<PAGE> 1
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:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MASSBANK Corp.
(Name of Registrant as Specified In Its Charter)
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,
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:
- --------------------------------------------------------------------------------
<PAGE> 2
MASSBANK CORP.
123 HAVEN STREET
READING, MASSACHUSETTS 01867
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 20, 1999
To the Stockholders of
MASSBANK CORP.:
The Annual Meeting of Stockholders of MASSBANK Corp. (the "Corporation")
will be held at Tara's Ferncroft Conference Center, 50 Ferncroft Road, Danvers,
Massachusetts on Tuesday, April 20, 1999 at 10:00 a.m. (together with all
adjournments and postponements thereof, the "Annual Meeting"), for the following
purposes:
1. To consider and act upon a proposal to elect four Directors to
serve until the 2002 Annual Meeting of Stockholders and until their
respective successors are duly elected and qualified; and
2. To consider and act upon any other matters which may properly come
before the Annual Meeting.
Only stockholders of record at the close of business on March 1, 1999 are
entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors,
ROBERT S. CUMMINGS, Secretary
Reading, Massachusetts
March 24, 1999
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE
COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED. IF YOU WISH TO VOTE YOUR STOCK IN PERSON AT THE ANNUAL MEETING, YOUR
PROXY MAY BE REVOKED.
<PAGE> 3
MASSBANK CORP.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 20, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of MASSBANK Corp. (the "Corporation") for the
Annual Meeting of Stockholders of the Corporation, and any adjournments or
postponements thereof (the "Annual Meeting"). At the Annual Meeting,
stockholders will consider and act upon the matters set forth in the
accompanying Notice of Annual Meeting of Stockholders.
Stock transfer books will not be closed, but the Board of Directors has
fixed the close of business on March 1, 1999 as the record date for determining
the stockholders entitled to notice of and to vote at the Annual Meeting. On
that date, there were outstanding 3,469,959 shares of common stock, par value
$1.00 per share ("Common Stock"), and the holders thereof on that date are
entitled to one vote for each share held by them.
The presence, in person or by proxy, of holders of at least a majority of
the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. The Corporation intends to count abstentions and broker non-votes as
present for purposes of determining the presence or absence of a quorum for the
transaction of business at the Annual Meeting. A broker non-vote occurs when a
broker or other nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because such broker or other
nominee does not have discretionary voting power as to the proposal and has not
received voting instructions from the beneficial owner.
A quorum being present, Directors will be elected by a plurality of the
votes cast. Votes may only be cast in favor or withheld from the nominees; there
is no ability to abstain. Accordingly, votes that are withheld and broker
non-votes will have no effect on the results of the vote for the election of
Directors.
The cost of soliciting proxies will be borne by the Corporation. The
solicitation of proxies by mail may be followed by the solicitation of certain
stockholders by officers or regular employees of the Corporation by telephone or
oral communication. The enclosed proxy, if executed and returned, may be revoked
at any time before it has been exercised (i) by delivery of a revocation in
writing to the Secretary of the Corporation at the principal executive offices
of the Corporation (123 Haven Street, Reading, Massachusetts 01867), (ii) by
delivering a later-dated proxy, or (iii) by voting in person at the Annual
Meeting. Attendance at the Annual Meeting will not by itself constitute
revocation of a proxy.
<PAGE> 4
Stockholders are requested to complete, date, sign and return the
accompanying proxy in the enclosed envelope. Shares represented by a properly
executed proxy received prior to the vote at the Annual Meeting and not revoked
will be voted at the Annual Meeting as directed on the proxy. If a properly
executed proxy is submitted and no instructions are given, the proxy will be
voted FOR the election of the four nominees for Director set forth herein. It is
not anticipated that any other matters than those set forth in this Proxy
Statement will be presented at the Annual Meeting. If other matters are
presented, proxies will be voted in accordance with the discretion of the proxy
holders.
The approximate date on which this Proxy Statement and the enclosed proxy
are first being sent to stockholders is March 24, 1999. The Corporation's 1998
Annual Report, including financial statements for the fiscal year ended December
31, 1998, is being mailed to stockholders concurrently with this Proxy
Statement. The Annual Report, however, is not part of the proxy soliciting
materials.
2
<PAGE> 5
PROPOSAL ONE
ELECTION OF DIRECTORS
In accordance with the Corporation's Restated Certificate of Incorporation
and By-Laws, the Board of Directors is divided into three approximately equal
classes, with each Director serving for a term of three years. As a consequence,
the term of only one class of Directors expires each year, and their successors
are elected for terms of three years. The Board of Directors is presently
comprised as follows:
Class I: Mses. Hickey and Pettinelli, Messrs. Costello, Marshall and
McPherson and Dr. Stackhouse, who were elected to serve until
the 1999 Annual Meeting of Stockholders and until their
successors are elected and qualified.
Class II: Messrs. Bedell, Cummings, Lapidus and Schurian, who were elected
to serve until the 2000 Annual Meeting of Stockholders and until
their successors are elected and qualified.
Class III: Messrs. Altschuler, Brandi, Bufferd and Carr, who were elected
to serve until the 2001 Annual Meeting of Stockholders and until
their successors are elected and qualified.
The Board of Directors has nominated four Class I Directors to stand for
re-election at the Annual Meeting to serve until the 2002 Annual Meeting of
Stockholders and until their successors are elected and qualified. Each of Ms.
Pettinelli, Messrs. Costello and Marshall and Dr. Stackhouse will stand for
re-election at the Annual Meeting. Ms. Hickey and Mr. McPherson have reached the
mandatory retirement age as set forth in the Corporation's By-Laws and,
therefore, are not standing for re-election at the Annual Meeting. Unless
otherwise noted thereon, proxies solicited hereby which are executed and
returned on a timely basis will be voted for the election of the Board of
Directors' nominees. The Corporation believes that each nominee for Director
will be able to serve. If one or more of such nominees should be unable to
serve, the individuals named in the enclosed proxy will vote for such other
person or persons, if any, as the Board of Directors at the time may recommend
to serve in place of the person or persons unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF ITS NOMINEES.
Set forth below is information regarding (i) the nominees for election as
Class I Directors at the Annual Meeting, (ii) the Directors whose terms expire
at the Annual Meeting and (iii) the continuing Directors whose terms are not
scheduled to expire until the 2000 or 2001 Annual Meeting of Stockholders.
SAMUEL ALTSCHULER EXECUTIVE VICE PRESIDENT AND DIRECTOR, SANMINA CORPORATION
[PHOTOGRAPH] Mr. Altschuler, 71, has served as a Director since 1986 and as
a Trustee of a predecessor bank since 1979. He is also a
member of the Compensation and Option Committee of the
Corporation. Mr. Altschuler was Chairman, President and a
Director of Altron, Inc., a manufacturer of electronic
interconnect products, since founding the company in 1970. As
of December 1998, Mr. Altschuler became Executive Vice
President and a Director of Sanmina Corporation, a provider of
electronic manufacturing services and the successor of Altron,
Inc. Mr. Altschuler is a past President of IPC, an industry
trade association.
