<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ANDOVER BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
61 MAIN STREET
ANDOVER, MASSACHUSETTS 01810
(978) 749-2000
March 20, 1998
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 30, 1998 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 two
Class II Directors for a three-year term; ratifying the appointment of KPMG Peat
Marwick LLP as Andover's independent auditors for 1998; 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 9, 1998, 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 two nominees as Class II Directors 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: (978) 749-2000
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 30, 1998
---------------------
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 30, 1998 (together with all adjournments and
postponements thereof, the "Annual Meeting"), for the following purposes:
1. To elect two Class II Directors, each for a three-year term to
serve until the 2001 annual meeting of shareholders and until his
successor is duly elected and qualified;
2. To ratify the appointment of KPMG Peat Marwick LLP as Andover's
independent auditors for the fiscal year ending December 31,
1998; and
3. 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 9, 1998, 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 $0.10 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 20, 1998
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE
COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD 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: (978) 749-2000
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, APRIL 30, 1998
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 30, 1998, 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 20, 1998.
At the Annual Meeting, the shareholders of Andover will be asked to
consider and vote upon the following matters:
1. To elect two Class II Directors, each for a three-year term to
continue until the 2001 annual meeting of shareholders and until
his successor is duly elected and qualified;
2. To ratify the appointment of KPMG Peat Marwick LLP as Andover's
independent auditors for the fiscal year ending December 31, 1998;
and
3. 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 9, 1998, 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
5,175,714 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 of Common Stock held, on each matter voted upon at the
Annual Meeting. Only holders of Common Stock of record at the close of business
on the Record Date will be entitled to notice of and to vote 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, and (ii) the appointment of KPMG Peat Marwick
LLP as Andover's independent auditors for the fiscal year ending December 31,
1998, 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 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.
With respect to the election of Directors, votes may only be cast in
favor of or withheld from the nominee; there is no ability to abstain.
Accordingly, all shares of Common Stock represented by proxy that withhold
authority to vote for a particular nominee or nominees and all broker non-votes
will have no effect on the results of the vote for the election of Directors.
With respect to the proposal relating to 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 two nominees of the Board of Directors to serve as Class II
Directors of Andover 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 will have the
authority to vote the shares of Common Stock represented by such proxy card in
their discretion on any such matter.
Any properly completed proxy may be revoked at any time before it is
voted on any matter (without, however, affecting any vote taken prior to such
revocation) 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 by 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 certain employees of Andover or Andover
Bank, the wholly-owned subsidiary of Andover ("Andover Bank") may also solicit
proxies personally or by telephone, telegraph or other means 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, 1997 is
enclosed. The Annual Report is not a part of the proxy soliciting materials.
2
<PAGE> 6
PROPOSAL 1
ELECTION OF CLASS II 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, two Class II Directors are to be elected for a
three-year term to serve until the 2001 annual meeting of shareholders and until
their successors are duly elected and qualified. The Andover Board has nominated
Robert J. Scribner and Naomi A. Gardner to serve as Class II 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. Certain
information with respect to the Nominees is shown below under "Information
Regarding Directors".
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, proxies not marked to the contrary will be voted for the
election of such other person or persons as the Andover Board may recommend.
VOTE REQUIRED FOR APPROVAL
A quorum being present, the affirmative vote of a plurality of the
votes cast is necessary to elect a Nominee as a Director of the Company.
THE BOARD RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE FOR THE
ELECTION OF THE TWO NOMINEES AS DIRECTORS OF THE COMPANY.
3
<PAGE> 7
INFORMATION REGARDING DIRECTORS
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company held four meetings during 1997.
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 three standing committees:
the Audit Committee, the Nominating Committee and the Compensation and Option
Committee.
The members of the Audit Committee, a joint committee comprised of
members of the Board of Directors of Andover Bank, Andover Bank NH and of the
Andover Board, are Robert J. Scribner (Chairman) and Fred P. Shaheen, members of
the Andover Board, John E. Fenton, Jr. and Irving E. Rogers, III, members of the
Board of Directors of Andover Bank, and John D. Collins, a member of the Board
of Directors of Andover Bank NH. 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 1997.
