<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))
Andover Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
Andover Bancorp, Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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
[ANDOVER BANCORP, INC. LETTERHEAD]
61 Main Street
Andover, Massachusetts 01810
(508) 749-2000
March 18, 1996
DEAR SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of Shareholders
(the "Annual Meeting") of Andover Bancorp, Inc. ("Andover" or the "Company")
to be held on Thursday, April 25, 1996 at 10:00 a.m., at the Andover Town
House, 20 Main Street, Andover, Massachusetts. Parking for the Annual Meeting
is available in Andover's parking lot which is located across the street from
the Andover Town House.
The Annual Meeting has been called for the purpose of electing three
Class III Directors for a three-year term; approving the amendment and
restatement of the Directors' Deferred Compensation Plan; ratifying the
appointment of KPMG Peat Marwick LLP as Andover's independent auditors; and
considering and voting upon such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors of Andover (the "Andover Board") has fixed the
close of business on March 1, 1996 as the record date for determining
shareholders entitled to notice of and to vote at the Annual Meeting.
The Andover Board recommends that shareholders vote FOR the election
of its three nominees as Class III Directors, FOR approval of the amendment and
restatement of the Directors' Deferred Compensation Plan and FOR the
ratification of the appointment of KPMG Peat Marwick LLP as Andover's
independent auditors.
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 if you wish, even if you have
previously returned your proxy card.
Very truly yours,
/s/ Gerald T. Mulligan
Gerald T. Mulligan
President and
Chief Executive Officer
<PAGE> 3
ANDOVER BANCORP, INC.
61 Main Street
Andover, MA 01810
Telephone: (508) 749-2000
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On April 25, 1996
---------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Andover Bancorp, Inc., a Delaware corporation ("Andover" or the "Company") will
be held at the Andover Town House, 20 Main Street, Andover, Massachusetts
at 10:00 a.m. on Thursday, April 25, 1996 (together with all adjournments and
postponements thereof, the "Annual Meeting"), for the following purposes:
1. To elect three Class III Directors, each for a three-year term
to serve until the 1999 Annual Meeting of Shareholders and
until his successor is duly elected and qualified;
2. To approve the amendment and restatement of the Deferred
Compensation Plan For Directors of Andover Bancorp, Inc. and
its subsidiaries (the "Directors' Deferred Compensation
Plan");
3. To ratify the appointment of KPMG Peat Marwick LLP as
Andover's independent auditors for the fiscal year ending
December 31, 1996; and
4. To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
The Board of Directors of Andover (the "Andover Board") has fixed the
close of business on March 1, 1996 as the record date (the "Record Date") for
determining shareholders entitled to notice of and to vote at the Annual
Meeting and any adjournments or postponements thereof. Only holders of shares
of common stock, par value $.10 per share, of Andover of record 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.
A list of the shareholders entitled to vote at the Annual Meeting
shall be available at 61 Main Street, Andover, Massachusetts for examination by
any shareholder, for any purpose germane to the Annual Meeting, during ordinary
business hours for a period of 10 days prior to the Annual Meeting.
By order of the Board of Directors
/s/ Cynthia J. Milne
CYNTHIA J. MILNE
Secretary
Andover, Massachusetts
March 18, 1996
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE
COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 4
ANDOVER BANCORP, INC.
61 Main Street
Andover, MA 01810
Telephone: (508) 749-2000
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held On Thursday, April 25, 1996
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Andover Bancorp, Inc. ("Andover" or the
"Company") for the Annual Meeting of Shareholders of Andover to be held at the
Andover Town House, 20 Main Street, Andover, Massachusetts at 10:00 a.m. on
Thursday, April 25, 1996, and any adjournments or postponements thereof (the
"Annual Meeting"). This Proxy Statement and the accompanying proxy card are
being mailed to shareholders on or about March 18, 1996.
At the Annual Meeting, the shareholders of Andover will be asked to
consider and vote upon the following matters:
1. To elect three Class III Directors, each for a three-year term
to continue until the 1999 annual meeting and until his
successor is duly elected and qualified;
2. To approve the amendment and restatement of the Directors'
Deferred Compensation Plan;
3. To ratify the appointment of KPMG Peat Marwick LLP as
Andover's independent auditors for the fiscal year ending
December 31, 1996;
4. To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
The Board of Directors of Andover (the "Andover Board") has fixed the
close of business on March 1, 1996 as the record date (the "Record Date") for
determining shareholders entitled to notice of and to vote at the Annual
Meeting and any adjournments or postponements thereof. As of the Record Date,
there were 4,239,571 shares of Andover's common stock, par value $0.10 per
share (the "Common Stock"), outstanding and entitled to vote at the Annual
Meeting. Each holder of Common Stock outstanding on the Record Date will be
entitled to one vote for each share held on each matter voted upon at the
Annual Meeting.
The presence, in person or by proxy, 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. A quorum being present, (i) Directors will be elected by a plurality
of the shares present in person or represented by proxy at the Annual Meeting
and entitled to vote on the election of Directors, (ii) the approval of the
amendment and restatement of the Directors' Deferred Compensation Plan will be
approved by a majority of the shares represented in person or by proxy and
entitled to vote at the Annual Meeting, and (iii) the appointment of KPMG Peat
Marwick LLP as Andover's independent auditors for the fiscal year ending
December 31, 1996 will be ratified by a majority of the shares represented in
person or by proxy and entitled to vote at the Annual Meeting.
<PAGE> 5
Andover intends to count (i) shares of Common Stock for which proxies
or ballots have been received but with respect to which holders or shares have
abstained on any matter and (ii) broker non-votes as present at the Annual
Meeting for purposes of determining the presence or absence of a quorum for the
transaction of business. 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.
With respect to the election of Directors, shares represented by proxy
that withholds authority to vote for a particular nominee or nominees and
broker non-votes will have no effect on the results of the vote for the
election of Directors. With respect to the proposals relating to the amendment
and restatement of the Directors' Deferred Compensation Plan and the
ratification of the Company's independent auditors, abstentions will have the
same effect as votes against the proposal while broker non-votes will have no
effect on the results of the vote.
Shareholders of Andover are requested to complete, date, sign and
return the accompanying form of proxy in the enclosed envelope. Shares
represented by proxies in the enclosed form will be voted as shareholders
direct. Proxies that contain no directions to the contrary will be voted FOR
the election of the three nominees of the Board of Directors to serve as Class
III Directors of Andover, FOR the amendment and restatement of the Directors'
Deferred Compensation Plan and FOR the ratification of the appointment of KPMG
Peat Marwick LLP as the Company's independent auditors for the current fiscal
year. At the time of preparation of this Proxy Statement, the Board of
Directors of Andover knew of no other matters to be presented for action at the
Annual Meeting. If any other business should properly come before the Annual
Meeting, the persons named as proxies in the accompanying proxy card shall have
authority to vote the shares in their discretion.
Any shareholder who executes a proxy may revoke it by notifying the
Secretary of Andover (61 Main Street, Andover, Massachusetts 01810) in writing
prior to the Annual Meeting or orally at the Annual Meeting before the proxy is
voted. Attendance at the Annual Meeting will not in and of itself constitute
revocation of a proxy.
The cost of soliciting proxies in the form enclosed herewith will be
borne by Andover. Solicitation of proxies will be made primarily by mail,
although the Directors, officers and regular employees of Andover or Andover
Bank, the wholly-owned subsidiary of Andover ("Andover Bank") may also solicit
proxies personally or by telephone or telegraph without special compensation
for such activities. Andover will also request persons, banks, firms and
corporations holding shares in their names or in the names of their nominees,
which are beneficially owned by others, to send proxy materials and obtain
proxies from such beneficial owners. Andover will reimburse such holders for
their reasonable expenses. Andover has also retained Kissel Blake Inc., a
proxy soliciting firm, to assist in solicitation of proxies at a fee estimated
to be approximately $2,500, plus reimbursement of certain out-of- pocket
expenses.
ANNUAL REPORT TO SHAREHOLDERS
Andover's Annual Report for the fiscal year ended December 31, 1995 is
enclosed. The Annual Report is not a part of the proxy soliciting materials.