3
<PAGE> 6
MATHIAS B. BEDELL RETIRED IN 1989 AS PRESIDENT OF BEDELL BROTHERS INSURANCE
AGENCY
[PHOTOGRAPH] Mr. Bedell, 66, has served as a Director since 1986 and as a
Trustee of a predecessor bank since 1965. Mr. Bedell is also a
member of the Executive Committee of the Corporation and a
Director and Executive Committee member of MASSBANK (the
"Bank"), the Corporation's principal subsidiary. He also
serves on the Compensation and Option Committee and the
Insurance Committee of the Corporation.
GERARD H. BRANDI CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
MASSBANK CORP. AND MASSBANK
[PHOTOGRAPH] Mr. Brandi, 50, has served as a Director since 1986. He first
joined a predecessor bank in 1975 and became a Trustee in
1978. He has served the Bank and Corporation in various
capacities over the past twenty-four years. Mr. Brandi was
named President of the Corporation and the Bank in 1986, Chief
Executive Officer in 1992 and Chairman in 1993. Mr. Brandi is
also Chairman of the Executive Committees of the Corporation
and the Bank, a member of the Asset/Liability Committee of the
Corporation and a member of the Trust Committee of the Bank.
He is a Director of the Depositors Insurance Fund,
Northeastern University's National Council, The Lowell Plan,
the New England Automated Clearing House, Connecticut On Line
Computer Center and the Massachusetts Bankers Association. He
also serves as the Vice Chairman and Director of the Lowell
Development and Finance Corp., and Treasurer and Director of
the Massachusetts Society for the Prevention of Cruelty to
Animals. Mr. Brandi is a member of the Government Relations
Council of the American Bankers Association and a Trustee and
a member of the Investment Committee of the Savings Banks
Employees Retirement Association.
ALLAN S. BUFFERD TREASURER, MASSACHUSETTS INSTITUTE OF TECHNOLOGY
[PHOTOGRAPH] Mr. Bufferd, 61, has served as a Director since 1995. He is
also a member of the Asset/Liability Committee of the
Corporation. Mr. Bufferd serves as Vice Chairman and Life
Trustee and as a member of the Executive Committee of the Beth
Israel Deaconess Medical Center, a Trustee of the Whiting
Foundation and Chairman of the Board of Trustees of Wheelock
College. He is also a member of the Investment Subcommittee of
the Commonwealth of Massachusetts Pension Retirement
Investments Trust. In addition, he is the Treasurer and a
Director of the Harvard Cooperative Society and a Director of
MASCO.
4
<PAGE> 7
PETER W. CARR RETIRED AS VICE PRESIDENT/FINANCE OF GUILFORD TRANSPORTATION
INDUSTRIES
[PHOTOGRAPH] Mr. Carr, 68, has served as a Director since 1986 and as a
Trustee of a predecessor bank since 1980. Mr. Carr is also the
Chairman of the Audit Committee of the Corporation.
ALEXANDER S. COSTELLO EDITORIAL PAGE EDITOR, THE LOWELL SUN
[PHOTOGRAPH] Mr. Costello, 45, has served as a Director since 1993. He is a
member of the Insurance Committee of the Corporation. Mr.
Costello is the Chairman of the Board of Directors of The
Lowell Plan, a non-profit organization dedicated to the
revitalization of the City of Lowell, and a member of the
Board of Governors of Saints' Memorial Hospital of Lowell.
ROBERT S. CUMMINGS ATTORNEY, SENIOR PARTNER OF PEABODY & BROWN
[PHOTOGRAPH] Mr. Cummings, 68, has served as a Director since 1986 and as a
Trustee of a predecessor bank since 1979. Mr. Cummings is
Secretary of the Corporation, a member of the Executive
Committee of the Corporation and a Director and Executive
Committee member of the Bank. He also serves as Chairman of
the Compensation and Option Committee of the Corporation. Mr.
Cummings is a Trustee of Hallmark Healthcare, Chairman of the
Commissioners of Trust Funds of the Town of Reading, Chairman
and Director of the Massachusetts Society for the Prevention
of Cruelty to Animals and Treasurer, Director and Executive
Committee member of the World Society for the Prevention of
Cruelty to Animals.
5
<PAGE> 8
LOUISE A. HICKEY RETIRED AS VICE PRESIDENT FOR PATIENT SERVICES AT
MELROSE-WAKEFIELD HOSPITAL
[PHOTOGRAPH] Ms. Hickey, 73, has served as a Director since 1986 and as a
Trustee of a predecessor bank since 1981. Ms. Hickey is a
member of the Compensation and Option Committee of the
Corporation. Ms. Hickey is an Honorary Trustee of the
Melrose-Wakefield Hospital.
LEONARD LAPIDUS UNITED STATES GOVERNMENT OFFICIAL
[PHOTOGRAPH] Mr. Lapidus, 69, has served as a Director since 1994. He is a
member of the Asset/Liability Committee of the Corporation.
Mr. Lapidus served as a Director of the Bank from 1994 to
1995. Mr. Lapidus served from 1981 to 1994 as President of the
Depositors Insurance Fund, a fund established under
Massachusetts law to provide deposit insurance to
Massachusetts savings banks. Presently, he is a United States
Government official who advises, and arranges to place
advisors with, the governments of former Soviet bloc countries
and emerging nations to help them reform their banking and
bank regulatory systems.
STEPHEN E. MARSHALL PRESIDENT AND TREASURER, C. H. CLEAVES INSURANCE AGENCY,
INC.
[PHOTOGRAPH] Mr. Marshall, 60, has served as a Director since 1986 and as a
Trustee of a predecessor bank since 1972. He is a member of
the Executive Committee of the Corporation and a Director and
Executive Committee member of the Bank. Mr. Marshall is also
Chairman of the Insurance Committee of the Corporation. Mr.
Marshall's affiliations include the Professional Insurance
Agents of Massachusetts, The American Cancer Society and the
Visiting Nurse Association.
ARTHUR W. MCPHERSON FINANCIAL CONSULTANT
[PHOTOGRAPH] Mr. McPherson, 73, has served as a Director since 1986 and as
a Trustee of a predecessor bank since 1973. Mr. McPherson is a
member of the Audit Committee of the Corporation and Chairman
of the Trust Committee of the Bank. Mr. McPherson is a
financial consultant who was previously Account Manager for
The Advisors Group. Mr. McPherson serves as a Deacon and the
Missions Co-ordinator for the Park Street Church of Boston. He
is also an Honorary Director of the Melrose YMCA.
6
<PAGE> 9
NANCY L. PETTINELLI EXECUTIVE DIRECTOR, VISITING NURSE ASSOCIATION OF GREATER
LOWELL, INC.
[PHOTOGRAPH] Ms. Pettinelli, 52, has served as a Director since October
1998. Ms. Pettinelli was the Director of Clinical Services for
the Visiting Nurse Association of Greater Lowell, Inc. from
1986 through April 1995 and has served as its Executive
Director thereafter.
HERBERT G. SCHURIAN CERTIFIED PUBLIC ACCOUNTANT
[PHOTOGRAPH] Mr. Schurian, 62, has served as a Director since 1986 and as a
Trustee of a predecessor bank since 1973. He is a member of
the Executive Committee of the Corporation and a Director and
an Executive Committee member of the Bank. He is Chairman of
the Asset/Liability Committee and a member of the Audit
Committee of the Corporation. Mr. Schurian is associated with
various professional, civic and local charitable
organizations.
DONALD B. STACKHOUSE, D.M.D. RETIRED AS PRESIDENT OF DENTAL HEALTH CONCEPTS IN
1995
[PHOTOGRAPH] Dr. Stackhouse, 67, has served as a Director since 1986 and as
a Trustee of a predecessor bank since 1972. He is also a
member of the Executive Committee of the Corporation and a
Director and an Executive Committee member of the Bank. Dr.
Stackhouse is a former Clinical Professor in Graduate
Prothodontics at Tufts University and a Director of the L.D.
Pankey Dental Institute.
7
<PAGE> 10
The following chart shows the number of shares of the Corporation's Common
Stock beneficially owned by each Director and named executive officer of the
Corporation as of January 19, 1999.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY PERCENT
NAME OWNED(1) OF CLASS(2)
---- ------------ -----------
<S> <C> <C>
Samuel Altschuler........................................... 21,611 *
Mathias B. Bedell........................................... 29,110(3) *
Gerard H. Brandi............................................ 157,669(4)(5) 4.5%
Allan S. Bufferd............................................ 3,900(6) *
Peter W. Carr............................................... 20,500(6) *
David F. Carroll............................................ 36,775(5)(6) 1.0%
Reginald E. Cormier......................................... 37,434(5) 1.1%
Alexander S. Costello....................................... 7,000 *
Robert S. Cummings.......................................... 28,400 *
Louise A. Hickey............................................ 17,009(7) *
Leonard Lapidus............................................. 5,100 *
Stephen E. Marshall......................................... 8,904 *
Arthur W. McPherson......................................... 4,100 *
Nancy L. Pettinelli......................................... 750 *
Herbert G. Schurian......................................... 24,700(8) *
Dr. Donald B. Stackhouse.................................... 22,307 *
Donald R. Washburn.......................................... 39,563(5)(9) 1.1%
Donna H. West............................................... 38,965(5)(10) 1.1%
All Directors and executive officers as a group (19
persons).................................................. 513,138(5)(11) 13.6%
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, each person named has sole voting and sole
investment power with respect to all shares indicated. Includes the
following number of shares that the above listed Directors and executive
officers have the right to acquire within 60 days through the exercise of
options granted pursuant to the Corporation's 1986 Stock Option Plan or
Amended and Restated 1994 Stock Incentive Plan: Mr. Altschuler, 16,500
shares; Mr. Bedell, 14,000 shares; Mr. Brandi, 30,000 shares; Mr. Bufferd,
3,500 shares; Mr. Carr, 16,500 shares; Mr. Carroll, 21,417 shares; Mr.
Cormier, 17,383 shares; Mr. Costello, 7,000 shares; Mr. Cummings, 21,000
shares; Ms. Hickey, 16,500 shares; Mr. Lapidus, 4,833 shares; Mr. Marshall,
8,750 shares; Mr. McPherson, 3,500 shares; Ms. Pettinelli, 750 shares; Mr.
Schurian, 18,500 shares; Dr. Stackhouse, 17,667 shares; Mr. Washburn,
22,417 shares; and Ms. West, 21,417 shares, respectively. Does not include
the following number of units of cash-only securities (contracts issued to
the holder under the Corporation's Deferred Compensation Plan) whose value
per unit is derived from changes in the market price per share of the
Corporation's Common Stock: Mr. Bedell, 5,464 units; Mr. Bufferd, 238
units; Mr. Cummings, 5,464 units; Mr. Lapidus, 238 units; and Mr. Marshall,
46 units.
(2) Calculated on the basis of 3,499,110 outstanding shares as of January 19,
1999.
(3) Includes 3,684 shares owned by Mr. Bedell's spouse, as to which shares Mr.
Bedell disclaims beneficial ownership.
8
<PAGE> 11
(4) Includes 753 shares held by Mr. Brandi as custodian for various nieces and
nephews and 9,389 shares owned by Mr. Brandi's spouse, as to all of which
shares Mr. Brandi disclaims beneficial ownership. Also includes 88,343
shares owned jointly with Mr. Brandi's spouse, with respect to which shares
Mr. and Mrs. Brandi share voting and investment power.
(5) Includes shares allocated to the accounts of executive officers under the
Bank's Employee Stock Ownership Plan (the "ESOP"). The number of such
allocated shares included in the above table is as follows: Mr. Brandi --
13,498; Mr. Carroll -- 5,636; Mr. Cormier -- 4,669; Mr. Washburn -- 6,054;
Ms. West -- 5,632; and all executive officers as a group (six persons) --
37,747. Does not include any portion of the unallocated shares under the
ESOP which may be deemed to be beneficially owned by participating
executive officers as a result of their ability to direct the voting of
such shares through the voting of shares allocated to their accounts under
the ESOP. The number of such unallocated shares over which the executive
officers may exercise voting power is as follows: Mr. Brandi -- 3,845; Mr.
Carroll -- 1,606; Mr. Cormier -- 1,330; Mr. Washburn -- 1,725; Ms. West --
1,604; and all executive officers as a group -- 10,753.
(6) Voting and investment power for these shares (other than shares which may
be acquired through the exercise of options as described above) is shared
with spouse as to all shares indicated.
(7) Includes 300 shares owned by Ms. Hickey with her son and daughter-in-law,
as to which shares Ms. Hickey shares investment and voting power.
(8) Includes 3,800 shares owned by Mr. Schurian's spouse and 400 shares owned
by his son, as to all of which shares Mr. Schurian disclaims beneficial
ownership.
(9) Includes 2,400 shares owned jointly with Mr. Washburn's spouse, with
respect to which shares Mr. and Mrs. Washburn share voting and investment
power.
(10) Includes 125 shares held by Ms. West as custodian for her grandson, as to
which shares Ms. West disclaims beneficial ownership.
(11) Includes 268,717 shares that such persons have the right to acquire through
the exercise of options granted pursuant to the Corporation's 1986 Stock
Option Plan or Amended and Restated 1994 Stock Incentive Plan.
BOARD AND COMMITTEE MEETINGS
During 1998, the Board of Directors of the Corporation held four meetings,
the Executive Committee of the Corporation held eleven meetings, the Audit
Committee of the Corporation held four meetings and the Compensation and Option
Committee of the Corporation held one meeting. During 1998, each incumbent
Director attended at least 75% of the aggregate number of meetings of the
Corporation's Board of Directors and of the committees of which he or she was a
member.
The Executive Committee of the Corporation consists of Messrs. Bedell,
Brandi, Cummings, Marshall and Schurian and Dr. Stackhouse and is vested with
the authority of the Board of Directors in most matters between Board meetings.
The Audit Committee of the Corporation consists of Messrs. Carr, McPherson
(whose term of office will expire at the Annual Meeting) and Schurian and is
responsible for reviewing the Corporation's financial statements and the scope
of the audit, reviewing the Corporation's internal financial and accounting
controls and recommending to the Board the appointment of independent auditors.
The Compensation and Option Committee of the Corporation consists of Messrs.
Altschuler, Bedell and Cummings and Ms. Hickey (whose term of office will expire
at the Annual Meeting). The Compensation and Option Committee is responsible for
making recommendations to the Board of Directors of the Bank with respect to the
policies which govern both annual compensation and incentive stock ownership
programs for the employees of the Bank.
9
<PAGE> 12
The Board of Directors of the Corporation acts as a nominating committee,
selecting nominees for election as Directors and executive officers. The Board
considers the recommendation of any stockholder with respect to nominees for
election to the Board if such recommendation is timely in accordance with, and
is accompanied by the information required by, the Corporation's By-Laws. To
make a recommendation, a stockholder should send the nominee's name and
supporting information to the Secretary of the Corporation at the Corporation's
principal offices. See "Stockholder Proposals."
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to each holder who,
to the knowledge of the Corporation, beneficially owned more than 5% of the
Corporation's Common Stock as of March 1, 1999.
<TABLE>
<CAPTION>
AMOUNT OF PERCENT OF
BENEFICIAL OWNERSHIP OF COMMON STOCK
NAME AND ADDRESS CORPORATION'S COMMON STOCK BENEFICIALLY OWNED(1)
---------------- -------------------------- ---------------------
<S> <C> <C>
Private Capital Management, Inc.(2) ......... 356,592 10.3%
3003 North Tamiami Trail
Naples, FL 33940
Baker, Fentress & Company(3)................. 233,449 6.7%
200 West Madison Street
Chicago, IL 60606
First Manhattan Co.(4)....................... 214,165 6.2%
437 Madison Avenue
New York, NY 10022
Dimensional Fund Advisors Inc.(5)............ 181,199 5.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
- ---------------
(1) Calculated on the basis of 3,469,959 outstanding shares as of March 1, 1999.
(2) Private Capital Management, Inc. ("PCM") is an investment adviser registered
under the Investment Advisers Act of 1940 (the "Advisers Act"). According
to the most recent filing made by PCM with the Securities and Exchange
Commission (the "SEC") on Schedule 13D dated March 10, 1993, 335,000 shares
(as adjusted for 3-for-2 and 4-for-3 splits of the Corporation's Common
Stock occurring after such date) had been purchased for the accounts of
investment advisory clients of PCM. PCM reported in such filing that it
possessed shared dispositive power over all of such shares and no voting
power over any of the shares. On March 10, 1999, a representative of PCM
informed the Corporation that it held 356,592 shares as of March 5, 1999 as
indicated above. PCM's percentage ownership is in excess of 10% of
outstanding Common Stock as a result of repurchases by the Corporation of
shares of its Common Stock.
(3) Baker, Fentress & Company ("Baker") is an investment company registered
under the Investment Company Act of 1940 (the "Investment Company Act").
According to a joint filing made by Baker and John A. Levin & Co., Inc.
("Levin") with the SEC on Schedule 13G dated February 12, 1999, Baker
possesses sole voting power over 20,100 of the above shares, shared voting
power over 121,519 of the above shares, sole dispositive power over 20,100
of the above shares and shared dispositive power over 213,349 of the above
shares. Levin, an investment adviser under the Advisers Act, holds for the
accounts of its investment advisory clients the above 233,449 shares. Baker
is the sole shareholder of Levin Management Co., Inc., which is the sole
shareholder of Levin. Baker, therefore, may be deemed the beneficial owner
of the above 233,449 shares held by Levin.
10
<PAGE> 13
(4) First Manhattan Co. ("First Manhattan") is a broker or dealer registered
under the Securities Exchange Act of 1934 and an investment adviser
registered under the Advisers Act. According to a filing made by it with
the SEC on Schedule 13G dated February 11, 1999, First Manhattan possesses
sole voting power over 174,587 of the above shares, shared voting power
over 19,978 of the above shares, sole dispositive power over 174,587 of the
above shares and shared dispositive power over 39,578 of the above shares.
(5) Dimensional Fund Advisors Inc. ("Dimensional") is an investment adviser
registered under the Advisers Act, which furnishes investment advice to
four investment companies registered under the Investment Company Act and
serves as investment manager to certain other investment vehicles (such
investment companies and investment vehicles, collectively, the
"Portfolios"). According to a filing made by it with the SEC on Schedule
13G dated February 11, 1999, Dimensional, in its role as investment advisor
and investment manager, possesses sole voting power and sole dispositive
power over the 181,199 above shares which are owned by the Portfolios.
EXECUTIVE COMPENSATION
Until the Corporation becomes actively involved in other business, no
separate compensation is being paid to the executive officers of the
Corporation, all of whom are executive officers of the Bank and receive
compensation as such.
SUMMARY OF COMPENSATION
The following table sets forth for the fiscal years ended December 31,
1998, 1997 and 1996, a summary of the compensation paid by the Bank to the Chief
Executive Officer and the four additional executive officers whose remuneration
from the Corporation and its subsidiaries exceeded $100,000 during 1998.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ----------------------- -------
--------------------------------------- RESTRICTED (1)
OTHER ANNUAL STOCK SECURITIES LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) UNDERLYING PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) OPTIONS(#) ($) ($)
- --------------------------- ---- ------ ----- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerard H. Brandi......... 1998 351,000 90,000 (2) -0- 2,500 -0- 74,837(3)
Chairman, President 1997 337,500 94,500 (2) -0- 3,333 -0- 76,580(3)
and Chief Executive 1996 322,800 100,068 (2) -0- 3,333 -0- 67,574(3)
Officer
Donald R. Washburn....... 1998 114,600 21,000 (2) -0- 1,750 -0- 12,280(4)
Senior Vice President, 1997 110,700 17,700 (2) -0- 2,333 -0- 13,244(4)
Lending 1996 106,800 18,156 (2) -0- 2,333 -0- 9,340(4)
Donna H. West............ 1998 113,400 18,500 (2) -0- 1,750 -0- 12,417(5)
Senior Vice President, 1997 108,600 20,600 (2) -0- 2,333 -0- 13,458(5)
Community Banking 1996 103,200 22,704 (2) -0- 2,333 -0- 9,019(5)
Reginald E. Cormier...... 1998 97,800 15,500 (2) -0- 1,750 -0- 10,762(6)
Vice President, 1997 93,000 18,500 (2) -0- 2,333 -0- 11,502(6)
Treasurer and Chief 1996 87,900 19,338 (2) -0- 2,333 -0- 7,689(6)
Financial Officer
David F. Carroll......... 1998 93,600 8,500 (2) -0- 1,750 -0- 9,977(7)
Vice President, 1997 90,000 14,000 (2) -0- 2,333 -0- 10,754(7)
Operations 1996 86,520 14,708 (2) -0- 2,333 -0- 7,572(7)
</TABLE>
11
<PAGE> 14
- ---------------
(1) Includes (i) the cash value of shares of MASSBANK Corp. Common Stock
acquired by the Employee Stock Ownership Plan (the "ESOP") and allocated to
the named party (but excluding any allocation of dividends and interest
thereunder), and (ii) such other items as are disclosed in individual
footnotes below. Such cash value was determined by multiplying the number of
shares of Common Stock so allocated by the closing price of the Common Stock
on December 31 of the applicable year.
(2) Perquisites did not exceed 10% of total salary and bonus.
(3) Consists of the Bank's payment of permanent life insurance premiums in the
amount of $3,226 in each of 1998, 1997 and 1996 under Mr. Brandi's executive
supplemental retirement agreement, ESOP allocations valued at $14,961,
$15,534 and $10,898 representing 382, 326 and 286 shares of Common Stock on
December 31, 1998, 1997 and 1996, respectively, determined in accordance
with footnote 1 above, and contributions of $56,650, $57,820 and $53,450 to
a rabbi trust for a deferred compensation program for Mr. Brandi in 1998,
1997 and 1996, respectively.
(4) Consists of ESOP allocations of $12,280, $13,244 and $9,340 representing
314, 278 and 245 shares of Common Stock at December 31, 1998, 1997 and 1996,
respectively, determined in accordance with footnote 1 above.
(5) Consists of ESOP allocations of $12,417, $13,458 and $9,019 representing
317, 283 and 237 shares of Common Stock at December 31, 1998, 1997 and 1996,
respectively, determined in accordance with footnote 1 above.
(6) Consists of ESOP allocations of $10,762, $11,502 and $7,689 representing
275, 242 and 202 shares of Common Stock at December 31, 1998, 1997 and 1996,
respectively, determined in accordance with footnote 1 above.
(7) Consists of ESOP allocations of $9,977, $10,754 and $7,572 representing 255,
226 and 199 shares of Common Stock at December 31, 1998, 1997 and 1996,
respectively, determined in accordance with footnote 1 above.
12
<PAGE> 15
OPTION GRANTS
The following table sets forth certain information regarding options
granted during 1998 to the Chief Executive Officer and the other executive
officers named above.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SHARES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES BASE PRICE ----------------------
NAME GRANTED IN FISCAL YEAR PER SHARE EXPIRATION DATE 5% 10%
---- ---------- -------------- ----------- --------------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Gerard H. Brandi..... 2,500 10.0% $44.25 January 19, 2008 $69,571 $176,308
Chairman, President
and Chief Executive
Officer
Donald R. Washburn... 1,750 7.0% $44.25 January 19, 2008 $48,700 $123,415
Senior Vice
President, Lending
Donna H. West........ 1,750 7.0% $44.25 January 19, 2008 $48,700 $123,415
Senior Vice
President,
Community Banking
Reginald E.
Cormier............ 1,750 7.0% $44.25 January 19, 2008 $48,700 $123,415
Vice President,
Treasurer and Chief
Financial Officer
David F. Carroll..... 1,750 7.0% $44.25 January 19, 2008 $48,700 $123,415
Vice President,
Operations
</TABLE>
13
<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUE
The following table sets forth certain information regarding options
exercised during the fiscal year ended December 31, 1998 and options held as of
December 31, 1998 by the Chief Executive Officer and the other executive
officers named above.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES ACQUIRED VALUE FISCAL YEAR END FISCAL YEAR END
NAME ON EXERCISE REALIZED EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
---- --------------- -------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Gerard H. Brandi......... 2,700 $70,925 27,500/0 $501,500/0
Chairman, President and
Chief Executive
Officer
Donald R. Washburn....... 1,600 $49,075 20,417/0 $400,627/0
Senior Vice President,
Lending
Donna H. West............ 1,500 $48,188 19,417/0 $368,052/0
Senior Vice President,
Community Banking
Reginald E. Cormier...... 2,700 $77,875 15,383/0 $259,031/0
Vice President,
Treasurer and Chief
Financial Officer
David F. Carroll......... -- -- 19,417/0 $368,052/0
Vice President,
Operations
</TABLE>
14
<PAGE> 17
COMPARATIVE STOCK PERFORMANCE BY THE CORPORATION
COMPARISON OF TEN YEAR CUMULATIVE TOTAL RETURN
The following chart compares the performance of the Common Stock of the
Corporation (assuming reinvestment of dividends) with the S&P 500 Index and a
group comprised of 16 industry peers, including the Corporation (the "Ten Year
Peer Group"), over a ten-year period. The chart assumes a $100 investment was
made on December 31, 1988 in the Common Stock of MASSBANK Corp., the stocks
included in the S&P 500 and the stocks of the Ten Year Peer Group. Data for the
chart was provided to the Corporation by The Bloomberg. Information about the
indices and the Ten Year Peer Group which was provided by The Bloomberg is
believed to be reliable, but neither the accuracy nor the completeness of such
information is guaranteed by the Corporation.
COMPARISON OF TEN YEAR CUMULATIVE TOTAL RETURN
AMONG MASSBANK CORP., THE S&P 500 INDEX AND THE TEN YEAR PEER GROUP
<TABLE>
<CAPTION>
MASSBANK CORP. S&P 500 INDEX TEN YEAR PEER GROUP
-------------- ------------- -------------------
<S> <C> <C> <C>
12/31/88 100.00 100.00 100.00
12/31/89 92.64 131.62 78.46
12/31/90 70.73 127.54 43.53
12/31/91 91.98 166.31 62.73
12/31/92 180.34 178.96 107.07
12/31/93 195.82 196.93 138.01
12/31/94 195.39 199.52 136.90
12/31/95 278.79 274.41 207.56
12/31/96 414.18 337.37 260.94
12/31/97 587.51 449.89 454.11
12/31/98 493.99 578.45 391.47
</TABLE>
(1) The banks in the Ten Year Peer Group are: Abington Bancorp, Inc., American
Bank of CT, Andover Bancorp, Inc., Banknorth Group, Inc., Cape Cod Bank &
Trust, First Essex Bancorp, First Federal Savings and Loan of East Hartford,
Granite State Bankshares, Inc., MASSBANK Corp., Medford Bancorp, Inc.,
Merchants Bancshares, Metrowest Bank, NewMil Bancorp, Inc., UST Corporation,
Warren Bancorp, Inc. and Webster Financial Corp.
15
<PAGE> 18
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
The following chart compares the performance of the Common Stock of the
Corporation (assuming reinvestment of dividends) with the S&P 500 Index and a
group comprised of 16 industry peers, including the Corporation (the "Five Year
Peer Group"), over a five-year period. The chart assumes a $100 investment was
made on December 31, 1993 in the Common Stock of MASSBANK Corp., the stocks
included in the S&P 500 and the stocks of the Five Year Peer Group. Data for the
chart was provided to the Corporation by The Bloomberg. Information about the
indices and the Five Year Peer Group which was provided by The Bloomberg is
believed to be reliable, but neither the accuracy nor the completeness of such
information is guaranteed by the Corporation.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG MASSBANK CORP., THE S&P 500 INDEX AND THE FIVE YEAR PEER GROUP
<TABLE>
<CAPTION>
MASSBANK CORP. S&P 500 INDEX FIVE YEAR PEER GROUP
-------------- ------------- --------------------
<S> <C> <C> <C>
12/31/93 100.00 100.00 100.00
12/31/94 99.78 101.32 100.87
12/31/95 142.37 139.34 153.06
12/31/96 175.77 171.32 194.73
12/31/97 300.03 228.46 330.52
12/31/98 252.27 293.74 290.33
</TABLE>
(1) The banks in the Five Year Peer Group are: Abington Bancorp, Inc., American
Bank of CT, Andover Bancorp, Inc., Banknorth Group, Inc., Cape Cod Bank &
Trust, First Essex Bancorp, First Federal Savings and Loan of East Hartford,
Granite State Bankshares, Inc., MASSBANK Corp., Medford Bancorp, Inc.,
Merchants Bancshares, Metrowest Bank, NewMil Bancorp, Inc., UST Corporation,
Warren Bancorp, Inc. and Webster Financial Corp.
16
<PAGE> 19
EMPLOYMENT AGREEMENTS
The Corporation and the Bank have entered into a three-year employment
agreement with Mr. Brandi, and the Bank has entered into two-year employment
agreements with Messrs. Carroll, Cormier and Washburn and Ms. West (each an
"Employment Agreement" and collectively the "Employment Agreements"). Mr.
Brandi's Employment Agreement is scheduled to expire in 2002, unless extended as
explained below. The Employment Agreements of Messrs. Carroll, Cormier and
Washburn and Ms. West are scheduled to expire in 2001, unless extended as
explained below. Pursuant to the Employment Agreements, Mr. Brandi, Mr. Carroll,
Mr. Cormier, Mr. Washburn and Ms. West are paid current annual salaries of
$366,000, $96,600, $102,480, $119,100, and $118,200, respectively.
Under the respective Employment Agreements, the Corporation or the Bank, as
the case may be, may terminate the officer's employment, without incurring any
continuing obligations to him or her, at any time for "cause," as defined in the
Employment Agreement. On each anniversary of the respective Employment
Agreement, unless the Corporation or the Bank, as the case may be, or the
officer has previously given the specified notice to the other of his, her or
its election not to extend the respective Employment Agreement, an additional
one-year period is automatically added to the term of the Employment Agreement.
In addition, the Employment Agreements provide generally that if the
Corporation or the Bank, as the case may be, were to terminate the officer's
employment for any reason other than for "cause," or, solely with respect to Mr.
Brandi, he were to terminate his own employment upon the occurrence of a
significant change in the responsibilities, powers or authorities exercised by
him from those exercised immediately prior to a "Change in Control," or
following a reduction in his annual compensation, or for other reasons as set
forth in his Employment Agreement, the officer would be entitled to continue to
receive the compensation and benefits specified in the Employment Agreement for
the duration of what otherwise would have been its term. The compensation and
benefits payable to Mr. Brandi in the foregoing situations provide for an
adjustment factor tied to increases in the Consumer Price Index. A "Change in
Control" is generally defined in Mr. Brandi's Employment Agreement to mean (i)
the occurrence of a tender or exchange offer, business combination, sale of
assets, contested election or combination of transactions, the result of which
is that the persons who were Directors of the Corporation or the Bank before
such transactions cease to constitute a majority of the Board of Directors of
the Corporation or the Bank, respectively, or (ii) the acquisition by a person
or group of persons of beneficial ownership of 25% or more of the Common Stock
of the Corporation or the Bank, as the case may be, which is not approved by the
respective Board of Directors in the manner established by Mr. Brandi's
Employment Agreement. In addition, Mr. Brandi's Employment Agreement provides
that in the event Mr. Brandi is not elected to, or is subsequently removed from,
the office of Chief Executive Officer of the Corporation or the Bank, then such
event would be treated as a termination without cause by the Corporation and the
Bank, and Mr. Brandi would be entitled to exercise his rights described in this
paragraph under the Employment Agreement.
EXECUTIVE SEVERANCE AGREEMENTS
The Corporation and the Bank have entered into an Executive Severance
Agreement with Mr. Brandi, and the Bank has entered into Executive Severance
Agreements with Messrs. Carroll, Cormier and Washburn and Ms. West (each an
"Executive Severance Agreement" and collectively the "Executive Severance
Agreements"). The Executive Severance Agreements generally provide that if there
were a "Change in Control" of the Corporation, as defined therein, and if at any
time during the two-year period following the Change in Control, either the
Corporation or the Bank, as the case may be, were to terminate the employment of
any of the above named officers for any reason other than for deliberate
dishonesty with respect to the Corporation or the Bank, conviction of certain
crimes, gross and willful failure to perform his or her duties, or for other
reasons as set forth in the Executive Severance Agreements, or any of the above
named officers were
17
<PAGE> 20
to terminate his or her employment following a substantial adverse change in his
or her title or responsibilities or a reduction in his or her annual base
salary, or for other reasons as set forth in the Executive Severance Agreements,
the named officer would be entitled to receive a lump sum payment equal to
approximately three times his or her average annual compensation over the five
previous years of his or her employment with the Corporation or the Bank, as the
case may be. For purposes of the Executive Severance Agreements, a "Change in
Control" is generally deemed to have occurred when (i) a person or group of
persons acquires beneficial ownership of 50% or more of the Common Stock of the
Corporation, (ii) as a result of a tender offer, proxy contest, merger or
similar transaction, persons who were Directors before such transaction cease to
constitute at least a majority of the Board of Directors of the Corporation, or
(iii) the stockholders of the Corporation approve a merger, a plan of
liquidation or an agreement for the sale of all or substantially all of the
Corporation's assets.
Any payments under the Executive Severance Agreements or the Employment
Agreements are subject to reduction if such payments are non-deductible to the
Corporation or the Bank as a result of Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"). In addition, if the officer becomes entitled
to receive cash compensation pursuant to both the Employment Agreement and the
Executive Severance Agreement, he or she is required to elect to receive cash
compensation pursuant to only one of such agreements. The officer would be
entitled to continue to receive any benefits he or she is eligible for under his
or her Employment Agreement regardless of the agreement under which he or she
elected to receive cash compensation.
PENSION PLAN
The Bank provides a retirement plan for all of its eligible employees
through the Savings Banks Employees Retirement Association ("SBERA"), an
unincorporated association of savings banks operating within Massachusetts and
other organizations which provide services to or for savings banks.
The following table illustrates annual minimum pension benefits for
retirement at age 65 under the most advantageous plan provisions (in effect for
the plan year November 1, 1998 - October 31, 1999) available for various levels
of compensation and years of service. The figures in this table are calculated
on the basis of a straight-life annuity and are based on the assumption that the
plan continues in its present form. The benefits are not subject to any
deduction for Social Security or other offset amounts.
<TABLE>
<CAPTION>
ANNUAL PENSION BENEFIT BASED ON YEARS OF SERVICE
--------------------------------------------------
AVERAGE 25 YEARS
COMPENSATION(1)(2) 10 YEARS 15 YEARS 20 YEARS OR MORE
- ------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000.................................... $19,132 $28,698 $38,265 $47,831
120,000.................................... 23,332 34,998 46,665 58,331
140,000.................................... 27,532 41,298 55,065 68,831
160,000.................................... 31,732 47,598 63,465 79,331
</TABLE>
- ---------------
(1) Average compensation for purposes of this table is based on the three years
immediately preceding retirement.
(2) Under applicable federal laws, the maximum compensation that may be used for
plan years beginning in 1998 to calculate benefits under the Bank's
retirement plan is $160,000.
Mr. Brandi, Mr. Carroll, Mr. Cormier, Mr. Washburn and Ms. West will have
an estimated 40, 29, 25, 35 and 35 credited years of service, respectively,
under the plan at age 65.
EXECUTIVE SUPPLEMENTAL RETIREMENT AGREEMENT
The Corporation and the Bank have entered into an Executive Supplemental
Retirement Agreement with Mr. Brandi. The Executive Supplemental Retirement
Agreement provides in general for monthly payments upon retirement and for
monthly payments to a beneficiary in lieu of retirement payments if Mr. Brandi
dies
18
<PAGE> 21
prior to his retirement. Mr. Brandi's agreement provides for 180 monthly
payments of $2,500 upon his retirement and 120 monthly payments of $3,000 in the
case of his death prior to retirement. The agreement is substantially funded by
an insurance policy owned by the Bank on the life of Mr. Brandi.
REPORT OF THE COMPENSATION AND OPTION COMMITTEE
The Compensation and Option Committee (the "Committee") of the Board of
Directors of the Corporation is comprised of the following non-employee
Directors: Samuel Altschuler, Mathias B. Bedell, Robert S. Cummings (Chairman)
and Louise A. Hickey (whose term of office will expire at the Annual Meeting).
The Committee is responsible for making recommendations to the Board of
Directors of the Bank with respect to the policies that govern both annual
compensation and incentive stock ownership programs for the employees of the
Bank.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance, and to enable the Bank to attract, retain
and reward executive officers who contribute to the success of the Bank.
STRUCTURE OF COMPENSATION
Compensation paid to the Bank's Chief Executive Officer ("CEO") and other
executive officers consists primarily of the following elements: base salary,
annual performance incentives in the form of cash bonuses, and long-term
performance incentives in the form of stock option awards, as discussed below.
BASE SALARY
Several factors determine base salary, including the Corporation's
performance, individual performance, compensation paid in prior years and
compensation of officers employed by similar institutions. The Committee reviews
competitive salary information from independent surveys. The Committee also
consults with the CEO with respect to the salaries for the other executives. The
Committee reviews recommendations of management for the annual salary, benefits
and incentives budget as part of the overall planning and budgeting process of
the Corporation, and submits its recommendations to the Board of Directors of
the Bank.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation paid to Gerard H. Brandi, the CEO of the Bank and the
Corporation, consisted of his annual base salary, a cash bonus, awards of stock
options and deferred compensation contributions. For 1998, the Committee
considered the following factors (without any specific weighting of these
measures) in determining the compensation to be paid to Mr. Brandi: the
Corporation's size and performance, including its profitability, efficiency and
share price performance, Mr. Brandi's performance and the compensation of chief
executive officers at similar institutions. Based on these factors, Mr. Brandi's
annual compensation, consisting of base salary and an annual performance
incentive in the form of a cash bonus, was increased approximately 2.1% during
1998, and he was awarded options to acquire 2,500 shares of Common Stock.
INCENTIVE PROGRAMS
Profit Sharing and Incentive Compensation Bonus Plan. All non-officer
employees of the Bank are eligible to receive annual profit-sharing
distributions based on the Corporation's net income. All officers and senior
executives (including the CEO) are eligible to receive incentive bonuses based
upon the following factors (without any specific weighting of these measures):
the Corporation's net income, return on assets,
19
<PAGE> 22
earnings per share and other specific goals and objectives. Because
substantially all of the target goals for these factors were met for 1998,
bonuses were awarded during 1998 to the CEO and the other executive officers.
Stock Option Awards. The Corporation's 1986 Stock Option Plan and Amended
and Restated 1994 Stock Incentive Plan are intended as performance incentives
for participants who contribute to the attainment of long-term strategic
objectives of the Corporation. The Plans enable persons to whom options are
granted to acquire or increase a proprietary interest in the success of the
Corporation. The long-term strategic objectives of the Corporation are set forth
in a five-year strategic plan which is revised annually. Because substantially
all of the Corporation's strategic objectives were attained, stock options were
awarded to the CEO, Directors and Bank officers.
Employee Stock Ownership Plan. All full-time employees of the Bank and the
Corporation who have at least one year of service are eligible to participate in
the Employee Stock Ownership Plan (the "ESOP"). The ESOP provides these persons
with a long-term ownership interest in the Corporation that is designed to serve
as an incentive for individual performance.
The Committee's policy with respect to Section 162(m) of the Code is to
make every reasonable effort to ensure that compensation is deductible to the
extent permitted and appropriate, while simultaneously providing the
Corporation's executives with appropriate rewards for their performance.
This report has been furnished by Samuel Altschuler, Mathias B. Bedell,
Robert S. Cummings and Louise A. Hickey, the members of the Committee.
* * * * *
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1998, the Compensation and Option Committee of the Board of Directors
was comprised of Messrs. Altschuler, Bedell and Cummings (Chairman) and Ms.
Hickey (whose term of office will expire at the Annual Meeting), all of whom are
non-employee Directors of the Corporation. The Corporation retained during 1998
and proposes to retain during 1999 the law firm of Peabody & Brown. Mr. Cummings
is a senior partner of Peabody & Brown.
DIRECTOR COMPENSATION
Members of the Board of Directors of the Corporation (excluding Executive
Committee members and employees of the Corporation or the Bank) received $400
for each Board of Directors or committee meeting attended during 1998, and will
receive $500 for each meeting during 1999, and members of the Executive
Committee received $400 for each Board of Directors meeting attended during
1998, and will receive $500 for each meeting during 1999. In addition, members
of the Executive Committee (excluding employees of the Bank) received during
1998, and will receive during 1999, an annual payment of $6,000, and such
members of the Executive Committee received an additional $200 for each meeting
attended of the Board of Directors of the Bank and of any committee thereof
during 1998, and will receive an additional $250 for each meeting during 1999.
Directors of the Corporation and the Bank also are reimbursed for expenses
incurred in connection with attendance at the meetings. During 1998, the
chairmen of the various committees (other than the Executive Committee)
received, and will receive in 1999, an additional $50 for each committee meeting
over which they presided and the Secretary of the Corporation, who is also the
Clerk of the Bank, received, and will receive in 1999, an annual payment of
$1,000.
20
<PAGE> 23
INDEBTEDNESS OF MANAGEMENT
The Bank has made loans (i) to one Director, who is also an executive
officer, (ii) to one other executive officer and (iii) to members of the
immediate families of certain Directors and executive officers, under which the
indebtedness of such persons exceeded $60,000 during 1998. Loans to such persons
were made in the ordinary course of business, were made on substantially the
same terms, including interest rates and collateral, 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 unfavorable features.
CERTAIN BUSINESS RELATIONSHIPS
The Corporation retained during 1998 and proposes to retain during 1999 the
law firm of Peabody & Brown. Robert S. Cummings, a Director and Secretary of the
Corporation, is a senior partner of Peabody & Brown.
INDEPENDENT PUBLIC ACCOUNTANTS
A representative of KPMG Peat Marwick LLP, the independent public
accountants for the Corporation, expects to be present at the Annual Meeting and
will have an opportunity to make a statement, if he or she desires to do so. The
representative will be available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Corporation's Directors, executive officers and beneficial owners of
more than 10% of its Common Stock are required under Section 16(a) of the
Securities Exchange Act of 1934, as amended, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Copies of those reports must also be furnished to the Corporation. Based solely
on a review of reports furnished to the Corporation and written representations
that no other reports were required, the Corporation believes that during 1998
no person who was a Director, executive officer or greater than 10% beneficial
owner of the Corporation's Common Stock failed to file on a timely basis all
reports required by Section 16(a), except that, with respect to Private Capital
Management, Inc., which the Corporation believes beneficially owned greater than
10% of the Corporation's Common Stock during 1998, the Corporation has not
received any filings under Section 16(a) and is therefore unable to make this
determination.
STOCKHOLDER PROPOSALS
For a proposal of a stockholder to be included in the Board of Directors'
Proxy Statement for the Corporation's 2000 Annual Meeting of Stockholders, it
must be received at the principal executive offices of the Corporation (123
Haven Street, Reading, Massachusetts 01867) on or before November 25, 1999. Such
a proposal must also comply with the requirements as to form and substance
established by the SEC for such a proposal to be included in the Proxy
Statement.
In addition, the Corporation's By-Laws also provide that any stockholder
wishing to have any director nominations or a stockholder proposal considered at
an annual meeting must provide written notice of such nominations or stockholder
proposal and certain other information as set forth in the By-Laws of the
Corporation to the Secretary of the Corporation at its principal executive
offices (a) not less than 75 days nor more than 120 days prior to the
anniversary of the immediately preceding annual meeting of stockholders (the
"Anniversary Date") or (b) in the event that the annual meeting of stockholders
is scheduled to be held on a date more than seven days prior to the Anniversary
Date, not later than the close of business on (i) the 20th
21
<PAGE> 24
day (or if that day is not a business day for the Corporation, on the next
succeeding business day) following the first date on which the date of such
meeting was publicly disclosed or (ii) if the first date of such public
disclosure occurs more than 75 days prior to such scheduled date of such
meeting, then the later of (1) the 20th day (or if that day is not a business
day for the Corporation, on the next succeeding business day) following the
first date of such public disclosure or (2) the 75th day prior to such scheduled
date of such meeting (or if that day is not a business day for the Corporation,
on the next succeeding business day). Any stockholder desiring to submit a
nomination or proposal must comply with the By-Laws of the Corporation.
Proxies solicited by the Board of Directors will confer discretionary
voting authority with respect to stockholder proposals, subject to SEC rules
governing the exercise of this authority.
OTHER MATTERS
The Board of Directors is not aware of any other matters which may come
before the Annual Meeting. It is the intention of the persons named in the
enclosed proxy to vote the proxy in accordance with their best judgment if any
other matters shall properly come before the Annual Meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE
COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED. IF YOU WISH TO VOTE YOUR STOCK IN PERSON AT THE ANNUAL MEETING, YOUR
PROXY MAY BE REVOKED.
March 24, 1999
22
<PAGE> 25
0728-PS-98
<PAGE> 26
PROXY
MASSBANK CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints GERARD H. BRANDI and REGINALD E. CORMIER,
and each of them, Proxies with power of substitution to vote on behalf of the
undersigned at the Annual Meeting of Stockholders of MASSBANK Corp. (the
"Corporation") to be held at Tara's Ferncroft Conference Center, 50 Ferncroft
Road, Danvers, Massachusetts, on Tuesday, April 20, 1999 at 10:00 a.m., and at
any adjournments or postponements thereof, hereby granting full power and
authority to act on behalf of the undersigned at the Annual Meeting, and at any
adjournments or postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF ALEXANDER S. COSTELLO, STEPHEN E. MARSHALL, NANCY L.
PETTINELLI AND DONALD B. STACKHOUSE AS CLASS I DIRECTORS OF THE CORPORATION, AS
PROPOSED BY THE BOARD OF DIRECTORS. IN THEIR DISCRETION, THE PROXIES ARE EACH
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING, AND AT ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. A STOCKHOLDER
WISHING TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS NEED
ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED SEE REVERSE
SIDE ON REVERSE SIDE
- ----------- -----------
<PAGE> 27
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
1. To elect Alexander S. Costello, Stephen E. Marshall, Nancy L. Pettinelli
and Donald B. Stackhouse as Class I Directors of the Corporation to serve
until the 2002 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified.
[ ] FOR [ ] WITHHOLD
[ ] FOR ALL EXCEPT_____________________
To vote your shares for all Director nominees, mark the "FOR" box. To withhold
voting for all nominees, mark the "WITHHOLD" box. If you do not wish your shares
voted "FOR" a particular nominee, mark the "FOR ALL EXCEPT" box and enter the
name(s) of the exception(s) in the space provided; your shares will be voted for
the remaining nominees.
2. To consider and act upon any other matters which may properly come before
the Annual Meeting, and at any adjournments or postponements thereof.
MARK HERE FOR ADDRESS CHANGE AND
NOTE AT LEFT [ ]
If only one of the Proxies is present and acting at the Annual Meeting in person
or by substitute, then that one shall have and may exercise all of the power and
authority of said Proxies hereunder. The undersigned hereby revokes any proxy
previously given and acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement and a copy of the Annual Report for the fiscal
year ended December 31, 1998.
Please date this proxy and sign exactly as your name appears hereon. Joint
owners should each sign. If signing as attorney or for an estate, trust or
corporation, title or capacity should be stated.
Signature:________________ Date:_______ Signature:________________ Date:_______
2