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. Cornelius J. McCarthy (Chairman) and Robert J.
Scribner, members of the Andover Board, and Thomas F. Caffrey and Paul J.
Donahue, members 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 Incentive Plan are granted and determines
compensation for the officers and other employees of Andover. The Compensation
and Option Committee held two meetings in 1997.
The members of the Nominating Committee, a joint committee comprised of
members of the Board of Directors of Andover Bank and of the Andover Board, are
Clifford E. Elias (Chairman) and Naomi A. Gardner, members of the Andover Board,
and Frank D. Goldstein and Robert W. Phinney, members of the Board of Directors
of Andover Bank. The Nominating Committee considers and recommends nominees for
election as officers and Directors of Andover. The Nominating Committee held two
meetings in 1997. 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 $5,000 annually and $400 for
each Board meeting they attend. The Directors of Andover Bank receive a fee of
$5,000 annually and $400 for each Board meeting they attend. Committee members
of Andover and Andover Bank currently receive an additional fee of $2,000
annually and $400 for each Committee meeting they attend. The Committee Chairman
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.
4
<PAGE> 8
Each 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 Director's Deferred Compensation Plan whereby
members can defer all or a portion of his or her Director's fees until the
Director ceases to be a member of such Board of Directors for any reason
whatsoever. Under the Director's Deferred Compensation Plan, each Director may
choose either to receive interest credits to his account equivalent to the
interest yield on Andover Bank's 36-month deposits or to direct the deemed
investment of his deferred compensation account in stock units equivalent in
value to Common Stock of the Company and receive distribution in shares of
Common Stock of the Company.
Set forth below is certain information regarding the Directors of the
Company, including the two Class II Directors who have been nominated to the
Board, based on information furnished by them to the Company.
<TABLE>
<CAPTION>
NAME AND POSITION DIRECTOR/OFFICER
WITH ANDOVER AGE SINCE (1)
----------------- --- ---------
<S> <C> <C>
(Nominees for Class II Term to Expire in 2001)
Naomi A. Gardner.....................................................56 1983
Director
Robert J. Scribner...................................................69 1975
Director
(Continuing Directors - Class III Term to Expire
in 1999)
Fred P. Shaheen .....................................................54 1983
Director
Clifford E. Elias ...................................................67 1983
Director
Gerald T. Mulligan...................................................52 1991
Director, President and Chief Executive Officer
(Continuing Directors - Class I Term to Expire
in 2000)
Thomas F. Caffrey....................................................58 1983
Director
Cornelius J. McCarthy................................................61 1983
Director
</TABLE>
(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.
The principal occupation and business experience during at least the
last five years for each Continuing Director and Nominee 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.
5
<PAGE> 9
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.
INFORMATION REGARDING EXECUTIVE OFFICERS
The names and ages of the four highest paid executive officers of the
Company and the Chief Executive Officer (the "Named Executive Officers") and the
principal occupation and business experience during the last five years for each
are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Gerald T. Mulligan.................................52 President and Chief Executive Officer
John R. Heerwagen..................................47 Senior Vice President
Michael J. Ecker...................................46 Senior Vice President
Joseph F. Casey....................................37 Chief Financial Officer and Treasurer
Raymond P. Smith...................................49 Senior Vice President
</TABLE>
Gerald T. Mulligan is President and Chief Executive Officer of Andover
and Andover Bank, a position he has held since joining Andover and Andover Bank
in 1991.
John R. Heerwagen is Senior Vice President-Retail Banking of Andover
Bank, a position he has held since joining Andover Bank in September, 1991. He
was elected Senior Vice President of Andover in December, 1993.
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. Mr. Ecker joined Andover Bank as Vice President-Special Assets
Group in July, 1991, and was elected as a Senior Vice President of Andover Bank
in 1992 and Senior Vice President of Andover in 1993.
Joseph F. Casey is Chief Financial Officer and Treasurer of Andover and
Andover Bank, a position he has held since 1991. Mr. Casey is a certified
public accountant.
Raymond P. Smith is Senior Vice President-Corporate Banking of Andover
and 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.
6
<PAGE> 10
OTHER EXECUTIVE OFFICERS
The following sets forth certain information, as of February 1, 1998,
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. He is 54 years
of age.
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. Ms. Conti is 43 years of age.
Gerald C. Woodworth, Jr. is Senior Vice President-Loan Operations of
Andover and Andover Bank. He joined Andover Bank as Vice President of Loan
Operations in April, 1986, and was elected a Senior Vice President of Andover
Bank and Andover in 1988 and 1993, respectively. Mr. Woodworth is 57 years of
age.
Pursuant to Andover's By-laws, each Andover officer, including each
Named Executive 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.
7
<PAGE> 11
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,
1997, 1996 and 1995, the cash compensation paid by Andover Bank, as well as the
value of long-term compensation and other compensation, to the Named Executive
Officers during 1997.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------------------------------
NAME AND OTHER ANNUAL SECURITIES ALL OTHER
PRINCIPAL COMPEN- UNDERLYING COMPENSA-
POSITION YEAR SALARY($) BONUS($) SATION ($) OPTIONS ($)(2) TION ($) (3)
- -------- ---- --------- -------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gerald T. Mulligan, 1997 $312,692 55,000 (1) 9,000 $12,420 (4)
President and Chief 1996 283,077 45,000 (1) 42,000 (5) 24,845 (4)
Executive Officer of 1995 258,461 45,000 (1) 18,000 9,544 (4)
Andover and Andover Bank
John R. Heerwagen, 1997 131,192 22,000 (1) 4,500 11,881 (6)
Senior Vice President of 1996 121,077 18,500 (1) 8,400 18,633 (6)
Andover and Andover Bank 1995 115,538 17,200 (1) 7,800 9,153 (6)
Michael J. Ecker, 1997 119,461 30,000 (1) 4,500 11,702 (7)
Senior Vice President of 1996 112,692 24,000 (1) 8,400 18,457 (7)
Andover and Andover Bank 1995 108,615 21,300 (1) 7,800 9,396 (7)
Joseph F. Casey, 1997 119,154 20,000 (1) 4,500 10,790 (8)
Chief Financial Officer 1996 108,615 15,500 (1) 8,400 19,625 (8)
and Treasurer of Andover 1995 105,350 14,500 (1) 7,800 8,245 (8)
and Andover Bank
Raymond P. Smith, 1997 115,077 15,000 (1) 4,500 9,457 (9)
Senior Vice President of 1996 103,692 9,000 (1) 8,400 7,925 (9)
Andover and Andover Bank 1995 (10) 53,846 --- (1) 9,600 ---
</TABLE>
(1) The amount of perquisites did not exceed 10% of salary and bonus.
(2) All option data for 1995 has been adjusted to reflect a 20% stock
dividend declared on October 17, 1996.
(3) 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 National Market. Such closing prices were $40.25
at December 31, 1997, $25.625 at December 31, 1996 and $17.6042 at
December 31, 1995. The amount does not include the cash value of
dividends declared in 1997 but paid in 1998. All ESOP data for 1995 has
been adjusted to reflect a 20% stock dividend declared on October 17,
1996.
8
<PAGE> 12
(4) Includes (i) Andover Bank's contribution of $1,910, $1,911 and $1,851
in 1997, 1996 and 1995, respectively, to Mr. Mulligan's 401(k) account,
and (ii) the cash value of 286 shares, 895 shares and 437 shares,
allocated to Mr. Mulligan under the ESOP at December 31, 1997, 1996 and
1995, respectively.
(5) Includes an award of options to purchase 24,000 shares granted on April
25, 1996, to Mr. Mulligan in lieu of his participating in Andover's
supplemental pension plan. Also includes an award of options to
purchase 18,000 shares granted on April 25, 1996.
(6) Includes (i) Andover Bank's contribution of $1,481, $1,209 and $1,161
in 1997, 1996 and 1995, respectively, to Mr. Heerwagen's 401(k)
account, and (ii) the cash value of 283 shares, 680 shares and 454
shares, allocated to Mr. Heerwagen under the ESOP, at December 31,
1997, 1996 and 1995, respectively.
(7) Includes (i) Andover Bank's contribution to Mr. Ecker's 401(k) account
of $1,449, $1,367 and $1,299 in 1997, 1996 and 1995, respectively, and
(ii) the cash value of 279 shares, 667 shares and 460 shares, allocated
to Mr. Ecker under the ESOP, at December 31, 1997, 1996 and 1995,
respectively.
(8) Includes (i) Andover Bank's contribution of $1,345, $1,073 and $1,098
in 1997, 1996 and 1995, respectively, to Mr. Casey's 401(k) account and
(ii) the cash value of 257 shares, 724 shares and 406 shares, allocated
to Mr. Casey under the ESOP, at December 31, 1997, 1996 and 1995,
respectively.
(9) Includes (i) Andover Bank's contribution of $1,078 and $520 in 1997 and
1996, respectively, to Mr. Smith's 401(k) account and (ii) the cash
value of 228 and 289 shares allocated to Mr. Smith under the ESOP, at
December 31, 1997 and 1996, respectively.
(10) Mr. Smith joined Andover in June, 1995.
9
<PAGE> 13
II. OPTION GRANTS TABLE
Set forth below is a chart showing the option grants made to the Named
Executive Officers during 1997. No stock appreciation rights ("SARs") have been
granted.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (3)
----------------------------------------------------------------------------------------------------------
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE OR BASE
NAME GRANTED (#)(1) FISCAL YEAR (2) PRICE ($/SH) EXPIRATION DATE 5% ($) 10% ($)
---- -------------- --------------- --------------- --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Gerald T. Mulligan, 9,000 18.83% $40.25 12/31/2007 $227,815.00 $577,331.00
President and CEO
John R. Heerwagen, 4,500 9.41% $40.25 12/31/2007 $113,907.00 $288,665.00
Sr. Vice President
Michael J. Ecker, 4,500 9.41% $40.25 12/31/2007 $113,907.00 $288,665.00
Sr. Vice President
Joseph F. Casey, 4,500 9.41% $40.25 12/31/2007 $113,907.00 $288,665.00
CFO & Treasurer
Raymond P. Smith, 4,500 9.41% $40.25 12/31/2007 $113,907.00 $288,665.00
Sr. Vice President
</TABLE>
(1) The options granted pursuant to the Andover Bancorp, Inc. Stock
Incentive Plan and are immediately exercisable.
(2) Percentages are based on a total of 47,800 shares of Common Stock
underlying all options granted to Directors and employees of the
Company during 1997.
(3) The amounts shown as potential realizable values are based on
arbitrarily assumed annualized rates of stock price appreciation of
five percent and ten percent over the full ten year term of the
options, as required by applicable Securities and Exchange Commission
regulations. No gain to the optionee is possible without an increase in
stock price which will benefit all shareholders proportionately. Actual
gains, if any, on options exercised are dependent on the future
performance of Common Stock and overall stock market conditions. There
can be no assurance that the potential realizable values shown in this
table will be achieved.
10
<PAGE> 14
III. OPTION EXERCISES AND YEAR-END TABLE
Set forth below is a chart showing the aggregated exercised and
unexercised options held by the Named Executive Officers during 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND DECEMBER 31, 1997 OPTION
VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($)
--------------------- ---------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) (1) UNEXERCISABLE UNEXERCISABLE (2)
- ---- --------------- ---------------------- ------------- -----------------
<S> <C> <C> <C> <C>
Gerald T. Mulligan, 5,000 $134,271 142,398/21,600 $3,242,269/$478,399
President and CEO
John R. Heerwagen, 3,800 86,360 35,688/--- $769,784/---
Sr. Vice President
Michael J. Ecker, 5,469 105,778 34,431/--- $746,190/---
Sr. Vice President
Joseph F. Casey, 4,848 99,021 33,064/--- $678,929/---
CFO & Treasurer
Raymond P. Smith, 7,500 156,320 15,000/--- $205,405/---
Sr. Vice President
</TABLE>
(1) 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.
(2) Value of unexercised, in-the-money options at December 31, 1997, is the
difference between its exercise price and the fair market value of the
underlying stock on December 31, 1997, which was $40.25 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.
IV. PENSION PLAN
The following table illustrates estimated annual pension benefits for
retirement at age 65 under the most advantageous plan provisions (in effect on
December 31, 1997) available for various levels of compensation and years of
service.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
25 years
REMUNERATION (1) (2) 15 YEARS 20 YEARS AND AFTER
- -------------------- --------- -------- ---------
<S> <C> <C> <C>
$120,000............................. 30,663 40,884 51,104
140,000............................. 36,213 48,284 60,354
160,000............................. 41,763 55,684 69,604
</TABLE>
(1) To determine the annual amount to be received by an individual under
the pension plan, the three yearly amounts of total taxable
compensation for the three years immediately preceding retirement are
averaged.
11
<PAGE> 15
(2) Federal law does not permit defined benefit pension plans to recognize
compensation in excess of $160,000 for plan years beginning in 1997.
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.
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 and Michael J. Ecker will both 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. Raymond
P. Smith, Senior Vice President of Andover and Andover Bank, will have an
estimated 19 years of service, under the Plan at normal retirement date.
V. TERMINATION AGREEMENTS AND EMPLOYMENT AGREEMENT
Andover and Andover Bank have entered into special termination
agreements with Gerald T. Mulligan and each of the other Named Executive
Officers, John R. Heerwagen, Michael J. Ecker, Joseph F. Casey and Raymond P.
Smith. Each of these special termination agreements provides generally that if
there is a change of control or merger of equals of Andover and if, at any time
during the two-year period following the transaction, the employment of the
officer is terminated for any reason (other than death or for cause, under
certain circumstances), then the officer would be entitled to receive a lump-sum
payment in an amount equal to approximately three times his average annual
compensation over the five previous years of his employment with Andover or
Andover Bank (or such shorter period in which the officer was employed). For the
purpose of these special termination agreements, a change of control or merger
of equals will generally be deemed to have occurred (i) upon the acquisition by
a person or group of persons of beneficial ownership of 25% or more of the
Common Stock of Andover, (ii) upon a majority of the Board of Directors of
Andover no longer being comprised of incumbent directors for any reason,
including a tender offer, proxy contest, merger or similar transaction, or (iii)
as a result of certain business combinations, liquidations, or sale or other
transactions as described in the agreements. In the case of Mr. Mulligan, in the
event that he is entitled to receive benefits under both his special termination
agreement and his employment agreement (described in the following paragraph),
he would be required to elect benefits under one of the agreements only.
Andover and Andover Bank have also entered into an employment
agreement with Gerald T. Mulligan. The employment agreement provides that Mr.
Mulligan's employment will continue for successive one-year periods from its May
16 anniversary date unless he is given at least six months' prior notice of its
non-renewal. Under the employment agreement, if Mr. Mulligan's employment is
terminated without cause (as defined in the agreement), Andover and Andover Bank
will remain obligated to continue to provide to Mr. Mulligan the compensation
and benefits specified in the agreement until its expiration date; if Mr.
Mulligan's employment is terminated for cause, Andover and Andover Bank will not
incur any continuing obligation to him under the agreement.
12
<PAGE> 16
VI. SHARE INVESTMENT PERFORMANCE
The Securities and Exchange Commission requires Andover to present a
chart comparing the cumulative total shareholder 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 nineteen 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 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 12/31/92
[GRAPH OMITTED]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
S&P 500 Index $100.00 $110.02 $111.51 $153.26 $188.36 $251.12
Industry Peer Group Index $100.00 $140.06 $155.55 $243.72 $311.99 $473.50
Andover Bancorp, Inc. $100.00 $136.66 $123.38 $194.22 $289.21 $464.29
</TABLE>
- --------
*The peer group consists of Abington Bancorp, Alliance BNCP of NE, American Bank
of Connecticut, Andover Bancorp, Inc., Bancorp Connecticut, Inc., Central
Co-operative Bank, Dime Financial Corp., First Essex Bancorp, Inc., First
Federal Savings and Loan of East Hartford, Lawrence Savings Bank, Massbank
Corp., Mechanics Savings Bank, Medford Bancorp, Inc., Metro West Bank, Norwich
Financial Corp., Peoples Heritage Financial Group, Inc., Sandwich Bancorp,
Warren BNCP, and Webster Financial Corp.
13
<PAGE> 17
REPORT ON EXECUTIVE COMPENSATION
Set forth below is a report that reflects the work of the Compensation
and Option Committee, which is composed of Thomas F. Caffrey, Paul J. Donahue,
Robert J. Scribner and Cornelius J. McCarthy (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
Incentive Plan. The Company provides executive officers with health, retirement
and other benefits under plans that are generally available to Andover's
employees.
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 and any change in the
responsibilities assumed by the executive officer. The specific measures of
corporate performance that were evaluated by the Compensation and Option
Committee in making compensation awards for fiscal 1997 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 1997 through the
Stock Incentive Plan reflect Andover's commitment to this
14
<PAGE> 18
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 1997 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 with improved earnings through 1997. By focusing on strengthening the
Andover Bank's core banking business, Mr. Mulligan was instrumental in this
return to consistent profitability and the record earnings achieved in 1997.
Compensation and Option Committee: Thomas F. Caffrey
Paul J. Donahue
Robert J. Scribner
Cornelius J. McCarthy, 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 most of its
commercial insurance coverage, which management believes is on substantially the
same terms as comparable coverage with unaffiliated persons. The amounts paid by
Andover to C. J. McCarthy Insurance Agency, Inc. in connection with such
commercial insurance coverage totalled $240,339.00 in fiscal year 1997.
Irving E. Rogers, III, Director of Andover Bank, is the General Manager
of the Eagle-Tribune and the Publisher of the Andover Townsman, both of which
are local newspapers. Andover Bank, in the normal course of business, advertises
in local newspapers, including the Eagle-Tribune and the Andover Townsman. The
amounts paid by Andover to the Andover Townsman and Eagle-Tribune in connection
with such advertisements totalled $119,495.00 in fiscal year 1997.
15
<PAGE> 19
PROPOSAL 2
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 1998 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, (other than as independent auditors), the Company or any
of the Company's subsidiaries.
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.
VOTE REQUIRED FOR APPROVAL
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 1998 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 1998 FISCAL YEAR.
16
<PAGE> 20
PRINCIPAL AND MANAGEMENT SHAREHOLDERS
The following table sets forth, to the best knowledge and belief of the
Company, certain information regarding the beneficial ownership of the Company's
Common Stock as of February 15, 1998, by (i) each person known to the Company to
be the beneficial owner of more than 5% of the outstanding Common Stock, (ii)
each of the Company's Directors and Nominees, (iii) each of the Named Executive
Officers, and (iv) all of the Company's executive officers and Directors as a
group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
DIRECTORS, NAMED EXECUTIVE OFFICERS AND 5% SHAREHOLDERS OWNED (1) CLASS (2)
- ------------------------------------------------------- --------- ---------
<S> <C> <C>
Banc Funds.........................................................271,000 (3) 5.24%
Thomas F. Caffrey................................................. 8,692 (4) *
Clifford E. Elias................................................. 31,712 (5) *
Naomi A. Gardner.................................................. 7,876 (6) *
Cornelius J. McCarthy............................................. 8,466 (7) *
Robert J. Scribner................................................ 16,700 (8) *
Fred P. Shaheen................................................... 21,569 (9) *
Gerald T. Mulligan.................................................210,278 (10) 4.07%
John R. Heerwagen................................................. 46,782 (11) *
Michael J. Ecker.................................................. 47,371 (12) *
Joseph F. Casey................................................... 37,893 (13) *
Raymond P. Smith.................................................. 15,885 (14) *
All Nominees, Continuing Directors,
Named Executive Officers and executive
officers of Andover and Andover Bank
as a group (19 persons) ...........................................577,524 (15) 11.17%
</TABLE>
- -------------
*Less than 1%
(1) 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 15,
1998.
(2) Computed on the basis of 5,168,214 of outstanding shares.
(3) The address of Banc Funds is 208 South LaSalle Street, Suite 200,
Chicago, Illinois 60604. The Company has relied upon information set
forth in the Schedule 13D filed July 11, 1996 with the Securities and
Exchange Commission. The Company believes this does not reflect shares
issued pursuant to the 20% stock split declared on October 17, 1996.
(4) Includes 3,275 shares owned by certain of Mr. Caffrey's family members,
as to which Mr. Caffrey disclaims beneficial ownership, and 79 shares
owned by a professional corporation. Also includes 1,700 shares which
Mr. Caffrey has the right to acquire under options granted pursuant to
Andover's Stock Incentive Plan.
17
<PAGE> 21
(5) Includes 12,000 shares beneficially owned by a trust of which Mr. Elias
is a trustee and shares voting and investment power and 5,885 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 Incentive
Plan.
(6) Includes 4,883 shares owned by certain of Mrs. Gardner's family members
as to which Mrs. Gardner disclaims beneficial ownership. Also includes
1,700 shares which Mrs. Gardner has the right to acquire under options
granted pursuant to Andover's Stock Incentive Plan.
(7) Includes 27 shares beneficially owned by C.J. McCarthy Insurance
Agency, Inc., of which Mr. McCarthy is president and sole stockholder,
and 6,586 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 1,700 shares which Mr. McCarthy has
the right to acquire under options granted pursuant to Andover's Stock
Incentive Plan.
(8) Includes 1,700 shares which Mr. Scribner has the right to acquire under
options granted pursuant to Andover' Stock Incentive Plan.
(9) Includes 17,940 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 1,700 shares which Mr. Shaheen
has the right to acquire under options granted pursuant to Andover's
Stock Incentive Plan.
(10) Includes 142,398 shares which Mr. Mulligan has the right to acquire
under options previously granted pursuant to Andover's Stock Incentive
Plan and 17,357 owned by his wife. Also includes 3,762 shares allocated
to Mr. Mulligan's account under the Andover Bank Employee Stock
Ownership Plan ("ESOP") as to which he may direct the vote.
(11) Includes 35,688 shares which Mr. Heerwagen has the right to acquire
under options granted pursuant to Andover's Stock Incentive Plan. Also
includes 2,582 shares allocated to Mr. Heerwagen's account under the
ESOP as to which he may direct the vote.
(12) Includes 34,431 shares which Mr. Ecker has the right to acquire under
options granted pursuant to Andover's Stock Incentive Plan. Also
includes 2,540 shares allocated to Mr. Ecker's account under the ESOP
as to which he may direct the vote. Also includes 360 shares owned by
one of Mr. Ecker's family members.
(13) Includes 33,064 shares which Mr. Casey has the right to acquire under
options granted pursuant to Andover's Stock Incentive Plan. Also
includes 3,029 shares allocated to Mr. Casey's account under the ESOP
as to which he may direct the vote.
(14) Includes 15,000 shares which Mr. Smith has the right to acquire under
options granted pursuant to Andover's Stock Incentive Plan. Also
includes 525 shares allocated to Mr. Smith's account under the ESOP as
to which he may direct the vote.
(15) Includes a total of 17,712 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
351,296 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 Incentive
Plan.
18
<PAGE> 22
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's Directors, executive officers and beneficial owners of
more than 10% of its Common Stock are required under Section 16(a) of the
Securities and Exchange Act of 1934, as amended, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Copies of
those reports must also be furnished to the Company.
Based solely on a review of reports furnished to the Company and written
representations that no other reports were required, the Company believes that
during fiscal 1997, no person who was a Director, executive officer or greater
than 10% beneficial owner of the Company's Common Stock failed to file on a
timely basis any reports required by Section 16(a) except as follows: Mr.
Cornelius J. McCarthy, a Director of Andover and Andover Bank, inadvertently
failed to timely file his Form 5 for February, 1994, February, 1995, and
February, 1996, each relating to dividend reinvestment purchases of Andover's
Common Stock.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of shareholders intended to be presented at Andover's 1999
Annual Meeting must be received in writing by Andover at its principal executive
offices on or before November 24, 1998, for inclusion in Andover's proxy
statement and form of proxy for that 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.
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,
DATE 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 20, 1998
19
<PAGE> 23
0685PS98
<PAGE> 24
ANDOVER BANCORP, INC.
61 MAIN STREET
ANDOVER, MASSACHUSETTS 01810
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
ON APRIL 30, 1998 THIS PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS
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 the
Proxies (each having full power to act without the other) to represent and to
vote (as designated herein) all shares of Common Stock of Andover Bancorp, Inc.
("Andover") held of record by the undersigned at the close of business on March
9, 1998, at the Annual Meeting of Shareholders to be held at the Andover Town
House, 20 Main Street, Andover, Massachusetts on April 30, 1998 at 10:00 a.m.,
local time, and at any adjournments or postponements thereof.
When properly executed, this proxy will be voted in the manner directed
herein by the undersigned shareholder(s). IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED (i) FOR THE ELECTION TO ANDOVER'S BOARD OF DIRECTORS OF THE TWO
NOMINEES SET FORTH ON THE REVERSE SIDE (PROPOSAL 1), (ii) FOR THE RATIFICATION
OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS ANDOVER'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998 (PROPOSAL 2) AND (iii) IN THE
DISCRETION OF THE PERSONS NAMED AS PROXIES AS TO SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
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. The Proxies cannot vote your shares unless you sign and return this
card.
(PLEASE DATE AND SIGN ON REVERSE SIDE AND MAIL
YOUR PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE)
<TABLE>
<CAPTION>
<S> <C>
Please mark The undersigned hereby acknowledge(s) receipt of a
your votes as Notice of Annual Meeting of Shareholders and related
in this example. Proxy Statement and hereby revoke(s) any proxy or
proxies heretofore given. This proxy may be
1. PROPOSAL TO ELECT THE FOLLOWING INDIVIDUALS AS revoked at any time before it is exercised.
CLASS II DIRECTORS TO SERVE UNTIL THE 2001 ANNUAL
MEETING OF SHAREHOLDERS AND UNTIL THEIR RESPECTIVE
SUCCESSORS ARE DULY ELECTED AND QUALIFIED. MARK HERE
FOR ADDRESS
Nominees: Robert J. Scribner and CHANGE AND
Naomi A. Gardner NOTE AT LEFT
FOR WITHHELD
BOTH FROM BOTH
NOMINEES NOMINEES
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD PROMPTLY IN THE
FOR BOTH EXCEPT: 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
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT duly authorized person, stating his or her title or
MARWICK LLP AS ANDOVER'S INDEPENDENT AUDITORS FOR authority.
THE CURRENT FISCAL YEAR ENDING DECEMBER 31, 1998.
FOR AGAINST ABSTAIN --------------------------- -----------------
Signature of Shareholder Date
3. IN THEIR DISCRETION, THE PROXIES ARE EACH AUTHORIZED --------------------------- -----------------
TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME Signature of Shareholder Date
BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENTS OR (if held jointly)
POSTPONEMENTS THEREOF.
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