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<PAGE> 6
PROPOSAL 1
ELECTION OF A CLASS OF DIRECTORS
The Andover Board is comprised of seven members divided into three
classes, with the Directors in each class serving a term of three years and
until their successors are duly elected and qualified. As the term of one
class expires, a successor class is elected at the annual meeting of
shareholders for that year.
At the Annual Meeting, three Class III Directors are to be elected for
a three-year term to serve until the 1999 Annual Meeting of Shareholders and
until their successors are duly elected and qualified. The Andover Board has
nominated Clifford E. Elias, Gerald T. Mulligan and Fred P. Shaheen to serve
as Class III Directors (the "Nominees"). Each of the Nominees is currently
serving as a Director of Andover. Unless authority to do so has been withheld
or limited in a proxy, it is the intention of the persons named as proxies to
vote the shares to which the proxy relates FOR the election of the Nominees to
the Andover Board.
The Andover Board anticipates that each of the Nominees will stand for
election and will serve, if elected, as a Director. However, if any person
nominated by the Andover Board 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 Andover Board may recommend.
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<PAGE> 7
INFORMATION AS TO CONTINUING DIRECTORS, NOMINEES AND NAMED EXECUTIVE OFFICERS
The following table sets forth certain information, as of February 1,
1996, with respect to (i) the three Nominees for election as Directors at the
Annual Meeting; (ii) those continuing Directors of Andover (the "Continuing
Directors") whose terms expire at the annual meetings of shareholders in 1997
and 1998; (iii) each of Andover's and Andover Bank's four highest paid
executive officers and the Chief Executive Officer ("Named Executive
Officers"); and (iv) Andover's and Andover Bank's Directors and executive
officers as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial
Ownership
of Shares of
Name and Position Director/Officer Common Percent of
With Andover Age Since (1) (2) Stock (3) Class
----------------- --- ---------------- ------------ ----------
<S> <C> <C> <C> <C>
(Nominees for Class III Term to Expire in 1999)
Fred P. Shaheen . . . . . . . . . . . . . . . . . . . 52 1983 17,053 (4) (5)
Director
Clifford E. Elias . . . . . . . . . . . . . . . . . . 65 1983 23,246 (6) (5)
Director
Gerald T. Mulligan . . . . . . . . . . . . . . . . . . 50 1991 130,168 (7) 3.07%
Director, President and Chief Executive Officer
(Continuing Directors - Class I Term to Expire
in 1997)
Thomas F. Caffrey . . . . . . . . . . . . . . . . . . . 56 1983 5,920 (8) (5)
Director
Cornelius J. McCarthy . . . . . . . . . . . . . . . . . 59 1983 6,134 (9) (5)
Director
(Continuing Directors - Class II Term to Expire
in 1998)
Naomi A. Gardner . . . . . . . . . . . . . . . . . . . 54 1983 5,423 (10) (5)
Director
Robert J. Scribner . . . . . . . . . . . . . . . . . . 67 1975 13,000 (11) (5)
Director
(Named Executive Officers)
John R. Heerwagen . . . . . . . . . . . . . . . . . . . 45 1993 32,609 (12) (5)
Senior Vice President
Michael J. Ecker . . . . . . . . . . . . . . . . . . . 44 1993 32,084 (13) (5)
Senior Vice President
Joseph F. Casey . . . . . . . . . . . . . . . . . . . . 35 1988 24,382 (14) (5)
Chief Financial Officer and Treasurer
James D. Dawson . . . . . . . . . . . . . . . . . . . . 43 1993 24,628 (15) (5)
Senior Vice President
All Nominees, Continuing Directors, Named
Executive Officers and executive
officers of Andover and Andover Bank
as a group (19 persons) . . . . . . . . . . . . . . 399,092 (16) 9.41%
</TABLE>
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<PAGE> 8
(1) Each of the Nominees and Continuing Directors, with the exception of Mr.
Mulligan, Mr. Shaheen and Mrs. Gardner, who were elected by the Board of
Directors in 1991, 1994 and 1992, respectively, has served as a Director
of Andover since its formation in February 1987. The dates indicated
include service as a Director of Andover Bank, including service prior
to the formation of Andover and as a Trustee of Andover Bank prior to
its conversion from mutual to stock form of ownership in May 1986. All
of the Nominees and Continuing Directors have served as Directors or
Trustees of Andover Bank since the dates indicated above, and continue
to serve as Directors of Andover Bank at the present time.
(2) Each of the Named Executive Officers became an officer of Andover in
1993 except Mr. Casey who became an officer of Andover in 1988. As
described below, each of the Named Executive Officers joined Andover
Bank prior to joining Andover.
(3) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934
as amended (the "Exchange Act"), a person is deemed to be the beneficial
owner, for purposes of this table, of any shares of Common Stock if he
or she has or shares voting power or investment power with respect to
such shares, or has the right to acquire beneficial ownership of such
shares at any time within 60 days of February 1, 1996.
(4) Includes 14,950 shares owned by Shaheen Brothers, Inc., of which Mr.
Shaheen is Treasurer and 50% owner and shares voting and investment
power with his partner. Also includes 500 shares which Mr. Shaheen has
the right to acquire under options granted pursuant to Andover's Stock
Option Plan.
(5) Indicates less than 1% ownership.
(6) Includes 10,000 shares beneficially owned by a trust of which Mr. Elias
is a trustee and shares voting and investment power and 3,716 shares
owned by his wife, as to which Mr. Elias disclaims beneficial ownership.
Also includes 500 shares which Mr. Elias has the right to acquire under
options granted pursuant to Andover's Stock Option Plan.
(7) Includes 81,500 shares which Mr. Mulligan has the right to acquire under
options previously granted pursuant to Andover's Stock Option Plan.
Also includes 2,569 shares allocated to Mr. Mulligan's account under the
Andover Bank Employee Stock Ownership Plan ("ESOP") as to which he may
direct the vote.
(8) Includes 2,517 shares owned by certain of Mr. Caffrey's family members,
as to which Mr. Caffrey disclaims beneficial ownership, and 63 shares
owned by a professional corporation. Also includes 500 shares which Mr.
Caffrey has the right to acquire under options granted pursuant to
Andover's Stock Option Plan.
(9) Includes 3,506 shares beneficially owned by C.J. McCarthy Insurance
Agency, Inc., of which Mr. McCarthy is president and sole stockholder,
and 2,000 shares owned by the retirement trust of C.J. McCarthy
Insurance Agency, of which Mr. McCarthy is trustee and has sole voting
and investment power. Also includes 500 shares which Mr. McCarthy has
the right to acquire under options granted pursuant to Andover's Stock
Option Plan.
(10) Includes 3,893 shares owned by certain of Mrs. Gardner's family members
as to which Mrs. Gardner disclaims beneficial ownership. Also includes
500 shares which Mrs. Gardner has the right to acquire under options
granted pursuant to Andover's Stock Option Plan.
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<PAGE> 9
(11) Includes 500 shares which Mr. Scribner has the right to acquire under
options granted pursuant to Andover's Stock Option Plan.
(12) Includes 26,300 shares which Mr. Heerwagen has the right to acquire
under options granted pursuant to Andover's Stock Option Plan. Also
includes 1,609 shares allocated to Mr. Heerwagen's account under the
ESOP as to which he may direct the vote.
(13) Includes 24,000 shares which Mr. Ecker has the right to acquire under
options granted pursuant to Andover's Stock Option Plan. Also includes
1,584 shares allocated to Mr. Ecker's account under the ESOP as to which
he may direct the vote. Also includes 300 shares owned by one of Mr.
Ecker's family members.
(14) Includes 20,843 shares which Mr. Casey has the right to acquire under
options granted pursuant to Andover's Stock Option Plan. Also includes
2,039 shares allocated to Mr. Casey's account under the ESOP as to which
he may direct the vote.
(15) Includes 21,800 shares which Mr. Dawson has the right to acquire under
options granted pursuant to Andover's Stock Option Plan. Also includes
1,128 shares allocated to Mr. Dawson's account under the ESOP as to
which he may direct the vote.
(16) Includes a total of 12,111 shares allocated to the accounts of Named
Executive Officers and all other executive officers under the ESOP as to
which he or she may direct the vote. Also includes a total of 231,690
shares which the Nominees, Continuing Directors, Named Executive
Officers and all other executive officers have the right to acquire
under options granted pursuant to Andover's Stock Option Plan.
The principal occupation and business experience during, at least, the
last five years for each Continuing Director, Nominee and Named Executive
Officers follows:
Thomas F. Caffrey is an attorney in private practice in Lawrence,
Massachusetts.
Clifford E. Elias is Professor of Law at Suffolk University, Boston,
Massachusetts and General Counsel of Holy Family Hospital, Methuen,
Massachusetts.
Naomi A. Gardner is the Director of Public Relations for Northeast
Rehabilitation Hospital in Salem, New Hampshire.
Cornelius J. McCarthy is President of C.J. McCarthy Insurance Agency,
Inc., Wilmington, Massachusetts.
Robert J. Scribner was Executive Vice President, Secretary and Director
of Merrimack Mutual Fire Insurance Co., Cambridge Mutual Fire Insurance Co. and
Bay State Insurance Co., Andover, Massachusetts, until his retirement.
Fred P. Shaheen is the Treasurer of Shaheen Brothers, Inc., Amesbury,
Massachusetts.
Gerald T. Mulligan is President and Chief Executive Officer of Andover
and Andover Bank. Prior to May, 1991, he served as President and Chief
Executive Officer of First Mutual of Boston, which position he held since 1989.
Prior to that, Mr. Mulligan was Vice Chairman and Chief Operating Officer of
First Mutual which has since been acquired by the Massachusetts Commissioner of
Banks for purposes of liquidation, and certain of its assets sold by the FDIC
to the Bank of Boston. From 1979 to 1983, Mr. Mulligan served as Massachusetts
Commissioner of Banks and had served as staff
6
<PAGE> 10
attorney to the Board of Governors of the Federal Reserve System, Washington,
D.C. Mr. Mulligan holds a JD from Georgetown University and an MBA from
Harvard University. Mr. Mulligan is 50 years of age.
Joseph F. Casey is Chief Financial Officer and Treasurer of Andover and
Andover Bank. He joined Andover Bank as Auditor in August, 1985, became its
Controller in 1986, became Treasurer of Andover and Andover Bank in 1988 and
1989, respectively, and became Chief Financial Officer and Treasurer of Andover
and Andover Bank in 1991. Mr. Casey holds a BS from Bentley College. Mr.
Casey, a certified public accountant, is 35 years of age.
James D. Dawson is Senior Vice President-Corporate Banking of Andover
and Andover Bank, a position he has held since December, 1992. He was elected
as a Senior Vice President of Andover in December, 1993. He joined Andover
Bank as Vice President-Corporate Banking in February, 1992. Prior to joining
Andover Bank, Mr. Dawson was a District Vice President of Shawmut Bank from
1985 to 1992. Mr. Dawson holds an AB from Brown University and an MBA from
Boston University. Mr. Dawson is 43 years of age.
Michael J. Ecker is Senior Vice President-Special Assets Group and
Construction Lending of Andover and Andover Bank, a position he has held since
October, 1995. He was elected as a Senior Vice President of Andover in
December, 1993. He joined Andover Bank as Vice President-Special Assets Group
in July, 1991. Prior to joining Andover Bank, from March, 1990 to July, 1991,
Mr. Ecker was the Vice President-Real Estate Owned at the First Mutual of
Boston which has since been acquired by the Massachusetts Commissioner of Banks
for purposes of liquidation, and certain of its assets sold by the FDIC to the
Bank of Boston. Mr. Ecker was the former President of M.I.L. Electronics, Inc.
of Waltham, Massachusetts from June of 1986 to February of 1990. Mr. Ecker
holds a BS from the University of Connecticut and an MBA from Harvard
University. Mr. Ecker is 44 years of age.
John R. Heerwagen is Senior Vice President-Retail Banking of Andover and
Andover Bank, a position he has held since joining Andover Bank in September,
1991. He was elected as a Senior Vice President of Andover in December, 1993.
Prior to joining Andover Bank, Mr. Heerwagen was the Senior Vice
President-Retail Banking at the First Mutual of Boston with which he held
various positions since 1985. First Mutual of Boston has since been acquired
by the Massachusetts Commissioner of Banks for purposes of liquidation, and
certain of its assets sold by the FDIC to the Bank of Boston. Mr. Heerwagen
holds a BSE from Princeton University and an MCRP from Harvard University. Mr.
Heerwagen is 45 years of age.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company held seven meetings during 1995.
No incumbent Director attended fewer than 75% of the aggregate of the total
number of meetings held by the Andover Board and the total number of meetings
held by all committees of the Andover Board on which such Director served
during the period of such Director's service. Andover has four standing
committees: the Executive Committee, the Audit Committee, the Nominating
Committee and the Compensation and Option Committee.
The members of the Executive Committee are Messrs. Mulligan (Chairman),
Elias, and Scribner. The Executive Committee is vested with the authority of
the Andover Board in most matters between meetings of the Andover Board. The
Executive Committee held no meetings in 1995.
The members of the Audit Committee, a joint committee comprised of
members of the Board of Directors of Andover Bank and of the Andover Board, are
Messrs. Caffrey (Chairman) and Scribner
7
<PAGE> 11
and Frank D. Goldstein and John E. Fenton, members of the Board of Directors of
Andover Bank. The Audit Committee reviews the financial statements of Andover
and the scope of the annual audit, monitors Andover's internal financial and
accounting controls and recommends to the Andover Board the appointment of
independent certified public accountants. The Audit Committee held four
meetings in 1995.
The members of the Compensation and Option Committee, a joint committee
comprised of members of the Board of Directors of Andover Bank and of the
Andover Board, are Messrs. Scribner (Chairman) and McCarthy and Frank D.
Goldstein, a member of the Board of Directors of Andover Bank. The
Compensation and Option Committee selects the officers and other employees to
whom stock options and rights under Andover's Stock Option Plan are granted and
determines compensation for the officers and other employees of Andover. The
Compensation and Option Committee held two meetings in 1995.
The members of the Nominating Committee are Mr. Elias (Chairman) and
Mrs. Gardner. The Nominating Committee considers and recommends nominees for
election as officers and Directors of Andover. The Nominating Committee held
one meeting in 1995. Andover's By-laws also permit shareholders who are
eligible to vote at the Annual Meeting to make nominations for Directors, if
such nominations are made pursuant to timely notice in writing to the Secretary
of Andover. See "Shareholder Proposals" for a discussion of the procedural
requirements for shareholder nominations.
COMPENSATION OF DIRECTORS
The Directors of Andover are each also Directors of Andover Bank. The
Directors of Andover currently receive a fee of $4,000 annually and $300 for
each Board and committee meeting they attend. The Directors of Andover Bank
receive a fee of $2,000 annually and $300 for each Board and committee meeting
they attend. The members of the Audit Committee of Andover and Andover Bank
currently receive an additional fee of $2,000 annually and $300 for each Audit
Committee meeting they attend. The Chairman of the Audit Committee, the
Nominating Committee and the Compensation and Option Committee receive an
additional fee of $1,000 annually. Directors who are also salaried employees
of Andover or Andover Bank do not receive any separate compensation for service
as a Director of Andover or Andover Bank.
OTHER EXECUTIVE OFFICERS
The following sets forth certain information, as of February 1, 1996,
with respect to the principal officers of Andover and Andover Bank, other than
the Named Executive Officers.
Octavio C. Bolivar is Senior Vice President-Systems and Operations of
Andover and Andover Bank, a position he has held since January, 1994. Prior to
joining Andover Bank, Mr. Bolivar was Vice President-Director of Client
Services at Mutual Services, Inc. from October of 1992 to January, 1994. From
July, 1991 to May, 1992, Mr. Bolivar was Director of Operations at South Boston
Savings Bank. Mr. Bolivar was the Senior Vice President-Systems and Operations
at the First Mutual of Boston with which he held various positions for 25
years. First Mutual of Boston has since been acquired by the Massachusetts
Commissioner of Banks for purposes of liquidation, and certain of its assets
sold by the FDIC to the Bank of Boston. Mr. Bolivar is 52 years of age.
8
<PAGE> 12
Barbara J. Conti is Senior Vice President of Human Resources of Andover
Bank, a position she has held since December, 1995. She joined Andover Bank as
Vice President of Human Resources in April, 1994. From 1991 until she joined
Andover Bank, Ms. Conti was the Vice President/Director of Human Resources of
Sterling Bank of Waltham, Massachusetts, which has since been acquired by Fleet
Bank. Prior to joining Sterling Bank, Ms. Conti was the Assistant Vice
President/Director of Human Resources of the Bank for Savings, Malden,
Massachusetts. Ms. Conti is 41 years of age.
Raymond P. Smith is Senior Vice President-Corporate Banking of Andover
Bank, a position he has held since joining Andover Bank in June, 1995. Mr.
Smith was elected President of Andover Bank NH in September, 1995. Prior to
joining Andover Bank, Mr. Smith was the Senior Vice President/Senior Lending
Officer at the New Dartmouth Bank, Manchester, New Hampshire from 1991 to 1994
which has since been acquired by Shawmut National Corporation. Mr. Smith was
the former Senior Vice President/Senior Commercial Lending Officer of New
Hampshire Savings Bank Corp which was closed by the New Hampshire Commissioner
of Banks in 1991 for purposes of liquidation and its assets were assumed by the
FDIC. Mr. Smith is 47 years of age.
Gerald C. Woodworth, Jr. is Senior Vice President-Loan Operations of
Andover and Andover Bank, a position he has held since January, 1989. He was
elected as a Senior Vice President of Andover in December, 1993. Prior to
joining Andover Bank in 1986 as a Vice President, Mr. Woodworth was a
Management Consultant and Senior Vice President of Consumer Lending at Shawmut
Bank of Boston. Mr. Woodworth holds a BSEE from Purdue University and an MBA
from Boston University. Mr. Woodworth is 55 years of age.
Pursuant to Andover's By-laws, each Andover officer holds office until
the regular annual meeting of the Board of Directors following the next annual
meeting of shareholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
9
<PAGE> 13
EXECUTIVE COMPENSATION
No separate compensation is paid to the executive officers of the Company,
all of whom are executive officers of Andover Bank and receive compensation as
such.
I. SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal years ended December 31,
1995, 1994 and 1993, the cash compensation paid by Andover Bank, as well as the
value of long-term compensation and other compensation, to the Chief Executive
Officer and the four other most highly compensated executive officers of the
Company.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
- -------------------------------------------------------------------------------- -----------
Name and Other Annual Securities (2)
Principal Compen- Underlying All Other
Position Year Salary($) Bonus($) sation ($) Options (#) Compensation($)
- -------- ---- --------- -------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gerald T. Mulligan, 1995 $260,000 45,000 (1) 15,000 $10,767 (3)
President and Chief 1994 240,000 45,000 (1) 64,000 (4) 10,520 (3)
Executive Officer of 1993 215,000 43,000 (1) 10,000 12,791 (3)
Andover and Andover Bank
John R. Heerwagen, 1995 116,000 18,500 (1) 6,500 9,051 (5)
Senior Vice President of 1994 110,000 17,200 (1) 6,500 7,530 (5)
Andover and Andover Bank 1993 101,000 16,200 (1) 5,000 5,939 (5)
Michael J. Ecker, 1995 109,000 24,000 (1) 6,500 9,021 (6)
Senior Vice President of 1994 104,000 21,300 (1) 6,500 7,237 (6)
Andover and Andover Bank 1993 99,000 19,800 (1) 5,000 5,817 (6)
Joseph F. Casey, 1995 104,000 15,500 (1) 6,500 8,100 (7)
Chief Financial Officer 1994 95,000 14,500 (1) 7,000 6,586 (7)
and Treasurer of Andover 1993 85,000 15,000 (1) 5,000 5,033 (7)
and Andover Bank
James D. Dawson, 1995 101,600 10,000 (1) 5,000 6,971 (8)
Senior Vice President of 1994 97,600 16,000 (1) 6,000 5,643 (8)
Andover and Andover Bank 1993 93,000 13,000 (1) 5,000 5,250 (8)
</TABLE>
(1) The amount of perquisites did not exceed 10% of salary.
(2) Includes (i) Andover Bank's contributions to the tax exempt benefit plan
that is qualified under Section 401(k) of the Internal Revenue Code of
1986, as amended and (ii) the cash value of shares of the Common Stock
acquired by the Employee Stock Ownership Plan ("ESOP") and allocated to
the named party. Such cash value was determined by multiplying the
number of shares of Common Stock so allocated by the closing price of
Common Stock at December 31 of the applicable year as reported by The
Nasdaq Stock Market. Such closing prices were $21.125 at December 31,
1995 and $14.25 at December 31, 1994, and $15.625 at December 31, 1993.
The amount does not include the cash value of dividends declared in 1995
but paid in 1996.
10
<PAGE> 14
(3) Includes (i) Andover Bank's contribution of $1,851, $1,856 and $400 in
1995, 1994 and 1993, respectively, to Mr. Mulligan's 401(k) account, and
(ii) the cash value of 437 shares, 608 shares and 793 shares, allocated
to Mr. Mulligan under the ESOP, at December 31, 1995, 1994 and 1993,
respectively.
(4) Includes an award of options to purchase 50,000 shares granted on June
16, 1994 to Mr. Mulligan in lieu of his participating in Andover's
supplemental pension plan. Also includes an award of options to
purchase 14,000 shares granted on December 30, 1994.
(5) Includes (i) Andover Bank's contribution of $1,161, $1,172 and $189 in
1995, 1994 and 1993, respectively, to Mr. Heerwagen's 401(k) account, and
(ii) the cash value of 454 shares, 446 shares and 368 shares, allocated
to Mr. Heerwagen under the ESOP, at December 31, 1995, 1994 and 1993,
respectively.
(6) Includes (i) Andover Bank's contribution to Mr. Ecker's 401(k) account of
$1,299, $1,238 and $176 in 1995, 1994 and 1993, respectively, and (ii)
the cash value of 460 shares, 421 shares, and 361 shares, allocated to
Mr. Ecker under the ESOP, at December 31, 1995, 1994 and 1993,
respectively.
(7) Includes (i) Andover Bank's contribution of $1,098, $1,100 and $63 in
1995, 1994 and 1993, respectively, to Mr. Casey's 401(k) account and (ii)
the cash value of 406 shares, 385 shares, and 312 shares, allocated to
Mr. Casey under the ESOP, at December 31, 1995, 1994 and 1993,
respectively.
(8) Includes the cash value of 396 shares, 396 shares, and 336 shares,
allocated to Mr. Dawson under the ESOP, at December 31, 1995, 1994 and
1993, respectively.
11
<PAGE> 15
II. OPTION GRANTS TABLE
Set forth below is a chart showing the option grants made to the Chief
Executive Officer and the other four most highly compensated executive officers
of Andover during 1995. The amounts shown as potential realizable values are
based on arbitrarily assumed annualized rates of stock price appreciation of
five percent and ten percent over the full ten year term of the options, as
required by applicable Securities and Exchange Commission regulations. No gain
to the optionee is possible without an increase in stock price which will
benefit all shareholders proportionately. Actual gains, if any, on options
exercised are dependent on the future performance of Common Stock and overall
stock market conditions. There can be no assurance that the potential
realizable values shown in this table will be achieved.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value
At Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
- -------------------------------------------------------------------------------------------------- ---------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise or Base
Name Granted (#) (1) In Fiscal Year Price ($/Sh) Expiration Date 5% ($) 10% ($)
---- --------------- -------------- ------------ --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Gerald T. Mulligan, 15,000 22.39% $21.125 12/29/2005 $199,350.00 $505,050.00
President and CEO
John R. Heerwagen, 6,500 9.70% $21.125 12/29/2005 $86,385.00 $218,855.00
Sr. Vice President
Michael J. Ecker, 6,500 9.70% $21.125 12/29/2005 $86,385.00 $218,855.00
Sr. Vice President
Joseph F. Casey, 6,500 9.70% $21.125 12/29/2005 $86,385.00 $218,855.00
CFO & Treasurer
James D. Dawson, 5,000 7.46% $21.125 12/29/2005 $66,450.00 $168,350.00
Sr. Vice President
</TABLE>
(1) The options granted are immediately exercisable.
12
<PAGE> 16
III. OPTION EXERCISES AND YEAR-END TABLE
Set forth below is a chart showing the aggregated exercised and
unexercised options held by the Chief Executive Officer and the other four most
highly compensated executive officers of Andover during 1995. Value realized
upon exercise is the difference between the fair market value of the underlying
stock on the exercise date and the exercise price of the option. Value of
unexercised, in-the-money options at December 31, 1995, is the difference
between its exercise price and the fair market value of the underlying stock on
December 31, 1995, which was $21.125 per share. These values have not been,
and may never be, realized. The underlying options have not been, and may not
be, exercised; and actual gains, if any, on exercise will depend on the value
of Common Stock on the date of exercise. There can be no assurance that these
values will be realized. Unexercisable options are those which have not fully
vested.
Aggregated Option Exercises in Last Fiscal Year and
December 31, 1995 Option Value
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
December 31, 1995 (#) December 31, 1995 ($)
--------------------- ---------------------
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Gerald T. Mulligan, 7,500 $54,375 81,500/20,000 $368,438/$2,500
President and CEO
John R. Heerwagen, 700 10,500 26,300/--- $178,763/---
Sr. Vice President
Michael J. Ecker, 4,000 55,250 24,000/--- $139,688/---
Sr. Vice President
Joseph F. Casey, 6,500 54,500 20,843/--- $ 88,020/---
CFO & Treasurer
James D. Dawson, 2,200 28,300 21,800/--- $134,000/---
Sr. Vice President
</TABLE>
IV. RETIREMENT PLAN
The following table illustrates annual pension benefits for retirement
at age 65 under the most advantageous plan provisions (in effect on December
31, 1995) 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 Andover Bank's Retirement Plan
(the "Plan") continues in its present form. The benefits are not subject to
any deduction for Social Security or other offset amounts. The maximum
compensation that may be used in 1995 to calculate benefits under the Plan is
$150,000.
Annual Pension Benefit
Based on Years of Service
<TABLE>
<CAPTION>
Average 25 years
Compensation (1) 10 years 15 years 20 years or more
- ---------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000 . . . . . . . . . . . . . $16,945 $25,417 $33,890 $42,362
120,000 . . . . . . . . . . . . . 20,645 30,967 41,290 51,612
140,000 . . . . . . . . . . . . . 24,345 36,517 48,690 60,862
150,000 . . . . . . . . . . . . . 26,195 39,292 52,390 65,487
</TABLE>
(1) Average compensation for purposes of this table is based on the
average of the total taxable compensation for the three years
immediately preceding retirement.
13
<PAGE> 17
Gerald T. Mulligan, President and Chief Executive Officer of Andover
and Andover Bank, will have an estimated 20 years of service under the Plan at
normal retirement date. Senior Vice Presidents of Andover and Andover Bank,
John R. Heerwagen, Michael J. Ecker and James D. Dawson, will each have an
estimated 25 years of service, under the Plan at normal retirement date.
Joseph F. Casey, Chief Financial Officer and Treasurer of Andover and Andover
Bank will have an estimated 40 years of service under the Plan at normal
retirement date.
V. EMPLOYMENT AGREEMENT AND SPECIAL TERMINATION AGREEMENTS
Andover and Andover Bank have entered into an employment agreement
with Gerald T. Mulligan. The term of Mr. Mulligan's employment agreement is
three years commencing on May 16, 1991, and will be extended for successive
one-year periods after May 16, 1994 unless Andover or Andover Bank gives Mr.
Mulligan prior specified notice of its election not to extend the employment
agreement. Under the employment agreement, Andover or Andover Bank may
terminate Mr. Mulligan's employment at any time for "cause" as defined in the
employment agreement, without incurring any continuing obligations to him. If
Andover or Andover Bank terminates Mr. Mulligan's employment without cause, or
Mr. Mulligan terminates his own employment because of a material breach of the
employment contract by Andover or Andover Bank, Andover and Andover Bank will
remain obligated to continue to provide the compensation and benefits specified
in Mr. Mulligan's employment agreement until the expiration date of the
employment agreement.
Andover and Andover Bank have also entered into special termination
agreements with Gerald T. Mulligan, John R. Heerwagen, Michael J. Ecker, Joseph
F. Casey and James D. Dawson. These special termination agreements provide
that if there is a "change in control" of Andover or Andover Bank, and if, at
any time during the three-year period following the change in control, either
Andover or Andover Bank were to terminate the employment of any of the above
listed officers for any reason other than for cause, or any of the above named
officers were to terminate his own employment following his demotion, reduction
in his annual compensation, loss of office or significant authority, or for
related reasons, then the named officer would be entitled to receive certain
severance benefits provided to him in the agreement. In the case of such a
termination, the named officer could elect to receive (in lieu of any benefits
due under his employment agreement) 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 Andover or Andover Bank (or such shorter
period in which the named officer was so employed). For the purpose of these
special termination agreements, a "change of control" is generally defined to
mean: (i) the acquisition by a person or group of persons of beneficial
ownership of 25% or more of the Common Stock of Andover or Andover Bank during
the term of the agreement which is not approved by two-thirds of the Directors
of Andover or Andover Bank, as the case may be, or (ii) a tender offer or
exchange offer, merger or other business combination, sale of assets or
contested election, as a result of which a majority of the Board of Directors
of Andover or Andover Bank is no longer composed of persons who were Directors
of Andover or Andover Bank prior to such event.
14
<PAGE> 18
VI. SHARE INVESTMENT PERFORMANCE
The Securities and Exchange Commission requires Andover to present a
chart comparing the cumulative total return on its Common Stock with the
cumulative total return of (i) a broad based equity market index, and (ii) a
published industry index or peer group. The following graph shows changes over
the past five-year period in the value of $100 invested in: (a) Andover's
Common Stock; (b) an industry peer group* of twenty-six other regional thrifts
as provided by Advest, Inc.; and (c) the Standard and Poor's 500 Index.
The Standard and Poor's 500 Index reflects the total return of a group
of stocks in a cross-section of industries. All of these stocks have
substantially larger market capitalizations than Andover. The Peer Group Index
includes twenty-six thrift institutions located in New England selected by
Advest, Inc. Some of these institutions have larger market capitalizations
than Andover and some have smaller market capitalizations.
Information about the indices has been obtained from sources believed
to be reliable, but neither the accuracy nor the completeness of such
information is guaranteed by Andover. The year-end values of each investment
are based on share price appreciation plus the reinvestment of dividends paid.
FIVE YEAR CUMULATIVE TOTAL RETURN
Value of $100 invested on 12/31/90
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 Index $ 100.00 $ 130.34 $ 140.25 $ 154.33 $ 156.42 $ 214.61
- --------------------------------------------------------------------------------------------------
Industry Peer Group Index $ 100.00 $ 172.34 $ 292.65 $ 401.80 $ 402.82 $ 640.40
- --------------------------------------------------------------------------------------------------
Andover Bancorp, Inc. $ 100.00 $ 68.05 $ 367.41 $ 503.75 $ 470.43 $ 713.26
- --------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
*The peer group consists of Abington Bancorp, American Bank of
Connecticut, Bancorp Connecticut, Inc., The Boston Bancorp, Inc., Central
Co-operative Bank, CFX Corp., Community Bancshares, Dime Financial
Corporation, DS Bancorp, Eagle Financial Corp., Eastern Bancorp, Family
Bancorp, First Federal Savings and Loan of East Hartford, Framingham Savings
Bank, Grove Bank For Savings, Lawrence Savings Bank, Massbank Corp., Medford
Savings Bank, Midconn Bank, Norwich Financial, Peoples Heritage Financial
Group, Inc., Peoples Savings Financial, The Sandwich Cooperative Bank, Tolland
Bank, Walden Bancorp and Webster Financial.
15
<PAGE> 19
REPORT ON EXECUTIVE COMPENSATION
Set forth below is a report that reflects the work of the Compensation
and Option Committee, which is composed of Frank D. Goldstein, Cornelius J.
McCarthy and Robert J. Scribner (Chairman), all of whom are independent
Directors. None of these non-employee Directors has any interlocking or other
relationships with Andover that would call into question his independence as a
committee member.
EXECUTIVE COMPENSATION PHILOSOPHY
The Compensation and Option Committee's philosophy of executive
compensation is (i) to provide competitive levels of compensation that
integrate pay with the individual executive's performance and Andover's annual
and long-term performance goals; (ii) to motivate key executives to achieve
strategic business initiatives and reward them for their achievement; (iii) to
provide compensation opportunities and benefits which are comparable to those
offered by other financial institutions, thus allowing Andover and Andover Bank
to compete for and retain talented executives who are critical to Andover's
long-term success; and (iv) to align the interests of key executives with the
long-term interests of shareholders in the enhancement of shareholder value
through stock and stock option awards that can result in the ownership of
Common Stock.
At present, compensation of Andover's Chief Executive Officer and
other executive officers is composed of the following elements: annual base
salary, annual performance incentives in the form of cash bonuses, and
long-term performance incentives in the form of stock option awards under
Andover's Stock Option Plan.
Each year the Compensation and Option Committee reviews the
performance of the Chief Executive Officer and each other executive officer in
light of the individual's and Andover's overall performance. The specific
measures of corporate performance that were evaluated by the Compensation and
Option Committee in making compensation awards for fiscal 1995 were Andover
Bank's overall profitability, the performance of Andover Bank's core banking
business and Andover's share price performance.
Annual Salaries
The annual base salaries for executives are intended to be competitive
with other financial institutions in the Northeast. The Compensation and
Option Committee reviews management's recommendations regarding annual salary,
annual bonuses, and other benefits and incentives as part of its overall
planning and submits its recommendations to the Andover Board. With respect to
salaries and awards for executive officers, the Compensation and Option
Committee also consults with the Chief Executive Officer.
Incentive Programs
Andover's incentive compensation programs combine short-term
incentives in the form of cash bonuses and stock-based long- term incentives in
the form of awards of stock options and stock allocations. Annual bonuses are
intended to recognize and reward individual contributions. Stock options align
the interests of executives and shareholders by providing value to the
executive when the Andover stock price increases. Thus, stock option grants
provide an incentive for the executive to manage Andover from the perspective
of an owner with an equity stake in the business. The stock option awards made
in 1995 through the Stock Option Plan reflect Andover's commitment to this
16
<PAGE> 20
principle. Stock options are intended to reward officers for long-term
appreciation in the value of Andover's stock. Individual stock option awards
are designed to be competitive with other financial institutions in the
Northeast, but are also based upon the recipient's individual performance.
Compensation of the Chief Executive Officer
Gerald T. Mulligan's compensation for fiscal year 1995 consisted of
his annual base salary, a cash bonus and an award of stock options. Mr.
Mulligan's compensation was based upon Andover Bank's overall profitability,
the performance of Andover Bank's core banking business and Andover's share
price performance. Andover Bank returned to profitability in 1992 and
continued that trend through 1995. By focusing on strengthening the Andover
Bank's core banking business, Mr. Mulligan was instrumental in this return to
consistent profitability.
Compensation and Option Committee: Frank D. Goldstein
Cornelius J. McCarthy
Robert J. Scribner, Chairman
CERTAIN TRANSACTIONS
Certain of Andover's Directors and officers are at present, as in the
past, customers of Andover Bank and from time to time have entered into
transactions with Andover Bank in the ordinary course of business. In
addition, certain of Andover's Directors are at present, as in the past, also
directors, officers or shareholders of corporations or members of partnerships
which are customers of Andover Bank and which have transactions with Andover
Bank in the ordinary course of business. Such transactions with Directors and
officers of Andover and with such corporations and partnerships are on such
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons and do not involve more than
normal risk of collectibility or present other features unfavorable to Andover
Bank.
During 1994, Andover Bank entered into an agreement with C. J. McCarthy
Insurance Agency, Inc. for the purpose of providing personal insurance
coverage, at the employee's option, to Andover Bank's employees through a
payroll deduction program. Cornelius J. McCarthy, owner of C. J. McCarthy
Insurance Agency, Inc., is a Director of Andover and Andover Bank. In
addition, C. J. McCarthy Insurance Agency, Inc. provides Andover Bank with some
of its commercial insurance coverage, which management believes is on
substantially the same terms as comparable coverage with unaffiliated persons.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Thomas F. Caffrey, Clifford E. Elias, Naomi A. Gardner and Fred P.
Shaheen, Directors of Andover and Andover Bank, inadvertently failed to file on
a timely basis a report required by Section 16 of the Exchange Act relating to
purchase of stock under the Company's dividend reinvestment plan.
17
<PAGE> 21
PROPOSAL 2
APPROVAL OF AMENDMENT TO DIRECTORS'
DEFERRED COMPENSATION PLAN
PROPOSAL
The Board of Directors of the Company has amended and restated the
Directors' Deferred Compensation Plan effective February 22, 1996, and is
recommending the restated plan to stockholders for approval. The amendment and
restatement would permit Directors' deferred compensation to be deemed invested
in stock units equivalent in value to Common Stock and would permit
distribution upon a Director's retirement from the Board to be payable in the
form of shares of Common Stock purchased on the open market or issued from
Treasury stock.
Subject to adjustments for stock splits, stock dividends, and similar
events, the total number of shares of Common Stock that can be issued under the
Directors' Deferred Compensation Plan is 50,000. The closing price of the
Common Stock on February 22, 1996 was $23.00 per share.
REASONS FOR THE AMENDMENT
The Directors' Deferred Compensation Plan was established in 1993 to
permit the Directors to defer receipt of their Directors' fees. During the
deferral term, the Directors' deferred compensation accounts received interest
credits each year equal to the interest yield on the Bank's 36-month term
deposits. In order to encourage Directors to acquire a greater equity stake in
the Company in a tax-efficient manner, the Company has amended and restated the
Directors' Deferred Compensation Plan to permit any Director of the Company or
any of its subsidiaries to direct the deemed investment of his deferred
compensation account in stock units equivalent in value to shares of Common
Stock of the Company and to receive distribution from the Directors' Deferred
Compensation Plan in actual shares of Common Stock. The Company believes that
this amendment will align the long-term interests of the Directors with the
interests of all stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE AMENDMENT AND RESTATEMENT OF
THE DIRECTORS' DEFERRED COMPENSATION PLAN BE APPROVED AND, THEREFORE,
RECOMMENDS A VOTE FOR THIS PROPOSAL.
SUMMARY OF THE DIRECTORS' DEFERRED COMPENSATION PLAN
The material terms of the Directors' Deferred Compensation Plan are
summarized below: The summary is qualified in its entirety by the full text of
the Directors' Deferred Compensation Plan which is attached hereto as Exhibit
A.
Eligibility. Any member of the Board of Directors of the Company or
any of its subsidiaries who is not an employee of the Company or any of its
subsidiaries is eligible to participate in the Directors' Deferred Compensation
Plan. To join the Directors' Deferred Compensation Plan, a Director must file
a written advance election to defer all or a portion of his Director's fees.
Deferred Compensation Accounts. Each Director's deferred fees are
maintained in a bookkeeping deferred compensation account. Each Director may
choose to receive interest credits to his account equivalent to the interest
yield on the Bank's 36-month term deposits. Alternatively, each Director may
direct the deemed investment of his deferred compensation account in stock
units equivalent in value to Common Stock. To comply with Section 16 of the
Securities Exchange
18
<PAGE> 22
Act of 1934, such an election must be made on an irrevocable basis six months
in advance. During the term of deferral, any deferred compensation account
that is deemed invested in stock units will be credited with additional units
if the Company declares any dividend.
Distribution. Amounts credited to a Director's deferred compensation
account will be paid on the January 15 coincident with or next following the
date the Directors ceases to be a member of the Board of Directors of the
Company or any of its subsidiaries. Payments can be either in a lump sum or in
installments over a ten-year period, as elected in advance by the Director.
Payments from a Director's deferred compensation account that is deemed
invested in stock units will be made in shares of Common Stock.
Adjustment for Stock Dividends, Stock Splits, Etc. The reserved shares
and the stock units in the deferred compensation accounts will be adjusted to
reflect stock dividends, stock splits or similar events.
Amendment and Termination. The Directors' Deferred Compensation Plan
may be amended or terminated at any time by vote of the Board of Directors of
the Company.
Stockholders' Vote. The amendment and restatement of the Directors'
Deferred Compensation Plan will be effective, as of February 22, 1996, upon
approval by the holder of at least a majority of the shares of Common Stock
present or represented and entitled to vote at the Annual Meeting.
New Plan Benefits.
Deferred Compensation Plan For Directors
of Andover Bancorp, Inc. and its Subsidiaries
<TABLE>
<CAPTION>
Number of
Non-Executive Director Group Stock Units**
---------------------------- -------------
<S> <C>
Non-Employee Directors as a Group (3) 6,790
</TABLE>
PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITORS
The firm of KPMG Peat Marwick LLP has been selected by the Board of
Directors to be the Company's independent auditors for the 1996 fiscal year.
The firm of KPMG Peat Marwick LLP, independent auditors, has audited the
accounts of the Company for several years, and has wide experience in bank
accounting and auditing. Neither the firm nor any of its partners has any
direct or indirect financial interest in, in any connection (other than as
independent auditors) with, the Company or any of the Company's subsidiaries.
- ---------------
** This number represents the number of stock units which would be
maintained in the Directors' bookkeeping accounts under the Directors'
Deferred Compensation Plan if the amounts standing to the credit of these
accounts were converted into stock units, using the closing price of the Common
Stock on February 22, 1996. Actual conversion will not occur until August 23,
1996.
19
<PAGE> 23
Representatives of KPMG Peat Marwick LLP are expected to be present at
the Annual Meeting. These representatives will be afforded the opportunity to
make a statement if they desire to do so, and are expected to be available to
respond to appropriate questions.
The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting is necessary to ratify
the selection of KPMG Peat Marwick LLP as the independent auditors of the
Company for the 1996 fiscal year. Should the selection of KPMG Peat Marwick
LLP as independent auditors of the Company not be ratified by the shareholders,
the Board will reconsider the matter.
THE BOARD RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS
OF THE COMPANY FOR THE 1996 FISCAL YEAR.
PRINCIPAL SHAREHOLDERS
The following table presents information as to the only shareholder
known to Andover to be beneficial owners or more than 5% of the Common Stock as
of February 15, 1996.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Percent of
Title of Class Name and Address of Beneficial Owner Ownership Class (1)
- -------------- ------------------------------------ --------- ---------
<S> <C> <C> <C>
Common Stock FMR Corporation (2) . . . . . . . . . . . . . . . . . . 375,600 8.86
82 Devonshire Street, Boston, MA 02109
</TABLE>
(1) Computed on the basis of 4,236,971 of outstanding shares.
(2) Andover has relied on the information set forth in Schedule 13G, dated
February 14, 1996, filed by FMR Corporation with the Securities and Exchange
Commission.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Proposals of shareholders intended to be presented at Andover's 1997
Annual Meeting of Shareholders must be received in writing by Andover at its
principal executive offices on or before November 26, 1996, for inclusion in
its proxy statement and form of proxy relating to the meeting.
In addition, Andover's By-laws provide that any Director nominations
and new business submitted by shareholders must be filed with the Secretary of
Andover at least 60 days, but not more than 150 days, prior to the date of the
scheduled annual meeting, and that no other nominations or proposals by
shareholders shall be acted upon at the meeting; provided, however, that if
less than 70 days' notice or prior public disclosure of the date of the
scheduled annual meeting is given or made, notice by the shareholder must be so
delivered or received not later than the close of business on the tenth day
following the earlier of the day on which such notice of the date of the
scheduled meeting was mailed or the day on which such public disclosure was
made.
Any such proposals should be mailed to: Secretary, Andover Bancorp,
Inc., 61 Main Street, Andover, Massachusetts 01810.
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OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows
of no matters to be brought before the Annual Meeting other than those
specifically listed in the Notice of Annual Meeting of Shareholders. However,
if further business is properly presented, the persons named as proxies in the
accompanying proxy will vote such proxy in their discretion.
Whether or not you expect to be present at the meeting, please
complete and sign the enclosed proxy and return it promptly in the enclosed
envelope. If you desire to vote your stock in person at the meeting, your
proxy may be revoked.
Andover, Massachusetts
March 18, 1996
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EXHIBIT A
DEFERRED COMPENSATION PLAN FOR DIRECTORS
OF ANDOVER BANCORP, INC. AND ITS SUBSIDIARIES
The Deferred Compensation Plan For Directors of Andover Bancorp, Inc. and
Its Subsidiaries, originally effective July 1, 1993, is hereby amended and
restated as follows effective February 22, 1996:
1. Eligibility. Any member of the Board of Directors of Andover Bancorp, Inc.
or any of its subsidiaries (each such entity being referred to herein as the
"Corporation") who is not an employee of Andover Bancorp, Inc. or any of its
subsidiaries may elect to defer, in accordance with this Plan, payment of all
or a portion of the compensation payable to him for service as such Director.
2. Election to Defer. A Director's election to defer payments shall be made
in writing and shall be effective upon receipt and acceptance by the
Corporation. Except in the case of a newly elected Director who may file an
election to defer within thirty (30) days of his election as Director, an
election to defer shall be made no later than ten (10) days preceding
commencement of a calendar year with respect to deferral of compensation to be
earned in such year. Any election may be revoked in writing and shall be
effective upon receipt by the Corporation, but only as to compensation to be
earned at and after commencement of the next succeeding calendar month. Any
election may be changed in writing and shall be effective upon receipt by the
Corporation, but only as to compensation to be earned at and after commencement
of the next succeeding calendar year.
3. Crediting of Interest. The Corporation shall maintain a book account to
which the deferred compensation of each Director participating in this Plan
shall be credited as of the end of each calendar month after such compensation
is earned. As of the end of each calendar month, the Corporation shall also
credit each deferred compensation account with interest on the amount then
standing in the account, exclusive of any deferred compensation credited to the
account as of such date. The rate to be used for this purpose shall be the
maximum interest yield paid by Andover Bank with respect to its 36-month term
deposit accounts, or if there shall be no 36-month term deposit accounts, at
the maximum interest yield paid on the term deposit account of such duration as
most closely approximates 36 months.
4. Stock Units.
(a) In lieu of receiving interest credit each month, a Director may elect
to convert the amounts in his deferred compensation account (and any future
deferrals) into stock units equivalent in value to shares of common stock of
Andover Bancorp, Inc. ("Stock"). Such an election must be made on an
irrevocable basis at least six months in advance. A Director may revoke his
election and elect to receive interest credits pursuant to Paragraph 3 above,
but any such revocation must be made in writing on an irrevocable basis at
least six months in advance.
(b) The conversion of deferred compensation into stock units will be made
on the basis of the fair market value of the Stock on the date of conversion,
or the date the compensation would otherwise be paid, whichever is applicable.
For this purpose, fair market value of the Stock on any given date shall mean
the closing price reported for the Stock on the NASDAQ National Market on such
date or, if no sales were reported on such date, for the last date preceding
such date for which a sale was reported.
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<PAGE> 26
(c) During the term of the deferral, each Director's account of stock
units will be credited with additional units to reflect any payment of
dividends (other than dividends payable only in shares of Stock). Each account
will be credited with a number of whole and fractional shares of stock units
determined by multiplying the dividend value per share of Stock by the number
of units in the account on the record date and dividing the result by the fair
market value of the Stock (as defined in Paragraph 4(b) above) on the record
date.
(d) In the event of a stock dividend, stock split or similar change in
capitalization affecting the Stock, appropriate adjustments shall be made in
the number of stock units credited to each Director's account.
5. Time and Method of Payment
(a) Amounts credited to a Director's deferred compensation account shall
be paid, or commenced to be paid, on the January 15 coincident with or next
following the date on which the Director ceases to be a member of the Board of
Directors of the Corporation for any reason whatsoever. In the case of
semi-annual installments, payments shall be made on each July 15.
(b) Payments of deferred compensation may be made either in a single lump
sum or in annual, or semi-annual, installments over a period of ten (10) years,
as the Director may have irrevocably specified before the compensation is
earned. In the absence of an effective election, payment shall be made in a
single lump sum. In the case of installment payments, interest or dividend
equivalent shall continue to be credited in accordance with Paragraph 3 or 4
during the payment period. The amount of each installment payment shall be
equal to the amount credited to the deferred compensation account as of the
preceding June 30 or December 31, as the case may be, divided by the number of
payments remaining to be made, including the current payment. On and after the
date which is the later of six months from the effective date of this amendment
or the date this amendment is approved by shareholders of Andover Bancorp,
Inc., payments from each Director's deferred compensation account of stock
units shall be payable only in the form of whole shares of Stock, with any
fractional share payable in cash.
(c) Elections by a Director of a method of payment under sub-paragraph (b)
shall be made in writing, effective upon receipt and acceptance by the
Corporation, and applicable only to compensation to be earned after the
effective date of the election. Such elections may also be changed by a
Director, subject to the same restrictions.
(d) Payments of deferred compensation shall be made as they become due to
the Director if then living, otherwise to a beneficiary or beneficiaries
designated by the Director in writing to the Corporation prior to the
Director's death, or failing such designation, the Director's estate.
(e) Notwithstanding any provision hereof to the contrary, if a Director,
or after a Director's death the Director's beneficiary, believes he is
suffering from financial hardship, an application may be made to the Board of
Directors of the Corporation for an acceleration of payments from the deferred
compensation account of the Director. A "financial hardship" shall mean a need
for financial assistance due to the occurrence of an unanticipated emergency
caused by an event beyond the Director's control. The need for financial
assistance must be such that the Director, any member of the Director's
immediate family or, after the Director's death, a designated beneficiary will
be subject to substantial hardship if the acceleration is not permitted. If
the Board of Directors of the Corporation determines, in its sole discretion,
that a hardship exists, the Corporation may accelerate payment to the Director
or the designated beneficiary of only so much
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<PAGE> 27
of the deferred compensation account as the Board of Directors of the
Corporation may determine is required to alleviate such hardship, and the
deferred compensation account shall be charged with said amount upon payment.
6. Limitation on Rights of Directors. No action taken pursuant to this Plan
shall create or be deemed to create a trust or fiduciary relationship of any
kind between the Corporation and the Directors. Although the Corporation shall
have no obligation to establish any separate fund, reserve or to invest in any
specific asset to provide security with respect to any deferred amounts during
the deferral period, the Corporation may elect to do so and, in such event, the
Directors shall not have any interest in such assets and all such assets shall
continue for all purposes to be a part of the general assets of the
Corporation, with the title to the beneficial ownership of such assets
remaining at all times in the Corporation. Each Director, his legal
representative or any of his beneficiaries shall not have any right, other than
the right of an unsecured general creditor of the Corporation, in respect to
the deferred compensation account established hereunder, and such persons shall
have no property interest in any specific assets of the Corporation.
7. Nonforfeitable. The right of each Director to the payment of deferred
compensation under this Plan shall be nonforfeitable and no action or failure
to act by the Director, the Corporation or any other person shall deprive the
Director of, or excuse the Corporation from its obligations to pay, the amounts
due hereunder.
8. Withholding Tax. The Corporation shall have the right to deduct from all
deferred amounts or payments hereunder any federal or state taxes required by
law to be withheld with respect to such deferred amounts or payments.
9. Non-Assignable. The deferred compensation payable under this Plan shall
not be subject to alienation, assignment, garnishment, execution or levy of any
kind, and any attempt to cause any compensation to be so subjected shall not be
recognized.
10. Termination and Amendment. This Plan may be amended at any time or may be
terminated, in whole or in part, at any time, and from time to time, by Andover
Bancorp, Inc. The foregoing provisions of this Paragraph notwithstanding, no
amendment or termination of this Plan shall, without the consent of a Director,
adversely affect the amounts payable hereunder on account of compensation
deferred prior to the effective date of such amendment or termination.
11. Notices. All notices, elections or designations by a Director to the
Corporation shall be delivered in person or by registered mail, postage
prepaid, and noted to be brought to the attention of the Treasurer, Andover
Bancorp, Inc.
12. Governing Law. This Plan, and all actions taken hereunder, shall be
governed by and construed in accordance with the laws of the State of
Massachusetts, except as such laws may be superseded by any applicable federal
law.
13. Shares Issuable. The aggregate maximum number of shares of Stock reserved
and available for issuance under the Plan shall be 50,000, subject to
appropriate adjustments in the event of a stock dividend, stock split, or
similar change in capitalization affecting the Stock. Shares subject to the
Plan are authorized but unissued shares or Treasury shares. Notwithstanding
the foregoing, no shares of Stock may be issued under the Plan until the
amendment and restatement of this Plan has been approved by the affirmative
votes of the holders of a majority of the shares of Stock of Andover Bancorp,
Inc. present, or represented, and entitled to vote at a meeting of
shareholders.
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<PAGE> 28
ANDOVER BANCORP, INC.
61 MAIN STREET
P ANDOVER, MASSACHUSETTS 01810
R
O PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 25, 1996
X THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Y
The undersigned hereby constitutes and appoints Gerald T. Mulligan and
Joseph F. Casey, and each of them, as Proxies of the undersigned, each with
full power to appoint his substitute. The undersigned hereby authorizes each of
such persons to represent and to vote all shares of Common Stock of Andover
Bancorp, Inc. ("Andover") held of record by the undersigned at the close of
business on March 1, 1996, at the Annual Meeting of Shareholders to be held at
the Andover Town House, 20 Main Street, Andover, Massachusetts on April 25,
1996 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 SHAREHOLDER(S). IF NO DIRECTION IS GIVEN THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE THREE NOMINEES SET FORTH ON THE REVERSE
SIDE, FOR THE AMENDMENT AND RESTATEMENT OF THE DIRECTORS' DEFERRED COMPENSATION
PLAN, FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS
ANDOVER'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1996,
AND IN THE DISCRETION OF THE PERSONS NAMED AS PROXIES AS TO SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING. A SHAREHOLDER 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.
////////////////
(PLEASE DATE AND SIGN ON REVERSE SIDE AND MAIL SEE REVERSE
YOUR PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE) SIDE
////////////////
PLEASE MARK
/ X / VOTES AS IN
THIS EXAMPLE.
1. Proposal to elect three Directors, each for a
three-year term.
NOMINEES: Clifford E. Elias, Gerald T. Mulligan and
Fred P. Shaheen
FOR WITHHELD
/ / / /
MARK HERE
FOR ADDRESS
CHANGE AND
/ / NOTE BELOW / /
- ---------------------------------------------
For all nominees except as noted above
2. Proposal to approve the amendment
and restatement of the Directors' FOR AGAINST ABSTAIN
Deferred Compensation Plan. / / / / / /
3. Proposal to ratify the appointment
of KPMG Peat Marwick LLP as
Andover's independent auditors FOR AGAINST ABSTAIN
for the current fiscal year. / / / / / /
The undersigned hereby acknowledge(s) receipt of a Shareholders and
Proxy Statement for the Annual Meeting of Shareholders and hereby
revoke(s) any proxy or proxies heretofore given. This proxy may be
revoked at any time before it is exercised.
In their discretion, the Proxies are each authorized to vote upon
such other business as may properly come before the meeting and
any adjournments or postponements thereof.
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
When signing as an attorney, administrator, executor, guardian or trustee,
please add your title as such. If executed by a corporation, the proxy should
be signed by a duly authorized person, stating his or her title or authority.
Signature: Date
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Signature: Date
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