<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 of Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
ANDOVER BANCORP, INC.
61 MAIN STREET
ANDOVER, MASSACHUSETTS 01810
(978) 749-2000
March 19, 1999
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 29, 1999, 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; ratifying the appointment of KPMG
Peat Marwick LLP as Andover's independent auditors for 1999; and considering and
voting upon such other business as may properly come before the meeting and any
adjournments or postponements thereof.
The Board of Directors of Andover (the "Andover Board") has fixed the
close of business on March 8, 1999, 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 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. YOU CAN ALSO
VOTE OVER THE INTERNET OR BY TELEPHONE USING THE INSTRUCTIONS ON THE ENCLOSED
PROXY CARD. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD OR VOTED OVER THE
INTERNET OR BY TELEPHONE.
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 29, 1999
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 29, 1999 (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 2002 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, 1999; 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 8, 1999, 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 19, 1999
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 OR VOTE OVER THE INTERNET OR BY TELEPHONE. YOU MAY STILL VOTE
IN PERSON IF YOU ATTEND THE MEETING EVEN IF YOU HAVE PREVIOUSLY EXECUTED YOUR
PROXY.
<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 29, 1999
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 29, 1999, 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 19, 1999.
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 2002 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, 1999; and
3. To transact such other business as may properly come before
the Annual Meeting and any adjournments of postponements
thereof.
The Board of Directors of Andover (the "Andover Board") has fixed the
close of business on March 8, 1999, 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
6,523,212 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,
1999, will be ratified by a majority of the shares present in person or
represented 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 of 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. This year
shareholders also have a choice of voting over the Internet or by using a
toll-free telephone number. The telephone and Internet voting procedures are
designed to authenticate the votes cast by use of a personal identification
number. The procedure allows shareholders to appoint a proxy to vote their
shares and to confirm their instructions have been properly recorded. Specific
instructions to be followed are set forth in the enclosed proxy card. Shares
represented by proxies 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 and FOR 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 (including an Internet or telephone vote)
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 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, a 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 $3,000, plus
reimbursement of certain out-of-pocket expenses.
ANNUAL REPORT TO SHAREHOLDERS
Andover's Annual Report for the fiscal year ended December 31, 1998 is
enclosed. The Annual Report is not a part of the proxy soliciting materials.
2
<PAGE> 6
PROPOSAL 1
ELECTION OF CLASS III 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 2002 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. 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 THREE 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 12 meetings during 1998. 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 Fred P. Shaheen (Chairman) and Naomi A. Gardner, 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 P. Bachini, 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 1998.
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 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 three meetings in 1998.
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, a member 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 one meeting in 1998.
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 $6,000 annually and $600 for
each Board meeting they attend. The Directors of Andover Bank receive a fee of
$6,000 annually and $600 for each Board meeting they attend. Committee members
of Andover and Andover Bank currently receive an additional fee of $3,000
annually and $600 for each Committee meeting they attend. The Committee Chairman
receives 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 services 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 three Class III 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 III term to Expire in 2002)
Clifford E. Elias................................................68 1983
Director
Gerald T. Mulligan...............................................53 1991
Director, President and Chief Executive Officer
Fred P. Shaheen..................................................55 1983
Director
(Continuing Directors - Class I Term to Expire in 2000)
Thomas F. Caffrey................................................59 1983
Director
Cornelius J. McCarthy............................................62 1983
Director
(Continuing Directors - Class II Term to Expire in 2001)
Naomi A. Gardner.................................................57 1983
Director
Robert J. Scribner...............................................70 1975
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.
Naomi A. Gardner is the Director of Public Relations for Northeast
Rehabilitation Hospital in Salem, New Hampshire.
5
<PAGE> 9
Cornelius J. McCarthy is President of C.J. McCarthy Insurance Agency,
Inc., Wilmington, Massachusetts.
Gerald T. Mulligan is President and Chief Executive Officer of Andover
and Andover Bank.
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.
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........................53 President and Chief Executive Officer
John R. Heerwagen.........................48 Senior Vice President
Michael J. Ecker..........................47 Senior Vice President
Joseph F. Casey...........................38 Chief Financial Officer and Treasurer
Raymond P. Smith..........................50 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, 1999,
with respect to the principal officers of Andover and Andover Bank, other than
the Named Executive Officers.
Octavio C. Bolivar is Senior Vice President of 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
55 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 44 years of age.
Gerald C. Woodworth, Jr. is Senior Vice President of 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 58 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,
1998, 1997, and 1996, 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 1998.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION (1) AWARDS
-------------------------------------- --------------
NAME AND SECURITIES ALL OTHER
PRINCIPAL UNDERLYING COMPENSA-
POSITION YEAR SALARY($) BONUS($) OPTIONS (#)(2) TION ($)(3)
- -------- ---- --------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Gerald T. Mulligan, 1998 342,692 60,000 11,250 9,805 (4)
President and Chief 1997 312,692 55,000 11,250 12,435 (4)
Executive Officer of 1996 283,077 45,000 52,500 (5) 24,851 (4)
Andover and Andover Bank
John R. Heerwagen, 1998 141,231 24,000 5,625 9,433 (6)
Senior Vice President of 1997 131,192 22,000 5,625 11,889 (6)
Andover and Andover Bank 1996 121,077 18,500 10,500 18,634 (6)
Michael J. Ecker, 1998 127,385 32,000 5,625 9,313 (7)
Senior Vice President of 1997 119,461 30,000 5,625 11,710 (7)
Andover and Andover Bank 1996 112,692 24,000 10,500 18,464 (7)
Joseph F. Casey, 1998 127,385 23,000 5,625 8,754 (8)
Chief Financial Officer 1997 119,154 20,000 5,625 10,782 (8)
and Treasurer of Andover 1996 108,615 15,500 10,500 19,626 (8)
and Andover Bank
Raymond P. Smith, 1998 121,538 16,000 5,625 7,821 (9)
Senior Vice President of 1997 115,077 15,000 5,625 9,457 (9)
Andover and Andover Bank 1996 103,692 9,000 10,500 7,921 (9)
</TABLE>
(1) The amount of perquisites did not exceed 10% of salary and bonus as to
any of the Named Executive Officers.
(2) All option data for 1996 and 1997 has been adjusted to reflect a five
for four stock split declared on April 23, 1998.
(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 as reported by the Nasdaq National Market
on the date of allocation of the shares to the employees' account. Such
closing prices were $31.25 at October 30, 1998, $29.40 at October 31,
1997, and $20.50 at December 31, 1996. The amount does not include the
cash value of dividends declared in 1998 but paid in 1999. All ESOP
data for 1996 and 1997 has been adjusted to reflect a five for four
stock split declared on April 23, 1998.
8
<PAGE> 12
(4) Includes (i) Andover Bank's contribution of $2,024, $1,910 and $1,911 in
1998, 1997 and 1996, respectively, to Mr. Mulligan's 401(k) account, and
(ii) the cash value of 249 shares, 358 shares and 1,119 shares,
allocated to Mr. Mulligan under the ESOP at October 30, 1998, October
31, 1997 and December 31, 1996, respectively.
(5) Includes an award of options to purchase 30,000 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
22,500 shares granted on April 25, 1996.
(6) Includes (i) Andover Bank's contribution of $1,652, $1,481 and $1,209 in
1998, 1997 and 1996, respectively, to Mr. Heerwagen's 401(k) account,
and (ii) the cash value of 249 shares, 354 shares and 850 shares,
allocated to Mr. Heerwagen under the ESOP, at October 30, 1998, October
31, 1997 and December 31, 1996, respectively.
(7) Includes (i) Andover Bank's contribution to Mr. Ecker's 401(k) account
of $1,594, $1,449 and $1,367 in 1998, 1997 and 1996, respectively, and
(ii) the cash value of 247 shares, 349 shares and 834 shares, allocated
to Mr. Ecker under the ESOP, at October 30, 1998, October 31, 1997 and
December 31, 1996, respectively.
(8) Includes (i) Andover Bank's contribution of $1,504, $1,345 and $1,073 in
1998, 1997 and 1996, respectively, to Mr. Casey's 401(k) account, and
(ii) the cash value of 232 shares, 321 shares and 905 shares, allocated
to Mr. Casey under the ESOP, at October 30, 1998, October 31, 1997 and
December 31, 1996, respectively.
(9) Includes (i) Andover Bank's contribution of $1,133, $1,078 and $520 in
1998, 1997 and 1996, respectively, to Mr. Smith's 401(k) account, and
(ii) the cash value of 214, 285 and 361 shares allocated to Mr. Smith
under the ESOP, at October 30, 1998, October 31, 1997 and December 31,
1996, respectively.
9
<PAGE> 13
II. OPTION GRANTS TABLE
Set forth below is a chart showing the option grants made to the Named
Executive Officers during 1998. No stock appreciation rights ("SARs") have been
granted.
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
------------------------------------------------------------------- ---------------------------
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE OR BASE
NAME GRANTED (#)(2) FISCAL YEAR (3) PRICE ($/SH) EXPIRATION DATE 5% ($) 10% ($)
- ---- -------------- --------------- ---------------- --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Gerald T. Mulligan 11,250 16.17% $34.63 12/31/2008 $244,972.00 $620,811.00
John R. Heerwagen 5,625 8.08% $34.63 12/31/2008 $122,486.00 $310,405.00
Michael J. Ecker 5,625 8.08% $34.63 12/31/2008 $122,486.00 $310.405.00
Joseph F. Casey 5,625 8.08% $34.63 12/31/2008 $122,486.00 $310,405.00
Raymond P. Smith 5,625 8.08% $34.63 12/31/2008 $122,486.00 $310,405.00
</TABLE>
(1) The amounts shown as potential realizable values are based on
arbitrarily assumed annualized rates of appreciation of five percent
and ten percent of the Common Stock over the full ten year term of the
options, as required by applicable Securities and Exchange Commission
regulations. No gain for the optionee is possible without an increase
in the price of the Common Stock which will benefit all shareholders
proportionately. Actual gains, if any, on options exercised are
dependent on the future performance of the Common Stock and overall
stock market conditions. There can be no assurance that the potential
realizable values shown in this table will be achieved.
(2) The options are granted pursuant to the Andover Bancorp, Inc. Stock
Incentive Plan and are immediately exercisable.
(3) Percentages are based on a total of 69,575 shares of Common Stock
underlying all options granted to Directors and employees of the
Company during 1998.
10
<PAGE> 14
III. OPTION EXERCISES AND YEAR-END TABLE
Set forth below is a chart showing the aggregated exercised and
unexercised options held by the Named Executive Officers during 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUE AT DECEMBER 31, 1998
-------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1998 (#) DECEMBER 31, 1998 ($)
---------------------- ---------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE (2)
- ---- --------------- --------------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Gerald T. Mulligan 12,730 $290,804 187,018/16,500 $3,553,058/$330,561
John R. Heerwagen 2,075 $ 39,822 48,161/--- $ 831,549/---
Michael J. Ecker 5,000 $137,333 43,664/--- $ 710,354/---
Joseph F. Casey 9,815 $165,722 37,140/--- $ 580,539/---
Raymond P. Smith 9,375 $138,406 15,000/--- $ 79,108/---
</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, 1998, is the
difference between its exercise price and the fair market value of the
underlying stock on December 31, 1998, which was $34.63 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, 1998) 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...................................... 30,498 40,665 50,831
140,000...................................... 36,048 48,065 60,081
160,000...................................... 41,598 55,465 69,331
</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 highest three consecutive years are averaged.
(2) Federal law does not permit defined benefit pension plans to recognize
compensation in excess of $160,000 for plan years beginning in 1997.
11
<PAGE> 15
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. It is
currently anticipated that the Plan will be terminated in 1999.
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 seventeen 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 seventeen 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>
- --------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
S&P 500 $100.00 $101.36 $139.31 $171.21 $228.26 $293.36
Index
- --------------------------------------------------------------------------------------------------------------
Industry Peer Group $100.00 $100.83 $149.47 $188.22 $332.01 $276.30
Index
- --------------------------------------------------------------------------------------------------------------
Andover Bancorp, Inc. $100.00 $ 93.35 $141.49 $210.77 $337.96 $371.06
- --------------------------------------------------------------------------------------------------------------
</TABLE>
*The peer group consists of Abington Bancorp, Alliance Bancorp of New
England, Inc., American Bank of Connecticut, Andover Bancorp, Inc., Bancorp
Connecticut, Inc., BostonFed Bancorp, Inc., Central Bancorp, Inc., First Essex
Bancorp, Inc., First Federal Savings and Loan of East Hartford, Hingham
Institution for Savings, Lawrence Savings Bank, MASSBANK Corp., Mechanics
Savings Bank, Medford Bancorp, Inc., MetroWest Bank, Peoples Heritage Financial
Group, Inc., and Warren Bancorp, Inc.
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
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 1998 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 PROGRAM
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 Common 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
14
<PAGE> 18
Company. The stock option awards made in 1998 through the Stock Incentive Plan
reflect Andover's commitment to this principle. Stock options are intended to
reward officers for long-term appreciation in the value of Andover's Common
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 1998 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 1998. By focusing on strengthening Andover
Bank's core banking business, Mr. Mulligan was instrumental in this return to
consistent profitability and the record earnings achieved in 1998.
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 which such
commercial insurance coverage totalled $125,000 in fiscal year 1998.
Irving E. Rogers, III, