expires in each year, and their successors are
elected at each annual meeting of stockholders for a term of three years and
until their successors are elected and qualified. The terms of Paul J. Crowley,
Edward J. Gaffey, Andrew D. Guthrie, Jr., M.D. as Directors of the Company
expire in 1998.
At the Annual Meeting, three persons will be elected Directors of the
Company to serve for a three-year term until the 2001 Annual Meeting of
Stockholders and until their successors are elected and qualified. The Board of
Directors of the Company has nominated Paul J. Crowley, Edward J. Gaffey, Andrew
D. Guthrie, Jr., M.D. for reelection as Directors of the Company for three-year
terms.
Unless authority to do so has been withheld or limited in the proxy, it is
the intention of the persons named in the proxy to vote the shares represented
by each properly executed proxy "FOR" the election of each of the nominees named
above as Directors of the Company. The Board of Directors believes that each of
the nominees will stand for election and, if elected, will serve as a Director.
However, if any nominee fails to stand for election or is unable to accept
election, the proxies will be voted for the election of such other person or
persons as the Board of Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF EACH OF THE NOMINEES PROPOSED BY MANAGEMENT FOR DIRECTORS NAMED HEREIN.
DIRECTORS
The following table sets forth as of January 1, 1998, information supplied
by each person who is currently a Director and/or a nominee for election as a
Director of the Company with respect to such person's age, principal occupation
for the past five years and the year in which the person began serving as a
Director or Trustee of the Bank (prior to the Reorganization).
NOMINEES FOR ELECTION AT THE ANNUAL MEETING FOR A THREE-YEAR TERM
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
- ------------------------------ --- -------- -----------------------------------------------
<S> <C> <C> <C>
Paul J. Crowley............... 67 1993 Founder and Chairman Emeritus of Computer
Partners and former President of C.S.C.
Consulting Group (retired)
Edward J. Gaffey.............. 60 1984 President of Country Way Trust; former
President and Treasurer of Edward J. Gaffey &
Sons, Inc., operating funeral homes in Medford,
Arlington and Scituate, Massachusetts
Andrew D. Guthrie, Jr., 68 1983 Physician, President of Mistick Pediatric
M.D......................... Associates
</TABLE>
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DIRECTORS WHOSE TERMS WILL EXPIRE AT THE 1999 ANNUAL MEETING
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
- ------------------------------ --- -------- -----------------------------------------------
<S> <C> <C> <C>
David L. Burke................ 54 1995 President and Treasurer of Boston Steel &
Manufacturing Company in Malden, Massachusetts
Mary Lou Doherty.............. 72 1983 Assistant Principal, Medford school system
(retired)
Arthur H. Meehan.............. 62 1992 Chairman of the Board of Directors of the
Company and the Bank; President and Chief
Executive Officer of the Company; President,
Chief Executive Officer and a Director of the
Bank since 1993
Eugene R. Murray.............. 65 1979 Clerk of the Company and of the Bank;
Underwriting Manager of Boston Office of Cigna
Special Risk Facilities (retired)
</TABLE>
DIRECTORS WHOSE TERMS WILL EXPIRE AT THE 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
- ------------------------------ --- -------- -----------------------------------------------
<S> <C> <C> <C>
Edward D. Brickley............ 62 1973 Manager of Corporate International Accounting
at Polaroid Corporation in Cambridge,
Massachusetts (retired)
Robert A. Havern, III......... 48 1981 Attorney in private practice in Arlington,
Massachusetts; Member of State Legislature of
the Commonwealth of Massachusetts since 1987
Francis D. Pizzella........... 70 1976 Attorney at law; President of Savings Bank Life
Insurance Company of Massachusetts and
President of the Savings Bank Employees
Retirement Association (retired)
</TABLE>
THE BOARD OF DIRECTORS, ITS COMMITTEES AND COMPENSATION
The following is a description of the Executive, Audit, Compensation and
Options Committees of the Board of Directors of the Company. The Board of
Directors acts as a nominating committee, selecting nominees for election or
reelection as Directors and officers. The Board of Directors will consider a
nominee for election to the Board of Directors recommended by a stockholder of
record if the stockholder submits the nomination in compliance with the
requirements of the Company's By-Laws. See "STOCKHOLDER PROPOSALS" for a summary
of these requirements.
Prior to February 24, 1998, each of the members of the Company's Executive
Committee, Audit Committee and Compensation and Options Committee also served as
a member of the equivalent committee of the Bank. Beginning on February 24,
1998, the Bank's Audit Committee and Compensation and Options Committee ceased
to exist.
Executive Committee. The Bank's Executive Committee met 14 times and the
Company's Executive Committee did not meet during fiscal year 1997. The members
of the Executive Committees of the Company and of the Bank during 1997 were
Messrs. Meehan (Chairman), Crowley, Gaffey, Murray and Pizzella. The Executive
Committee is vested with the authority of the Board of Directors in most matters
between meetings of the Board of Directors. Except for Mr. Meehan, who received
no compensation for his service, members of the Bank's Executive Committee
received $400 for each meeting they attended during fiscal year 1997, as well as
annual fee of $8,600.
Audit Committee. The Bank's Audit Committee met 6 times and the Company's
Audit Committee did not meet during fiscal year 1997. The members of the Audit
Committees of the Company and of the Bank were Messrs. Gaffey (Chairman and
Clerk), Brickley and Pizzella. The Audit Committee reviews the financial
statements and the scope of the annual audit, monitors internal financial and
accounting controls, and
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<PAGE> 9
recommends to the Board of Directors of the Company the appointment of
independent certified public accountants. Members of the Bank's Audit Committee
received $450 (the Clerk received an additional fee of $125 per meeting) for
each meeting they attended during fiscal year 1997 and an annual fee of $2,400.
Compensation and Options Committee. The Bank's Compensation and Options
Committee met 4 times and the Company's Compensation and Options Committee did
not meet during fiscal year 1997. The Compensation and Options Committees of the
Company and of the Bank consist of Messrs. Murray (Chairman), Burke, Crowley,
Gaffey, and Pizzella. The Compensation and Options Committee establishes salary
increases and other compensation-related issues for the Chairman, President and
Chief Executive Officer, and reviews the proposed salary increases of all other
senior executives and all officers as a group. The Compensation and Options
Committee also determines, pursuant to the Medford Bancorp, Inc. Stock Option
Plan, the persons to whom options will be granted, the number of shares
underlying the options, the types of options and other terms and conditions of
the options. Members of the Bank's Compensation and Options Committee received
$450 for each meeting they attended during fiscal year 1997.
The Board of Directors of the Bank held 12 meetings during fiscal year
1997. Each of the Directors attended at least 75% of the total number of
meetings of the Board of Directors and of the committees of the Bank of which he
or she was a member. Except for Mr. Meehan, who received no compensation for his
service, directors of the Bank received $650 for each meeting of the Board of
Directors that they attended.
The Board of Directors of the Company held 2 meetings during fiscal 1997.
Each of the Directors attended at least 75% of the total number of meetings of
the Board of Directors of the Company. Except for Mr. Meehan, who received no
compensation for his service, directors of the Company received $325 for each
meeting of the Board of Directors that they attended.
Pursuant to the Company's Directors Deferred Compensation Plan for Outside
Directors, non-employee Directors may defer payment of all or any part of annual
fees, meeting fees, committee fees, and other payments for services rendered by
the Directors ("Fees") and may invest such Fees in the Company's Common Stock.
Under this plan, Fees earn interest and dividends and are payable at the
Director's election in installments over a three-year period following the
Director's retirement from the Board of Directors, death, or disability.
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<PAGE> 10
OWNERSHIP BY MANAGEMENT AND OTHER STOCKHOLDERS
The following table sets forth certain information with respect to the
number of shares of the Company's Common Stock beneficially owned as of January
1, 1998 by the Chairman, President and Chief Executive Officer, the other four
most highly compensated executive officers (including executive officers of the
Bank), each Director and all Directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE
AMOUNT AND NATURE OF OF
BENEFICIAL OUTSTANDING
EXECUTIVES OWNERSHIP(1)(2)(3) COMMON STOCK
- --------------------------------------------------------- -------------------- ------------
<S> <C> <C>
Arthur H. Meehan......................................... 132,691(4)
Chairman, President, Chief Executive Officer
and Director of the Company
Phillip W. Wong.......................................... 32,210 *
Senior Vice President, Chief Financial Officer
and Treasurer of the Company
George A. Bargamian...................................... 37,450 *
Senior Vice President of the Bank
Eric B. Loth............................................. 30,616 *
Senior Vice President of the Bank
William F. Rivers........................................ 41,346(5) *
Senior Vice President of the Bank
DIRECTORS
- ---------------------------------------------------------
Edward D. Brickley....................................... 15,687(6) *
David Burke.............................................. 2,677 *
Paul J. Crowley.......................................... 51,784(7) [ ]
Mary Lou Doherty......................................... 10,036 *
Edward J. Gaffey......................................... 51,613(8) [ ]
Andrew D. Guthrie........................................ 23,467 *
Robert A. Havern......................................... 16,198 *
Eugene R. Murray......................................... 36,100 *
Francis D. Pizzella...................................... 75,294(9) [ ]
All Directors and Executive Officers as a Group
(15 persons)........................................... 564,596 [ ]
</TABLE>
- ------------------------
* Less than 1%
(1) Unless otherwise noted in the footnotes to this table, each of the
Directors, nominees and executive officers has sole or shared voting and
investment power for the shares of Common Stock beneficially owned by
him/her. The amounts set forth for Messrs. Meehan, Wong, Bargamian, Loth and
Rivers include 4,532, 1,209, 5,698, 24, and 10,741 shares, respectively,
allocated to their accounts under the Bank's Employees' Stock Ownership Plan
(the "ESOP").
(2) The shares of Common Stock in this column include those shares which may be
acquired by the persons or group indicated pursuant to the exercise of stock
options within 60 days of January 1, 1998.
(3) This share ownership includes shares of Common Stock allocated to the
account of Directors under the Deferred Investment Plan for Outside
Directors. Under this plan 3,416, 627, 4,388, 14,493, 8,071, 14,434 and
13,547 shares of Common Stock had been allocated to the accounts of Messrs.
Brickley, Burke, Crowley, Gaffey, Guthrie, Murray and Pizzella,
respectively.
(4) Mr. Meehan also has interest in a 401(k) Plan Share Fund which may invest in
the Company's stock. He does not have voting power over the shares, but does
have the right to dispose of them.
(5) Mr. Rivers also has an interest in a 401(k) Plan Share Fund which may invest
in the Company's stock. He does not have voting power over the shares, but
does have the right to dispose of them.
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<PAGE> 11
(6) Of the shares of Common Stock listed as owned by Mr. Brickley, 3,534 shares
are owned by Mr. Brickley's wife. Mr. Brickley disclaims beneficial
ownership of these shares.
(7) Of the shares of Common Stock listed as owned by Mr. Crowley, 5,000 shares
are owned by Mr. Crowley's wife. Mr. Crowley disclaims beneficial ownership
of these shares.
(8) Of the shares of Common Stock listed as owned by Mr. Gaffey, 10,100 shares
are owned by Mr. Gaffey's wife. Mr. Gaffey disclaims beneficial ownership of
these shares.
(9) Of the shares of Common Stock listed as owned by Mr. Pizzella, 16,127 shares
are owned by Mr. Pizzella's wife. Mr. Pizzella disclaims beneficial
ownership of these shares.
The following table presents information as to the entities known to the
Company to be beneficial owners of more than five percent of the Common Stock of
the Company as of December 31, 1997.
<TABLE>
<CAPTION>
PERCENTAGE
AMOUNT AND NATURE OF
OF BENEFICIAL OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP COMMON STOCK
- ------------------------------------------------------------- ----------------- ------------
<S> <C> <C>
Dimensional Fund Advisors Inc................................ 335,500(1) --
1299 Ocean Avenue, 11th Floor, Santa Monica, California
90401
Investors Bank and Trust Bank, in its capacity as Trustee of
the Medford Savings Bank Employees' Stock Ownership Plan... 250,245(2) --
24 Federal Street, Boston, Massachusetts 02110
</TABLE>
- ---------------
(1) The Company has relied upon the information set forth in the Schedule 13G
filed with the SEC by Dimensional Fund Advisors Inc. ("Dimensional"), for
beneficial ownership of shares of Common Stock as of December 31, 1997, all
of which are held in portfolios of DFA Investment Dimensions Group Inc., an
open-end investment company registered under the Investment Company Act of
1940 (the "1940 Act"), or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares of Common Stock. Persons who are
officers of Dimensional also serve as officers of DFA Investment Dimensions
Group, Inc., (the "Fund") and The DFA Investment Trust Company (the
"Trust"), each an open-ended management investment company registered under
the 1940 Act. In their capacity as officers of the Fund and the Trust, these
persons vote 38,200 additional shares which are owned by the Fund and 54,100
shares which are owned by the Trust (both included in the beneficial
ownership number of Dimensional).
(2) The Company has relied on information furnished by the Trustee of the ESOP
to the Company.
EXECUTIVE COMPENSATION
Executive officers of the Company currently receive no compensation in
their capacities as executive officers of the Company but are compensated as
employees of the Bank.
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<PAGE> 12
The following table sets forth information concerning the compensation for
services rendered in all capacities during the three fiscal years through 1997
earned by the Chairman, President and Chief Executive Officer, and the four
other most highly compensated executive officers of the Bank (who, in the case
of Messrs. Meehan and Wong, are also officers of the Company).
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(3)
------------ ALL
ANNUAL COMPENSATION(1) SECURITIES OTHER
NAME AND PRINCIPAL POSITION WITH THE -------------------------------- UNDERLYING ANNUAL
BANK YEAR SALARY($) BONUS(2)($) OPTIONS(#) COMPENSATION
- ------------------------------------- ---- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Arthur H. Meehan, 1997 $ 380,000 $75,000 5,000 $100,961(4)
Chairman, President and 1996 345,000 60,000 None 38,375(4)
Chief Executive Officer 1995 300,000 50,000 None 63,841(4)
Phillip W. Wong, 1997 $ 125,000 $25,000 2,000 $ 2,250(5)
Executive Vice President, 1996 114,000 25,000 None 2,085(5)
Chief Financial Officer, 1995 104,000 25,000 None 11,162(5)
and Treasurer
George A. Bargamian, 1997 $ 118,000 $15,000 2,000 $ 2,040(6)
Senior Vice President 1996 110,000 18,000 None 1,950(6)
1995 101,000 20,000 None 10,859(6)
Eric B. Loth, 1997 $ 116,000 $15,000 2,000 $ 1,890(7)
Senior Vice President 1996 110,000 10,000 None 1,725(7)
1995 102,500 5,000 None 515(7)
William F. Rivers, 1997 $ 110,000 $15,000 2,000 $ 1,905(8)
Senior Vice President 1996 103,000 17,000 None 1,845(8)
1995 97,000 20,000 None 10,706(8)
</TABLE>
- ---------------
(1) Excludes the value of certain perquisites and benefits furnished by the
Company or Bank to its executive officers to facilitate the conduct of its
business. The aggregate amount of such benefits for each executive officer
did not exceed the lesser of $50,000 or 10% of the compensation reported in
the table for such individual.
(2) Amounts paid under the Bank's Incentive Compensation Program for services
rendered in the year reported.
(3) None of the executives listed received any restricted stock awards or LTIP
payouts during the three years reported.
(4) A contribution of $2,375, $2,375 and $2,310 was made to Mr. Meehan's 401(k)
account in 1997, 1996 and 1995, respectively. A contribution of $19,531 was
made to Mr. Meehan's account in the ESOP in 1995. A contribution of $42,739,
$36,000 and $42,000 was made to Mr. Meehan's Supplemental Executive
Retirement Plan in 1997, 1996 and 1995, respectively. A contribution of
$55,847 was made to Mr. Meehan's Executive Supplemental Benefit Agreement in
1997.
(5) A contribution of $2,250, $2,085 and $1,935 was made to Mr. Wong's 410(k)
account in 1997, 1996 and 1995, respectively, and a contribution of $9,227
was made to Mr. Wong's account in the ESOP in 1995.
(6) A contribution of $2,040, $1,950 and $1,846 was made to Mr. Bargamian's
401(k) account in 1997, 1996 and 1995, respectively, and a contribution of
$9,013 was made to Mr. Bargamian's account in the ESOP in 1995.
9
<PAGE> 13
(7) A contribution of $1,890, $1,725 and $515 was made to Mr. Loth's 401(k)
account in 1997, 1996 and 1995, respectively.
(8) A contribution of $1,905, $1,845 and $1,830 was made to Mr. Rivers' 401(k)
account in 1997, 1996 and 1995, respectively, and a contribution of $8,876
was made to Mr. Rivers' account in the ESOP in 1995.
II. STOCK OPTIONS GRANTED IN FISCAL 1997
The following table sets forth information concerning individual grants of
stock options made during fiscal 1997 to each executive officer of the Company
and/or the Bank listed below. Neither the Company nor the Bank granted any stock
appreciation rights during fiscal 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
- ----------------------------------------------------------------------------------------- AT ASSUMED ANNUAL
NUMBER OF PERCENTAGE OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES BASE PRICE EXPIRATION --------------------
NAME GRANTED IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ----------------------------- ---------- -------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Arthur H. Meehan............. 5,000 18.5% $ 39.50 12/22/07 $124,207 $314,764
Phillip W. Wong,............. 2,000 7.4% $ 39.50 12/22/07 $ 49,683 $125,906
George A. Bargamian.......... 2,000 7.4% $ 39.50 12/22/07 $ 49,683 $125,906
Eric B. Loth................. 2,000 7.4% $ 39.50 12/22/07 $ 49,683 $125,906
William F. Rivers............ 2,000 7.4% $ 39.50 12/22/07 $ 49,683 $125,906
</TABLE>
III. OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth the aggregate number of stock options
exercised by each executive officer of the Company and/or the Bank listed below
and, for each such executive officer, the number of exercisable and
unexercisable stock options and the value of exercisable and unexercisable
"in-the-money" stock options at the end of fiscal 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES IN-THE-MONEY
UNDERLYING SECURITIES
UNEXERCISED UNDER-
OPTIONS LYING OPTIONS
AT FY-END(#) AT FY-END($)
SHARES ACQUIRED -------------- -----------------
ON EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE(1)
- ------------------------------------ --------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Arthur H. Meehan.................... -0- -0- 86,892/5,000 $2,384,139/-0-
Phillip W. Wong..................... -0- -0- 30,000/2,000 $851,250/-0-
George A. Bargamian................. -0- -0- 23,000/2,000 $783,438/-0-
Eric B. Loth........................ -0- -0- 30,000/2,000 $611,250/-0-
William F. Rivers................... -0- -0- 25,500/2,000 $868,594/-0-
</TABLE>
- ---------------
(1) Market value of underlying securities at exercise or year-end, minus the
exercise or base price. Market value is calculated on the basis of the
closing price for the Common Stock on NASDAQ of $39.25 on December 31, 1997.
PENSION PLAN
The Bank provides a non-contributory qualified retirement plan for its
eligible employees through the Savings Banks Employees Retirement Association.
The retirement plan provides that the retirement benefit
10
<PAGE> 14
provided to any participant will be based on the average of the highest three
consecutive years of cash compensation during the participant's employment at
the Bank.
The following table illustrates annual pension benefits for retirement at
age 65 under the most advantageous plan provisions in effect on December 31,
1997. The benefits listed in the table are not subject to any deduction for
Social Security or other offset amount.
<TABLE>
<CAPTION>
ANNUAL PENSION BENEFIT
BASED ON YEARS OF SERVICE(1)(2)
----------------------------------------------
25 OR
AVERAGE COMPENSATION 10 YEARS 15 YEARS 20 YEARS MORE YEARS
- ----------------------------------------------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
$60,000.............................................. 9,342 14,013 18,684 23,354
80,000.............................................. 13,042 19,563 26,084 32,604
100,000.............................................. 16,742 25,113 33,484 41,854
120,000.............................................. 20,442 30,663 40,884 51,104
140,000.............................................. 24,142 36,213 48,284 60,354
150,000.............................................. 25,992 38,988 51,984 64,979
</TABLE>
- ---------------
(1) The annual pension benefit is computed on the basis of a straight-life
annuity.
(2) Federal law does not permit qualified pension plans to recognize
compensation in excess of $160,000 for plan years beginning in 1997 or to
pay an annual benefit in excess of $125,000 for plan years beginning in
1997.
The number of credited years of service at December 31, 1997 and the
estimated credited years at age 65, (the maximum number of credited service
years is 25 years) respectively, for purposes of the retirement plan for the
following executive officers were: Mr. Meehan 6 and 9; Mr. Wong 5 and 23; Mr.
Bargamian 10 and 25; Mr. Loth 3 and 13 and Mr. Rivers 24 and 25.
EMPLOYMENT CONTRACT, SPECIAL TERMINATION AGREEMENTS, OTHER AGREEMENTS
The Bank and the Company entered into an amended and restated employment
agreement with Mr. Meehan, effective November 26, 1997, to include the Company
as a party (the "Amended and Restated Agreement"). Although the Amended and
Restated Agreement has an initial term of three years, on April 27, 1998, and on
each successive anniversary of that date, unless the Company and the Bank, or
Mr. Meehan, have previously given the specified notice to the other of its or
his election not to extend the Agreement, an additional one-year period will be
added to the Amended and Restated Agreement. The Amended and Restated Agreement
provides that Mr. Meehan will receive minimum annual compensation equal to a
current base salary ($420,000 as of January 1, 1998), subject to no less than an
annual cost of living increase, in addition to all regular benefits provided by
the Bank and any sums that may be awarded under the Bank's discretionary bonus
plan. Under the terms of the Amended and Restated Agreement, the Company and the
Bank may terminate Mr. Meehan's employment, without incurring any continuing
obligations to him, at any time for "cause," which is defined by the Amended and
Restated Agreement to mean his deliberate dishonesty to the Company or the Bank,
conviction of a crime involving moral turpitude, or gross and willful failure to
perform his duty. If the Company and the Bank terminate Mr. Meehan's employment
for any reason other than "cause," or if Mr. Meehan terminates his employment
under certain conditions, the Company and the Bank will remain obligated to
continue providing the compensation and benefits specified in the Amended and
Restated Agreement for the duration of what otherwise would have been the term
of the Amended and Restated Agreement.
The Bank entered into amended and restated special termination agreements
with each of Messrs. Meehan, Wong, Bargamian, Loth and Rivers, effective
November 26, 1997, to include certain references to change in control (as
defined in the Amended and Restated Special Termination Agreements) of the
Company (the "Special Termination Agreements"). In addition, the Special
Termination Agreements of Messrs. Meehan and Wong include the Company as a
party. The Special Termination Agreements provide that (A) if there is a Change
in Control and (B) if, at any time during the three-year period following such
11
<PAGE> 15
Change in Control, the Bank (and the Company, in the case of Messrs. Meehan and
Wong) terminates the contracting officer's employment for any reason other than
for "cause" (as defined in the Special Termination Agreement), or the
contracting officer terminates his own employment following (i) his demotion;
(ii) his loss of title, office or significant authority; (iii) a reduction in
his annual base salary; (iv) the failure to pay the officer his current or
deferred compensation for seven days; (v) the failure to continue in effect any
material compensation, incentive, bonus or benefit plan, unless an alternative
equitable arrangement is agreed upon; (vi) the failure to continue to provide
the officer with certain benefits; or (vii) the failure to obtain a satisfactory
agreement from any successor to assume and agree to perform the Special
Termination Agreements, the officer will be entitled to receive the severance
benefits provided to him in his respective agreement as described below. In the
case of such a termination, Mr. Meehan would be entitled to receive a lump sum
payment in an amount equal to approximately three times his average annual
compensation over the five previous years of his employment with the Bank, and
each of Mr. Wong, Bargamian, Loth and Rivers would be entitled to receive an
amount equal to approximately two times his average annual compensation over the
same period.
The Bank entered into a Supplemental Executive Retirement Plan with Mr.
Meehan, effective November 1, 1994. The agreement is designed to provide the
benefits which he would have been entitled to under defined benefit plans but
for the reduction in the IRC 401(a)(17) compensation ceiling to $150,000
effective November 1, 1994.
The Bank also entered into an Executive Supplemental Benefit Agreement with
Mr. Meehan, effective October 28, 1997. The Executive Supplemental Benefit
Agreement generally provides for fifteen annual payments of $70,000 to Mr.
Meehan upon his retirement or to a beneficiary if Mr. Meehan dies before
receiving all fifteen annual payments. The annual payments are conditioned upon
Mr. Meehan's fulfilling certain specified duties to render services to the Bank
in an advisory or consulting capacity at the request of the Bank.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report, as ratified by the Company's Compensation and Options
Committee, reflects the work of the Bank's Compensation and Options Committee,
all members of which were also members of the Company's Compensation and Options
Committee.
The Company's executive compensation philosophy is to provide competitive
levels of compensation, integrate management's pay with the achievement of the
Company's performance goals, reward above average corporate performance,
recognize individual initiative and achievement, and assist the Company in
attracting and retaining qualified management.
At the end of each fiscal year, the Compensation and Options Committee
reviews the performance of the Chairman, President and Chief Executive Officer
(the "CEO"), evaluates the performance of the Company, and establishes an
appropriate salary increase for recommendation to and approval by the Board of
Directors. In addition, the Compensation and Options Committee reviews the
proposed salary increases for all other senior executives, and all officers as a
group. In establishing the salary for the CEO, the Compensation and Options
Committee (i) considers financial performance data, including, without
limitation, return on assets, return on equity, asset growth and quality, and
capital position, (ii) utilizes a comparison of base salaries for comparable
positions in financial institutions within the Company's peer group provided by
outside consulting services and (iii) makes a subjective evaluation of the
individual performance of the CEO in carrying out his or her duties and
responsibilities. The committee's salary practice is to compensate the CEO to
attract and retain a qualified incumbent.
Additional short-term incentives can be earned through a discretionary
bonus plan, administered by the Compensation and Options Committee. Senior
executive officers as well as other officers are eligible to receive a bonus
payable prior to the end of the first quarter of the following year if the
Company or the Bank meets or exceeds certain base standards and individual
performance warrants consideration. The base standards for 1997 were the
budgeted financial goals and results of the Company and the Bank, which included
earnings per
12
<PAGE> 16
share as well as other financial achievements, and the discretionary evaluation
of individual performance and contributions towards those results.
Long-term incentives are provided through the grant of stock options. These
plans are administered by the Compensation and Options Committee, which has the
authority to determine the individuals to whom and the terms at which option
grants are made. Options are granted to individuals to reward significant
contributions to company performance or to attract and retain qualified
individuals. Both "incentive stock options" and "nonqualified stock options" may
be granted pursuant to these plans. All options granted under these plans are
required to have an exercise price per share equal to at least the fair market
value of a share of Common Stock on the date the option is granted and generally
vest over a period of at least three years.
Based upon a review of Mr. Meehan's performance conducted at Committee
meetings in January, October and December 1997, as described above, Mr. Meehan's
salary was increased effective January 1, 1998. Also based on Mr. Meehan's
performance, in October 1997, the Bank entered into an Executive Supplemental
Benefit Agreement with Mr. Meehan, which provides for certain retirement
benefits. Finally, based upon standards established in Committee meetings and
described above, Mr. Meehan was granted stock options and awarded a cash bonus
in December 1997.
Messrs. Wong, Bargamian, Loth and Rivers were also granted salary increases
effective January 1, 1998 based upon their performance, as described above. In
addition, Messrs. Wong, Bargamian, Loth and Rivers were granted stock options
and awarded a cash bonus in December 1997 based upon assessments of individual
performance as well as comparison to peer group compensation packages.
This report is provided by Messrs. Burke, Crowley, Gaffey, Murray and
Pizzella, the members of the Compensation and Options Committees of the Company
and of the Bank during fiscal year 1997.
RELATIONSHIPS AND TRANSACTIONS WITH THE COMPANY
Certain Directors and officers of the Company and the Bank and members of
their immediate family are at present, as in the past, customers of the Bank and
have transactions with the Bank in the ordinary course of business. In addition,
certain of the Directors are at present, as in the past, also directors,
officers or stockholders of corporations or members of partnerships that are
customers of the Bank and have transactions with the Bank in the ordinary course
of business. Such transactions with Directors and officers of the Company and
the Bank and their families and with such corporations and partnerships were
made in the ordinary course of business, were made on substantially the same
terms, including interest rates and collateral on loans, as those prevailing at
the time for comparable transactions with other persons, and did not involve
more than the normal risk of collectibility or present other features
unfavorable to the Bank.
13
<PAGE> 17
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock (or the
Bank's common stock, prior to the Bank's Reorganization), based on the market
price of the Company's (or Bank's) common stock and assuming reinvestment of
dividends, with the total return of companies within the Standard & Poor's 500
Stock Index and the Keefe, Bruyette & Woods ("KBW") New England Bank Index. The
calculation of total cumulative return assumes a $100 investment in the
Company's (or Bank's) common stock, the S&P 500 and the KBW New England Bank
Index on December 31, 1992.
[CHART]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Medford Savings Bank
Medford Bancorp, Inc. $100.00 $130.09 $137.41 $211.25 $261.91 $410.39
% change 30.09 5.63 53.74 23.98 56.69
S&P 500 $100.00 $110.02 $111.51 $153.26 $188.36 $251.12
% change 10.02 1.35 37.44 22.90 33.32
KBW New England Bank Index $100.00 $133.51 $134.40 $209.77 $289.74 $498.12
% change 33.51 0.67 56.08 38.12 71.92
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and SEC
regulations, the Company's executive officers and directors must file reports of
ownership and changes in ownership with the SEC and the Nasdaq Stock Market,
Inc. and furnish the Company with copies of all Section 16(a) reports they file.
Prior to the Reorganization, the Bank's executive officers and directors were
required to file analogous reports with the Federal Deposit Insurance
Corporation. To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company, no executive officer or director of
either the Bank or the Company failed to file any such reports.
14
<PAGE> 18
PROPOSAL TWO
APPROVAL OF AMENDMENT OF AMENDED ARTICLES OF ORGANIZATION
TO LIMIT CERTAIN MONETARY LIABILITIES OF DIRECTORS
The Board of Directors has determined that the ability of the Company to
continue to attract and retain qualified Directors will be enhanced by amending
the Company's Amended Articles of Organization to limit the personal liability
of Directors to the extent permitted by Section 13(b)(1 1/2) of Chapter 156B of
the Massachusetts General Laws ("Section 13(b)"). The Directors of the Company
have approved an amendment to the Company's Amended Articles of Organization
that would add a new Article to read in its entirety as follows:
"ARTICLE VI(K). Limitation of Liability of Directors.
No director of Bancorp shall be personally liable to Bancorp or its
stockholders for monetary damages for breach of fiduciary duty as a
director notwithstanding any provision of law imposing such liability;
provided, however, that this Article shall not eliminate or limit any
liability of a director (i) for any breach of the director's duty of
loyalty to Bancorp or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Sections 61 or 62 of the Massachusetts Business
Corporation Law, or (iv) with respect to any transaction from which the
director derived an improper personal benefit.
The provisions of this Article shall not eliminate or limit the
liability of a director of Bancorp for any act or omission occurring prior
to the date on which this Article became effective. No amendment or repeal
of this Article shall adversely affect the rights and protection afforded
to a director of Bancorp under this Article for acts or omissions occurring
prior to such amendment or repeal. If the Massachusetts Business
Corporation Law is hereafter amended to further eliminate or limit the
personal liability of directors or to authorize corporate action to further
eliminate or limit such liability, then the liability of the directors of
Bancorp shall be eliminated or limited to the fullest extent permitted by
the Massachusetts Business Corporation Law as so amended."
Section 13(b), which has a counterpart under Delaware law and has been
implemented routinely by companies since becoming effective in 1986, provides
the statutory right for a Massachusetts corporation to include in its articles
of organization a provision that generally eliminates or limits the ability of
the corporation and its stockholders to recover monetary damages from a director
for breach of fiduciary duty as a director. The 1986 amendment which added
Section 13(b) reflected a significant concern that directors may be subjected to
unwarranted personal liability for business decisions made in good faith.
Directors have traditionally relied on the so-called "business judgment rule" to
protect them from liability for business decisions that are reasonable and made
in good faith, but that later turn out to have adverse consequences and are
subsequently alleged to have been negligent. The proposed amendment does not
change the fiduciary duty of directors to act in good faith and in a manner they
reasonably believe to be in the best interests of the corporation and with such
care as an ordinary prudent person in a like position would use under similar
circumstances, as set forth in Section 65 of the Massachusetts Business
Corporation Law. Directors continue to be subject to equitable remedies for
breach of their duty of care, such as injunctive relief or rescission. In other
words, the proposed amendment would not eliminate the duty of care; it would
only eliminate monetary damage awards occasioned by a breach of that duty.
The proposed amendment does not eliminate or limit, however, the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
authorizing in violation of Sections 61 or 62 of the Massachusetts Business
Corporation Law dividends or distributions to stockholders, stock redemptions,
or loans to officers or directors of the corporation which are not repaid, or
(iv) for any transaction from which the director derived an improper personal
benefit. The proposed amendment also would not limit the liability of a director
who is also an officer of a corporation for claims based on his acts or
omissions as an officer. Furthermore, the proposed amendment would not eliminate
or limit the liability of directors for acts or omissions occurring prior to the
effective date of the amendment. In
15
<PAGE> 19
addition, the SEC has taken the position that the proposed amendment would not
limit the monetary liability of Directors of the Company for violations of the
federal securities laws.
The proposed amendment would supplement the protection presently provided
to Directors by the indemnification provisions in the Company's Amended Articles
of Organizations and by its director and officer indemnity insurance ("D&O
insurance"). The indemnification provisions presently contained in the Company's
Amended Articles of Organization provide that Directors are entitled to
reimbursement for their damages and expenses in any claim or lawsuit in which
they are involved as a result of serving as a Director unless they are
adjudicated or otherwise determined not to have acted in good faith in the
reasonable belief that their action was in the best interests of the Company.
These provisions might under certain circumstances permit Directors to claim
indemnity for monetary damages payable to the Company or its stockholders for
negligent acts or omissions made in good faith, but it is uncertain whether a
court would allow Directors to recover indemnity for such damages. The ability
of directors of corporations to assert successfully indemnity claims may also be
limited by securities laws, public policy considerations, the insolvency of the
corporation or the risk of revocation or denial of indemnification by a
successor board of directors. In response to these situations, the proposed
amendment would provide significant protection to Directors of the Company
against claims for monetary damages.
Additional protection may be available under the Company's D&O insurance.
However, it is possible that future D&O insurance will provide less protection
from liability for the Directors than in the past and at a greater expense to
the Company, or that the Company may have to terminate this insurance since its
cost is no longer reasonable relative to its benefits. The resulting increase in
the exposure of the Directors may limit the Company's ability to continue to
attract and retain qualified Directors who are unwilling to expose their
personal assets to such risks.
Although the Directors recognize that adoption of the proposed amendment
will benefit them and their successors, that they may be deemed to have an
interest in this matter, and that the Company has not yet experienced difficulty
in attracting qualified persons to serve as Directors, the Directors
nevertheless believe that the proposal is appropriate to promote maintenance of
an effective corporate governance system that encourages independent judgment
and reasonable risk-taking by the Directors for the benefit of the Company and
its stockholders.
If approved by the stockholders, the proposed amendment will become
effective upon the filing of Articles of Amendment with the Secretary of State
of the Commonwealth of Massachusetts, which filing would take place shortly
after the Annual Meeting of Stockholders. Once effective, any modification or
repeal of the proposed Article would require the approval of at least 66 2/3% of
the total votes eligible to be cast at a duly constituted meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
AMENDMENT OF THE COMPANY'S AMENDED ARTICLES OF ORGANIZATION.
ACCOUNTANTS
The firm of Wolf & Company, P.C. served as the Company's independent public
accountants for the year ended December 31, 1997 and is expected to serve as the
Company's independent public accountants for 1998. Representatives of Wolf &
Company, P.C. are expected to be present at the Annual Meeting to be available
to respond to appropriate questions, and to have the opportunity to make a
statement if they so desire.
OTHER MATTERS
It is not anticipated that any matters other than those set forth in this
Proxy Statement will be brought before the Annual Meeting. If any other matters
properly come before the Annual Meeting, the persons named as proxies will vote
upon such matters in their discretion in accordance with their best judgment.
16
<PAGE> 20
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 Annual Meeting
of Stockholders of the Company must be received in writing by the Company at its
principal executive offices on or before , 1998 in order to be
included in its proxy statement and form of proxy relating to the 1999 Annual
Meeting. The Company's By-Laws also provide that any stockholder wishing to have
a proposal or director nomination considered at the 1999 Annual Meeting must
provide written notice of such proposal or director nomination, along with
appropriate supporting materials as set forth in the Company's By-laws, to the
Clerk of the Company at the Company's principal executive office not less than
75 days nor more than 120 days prior to April 27, 1999; provided, however, that
in the event the Annual Meeting is scheduled to be held on a date more than 30
days before April 27, 1999 or more than 60 days after April 27, 1999, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Company at its principal executive office not later than the close of
business on the later of (a) the 75th day prior to the scheduled date of such
Annual Meeting, or (b) the 15th day following the day on which public disclosure
of the date of such Annual Meeting is first made by the Company. Any proposals
or nominations that are not received during this period will not be considered
at the 1999 Annual Meeting. Any stockholder wishing to submit a proposal or
director nomination should review the By-law requirements regarding proposals
and director nominations and should submit any such proposal or director
nomination and appropriate supporting documentation to: Medford Bancorp, Inc.,
29 High Street, Medford, Massachusetts 02155, Attention: Shareholder Relations.
17
<PAGE> 21
PRELIMINARY COPIES
March , 1998
Dear Plan Participant:
The enclosed information pertains to the voting of your shares of common
stock of Medford Bancorp, Inc. (the "Company"), the holding company of Medford
Savings Bank (the "Bank"), on matters to be acted upon at the 1998 Annual
Meeting of Stockholders to be held on April 27, 1998. You are able to instruct
the Trustee of the Medford Savings Bank Employees' Stock Ownership Plan (the
"ESOP") on the voting of all full and fractional shares in your account under
the ESOP.
The following items are enclosed:
An Annual Report of Medford Bancorp, Inc., which will enable you to review
the financial condition and other information regarding the operating of the
Company and the Bank during 1997.
A Proxy Statement explaining in detail the matters to be acted upon at the
Annual Meeting of Stockholders.
A Voting Instruction Card, which enables you to instruct the voting of
shares of the Company's common stock allocated to your ESOP account. The number
of allocated shares you are entitled to vote is indicated on the voting
instruction card.
A Postage-Paid Envelope addressed to the Trustee for mailing the voting
instruction card.
It is very important that you complete and return this voting instruction
card to the Trustee. The Trustee will vote shares allocated to your ESOP Account
in accordance with your instructions.
You may revoke your instructions by forwarding to the Trustee a later-dated
instruction card or a notice of revocation of a prior instruction card, provided
that such instruction card or notice of revocation is received by the Trustee on
or before April 20, 1998.
We hope that you will review the enclosed materials carefully and that you
will take this opportunity to instruct the Trustee how to vote your shares. If
the voting instruction card is not received by April 20, 1998, your allocated
shares in the ESOP will not be voted. Your instructions to the Trustee are
confidential.
Sincerely,
ARTHUR H. MEEHAN
Chairman, President and Chief
Executive Officer
Enclosure
<PAGE> 22
PRELIMINARY COPIES
MEDFORD BANCORP, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 27, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Arthur H. Meehan, William F.
Rivers and George A. Bargamian, and each of them, as Proxies of the undersigned,
with full power to appoint his substitute, and authorizes each of them to
represent and to vote all shares of Common Stock of Medford Bancorp, Inc. (the
"Company") held of record by the undersigned at the close of business on
March 2, 1998 at the Annual Meeting of Stockholders to be held at Medford
Savings Bank, Five High Street, Suite 202, Medford, Massachusetts, on Monday,
April 27, 1998 at 10:00 a.m., local time, and at any adjournments or
postponements thereof.
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned stockholder(s). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR THE THREE NOMINEES OF THE BOARD OF DIRECTORS LISTED IN PROPOSAL 1 AND
FOR PROPOSAL 2. IN THEIR DISCRETION, THE PROXIES ARE EACH AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND AT ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF. A stockholder wishing to vote in
accordance with the Board of Directors' recommendation need only sign and date
this proxy and return it in the enclosed envelope prior to the Annual Meeting of
Stockholders, April 27, 1998.
Proxy for the Annual Meeting of Stockholders to be held on April 27, 1998
(please date and sign on reverse side, and mail your proxy card promptly in the
enclosed envelope).
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign this proxy exactly as your name(s) appear(s) on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, this signature should
be that of an authorized officer who should state his or her title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_____________________________________ _____________________________________
_____________________________________ _____________________________________
_____________________________________ _____________________________________
<PAGE> 23
<TABLE>
<S> <C>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- ---------------------------------------------------------- 1. Election of three directors for a For All With- For All
MEDFORD BANCORP, INC. three year term. Nominees hold Except
- ----------------------------------------------------------
PAUL J. CROWLEY [ ] [ ] [ ]
EDWARD J. GAFFEY
ANDREW D. GUTHRIE, JR., M.D.
Mark box at right if an address change or comment has [ ] IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR
been noted on the reverse side of this card. NOMINEE, MARK THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE
THROUGH THE NAME(S) OF THE NOMINEE(S). YOUR SHARES WILL BE
VOTED FOR THE REMAINING NOMINEE(S).
RECORD DATE SHARES:
For Against Abstain
2. Approval of the amendment of the [ ] [ ] [ ]
Amended Articles of Organization
of Medford Bancorp, Inc.
THE UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF A COPY OF
THE ACCOMPANYING NOTICE OF ANNUAL MEETING OF STOCKHOLDERS,
THE PROXY STATEMENT WITH REPORT THERETO AND THE COMPANY'S
1997 ANNUAL REPORT TO STOCKHOLDERS, AND HEREBY REVOKE(S)
ANY PROXY OR PROXIES HERETOFORE GIVEN. THIS PROXY MAY BE
-------------------- REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
Please be sure to sign and date this Proxy. Date
- -------------------------------------------------------------------
- --Stockholder sign here------------------------Co-owner sign here--
</TABLE>
DETACH CARD DETACH CARD
MEDFORD BANCORP, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy
Ballot.
Your vote counts, and you are strongly encouraged to exercise your
right to vote your shares.
Please mark the boxes on this proxy card to indicate how your shares
will be voted. Then sign the card, detach it and return your proxy
vote in enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders,
April 27, 1998.
Thank you in advance for your prompt consideration.
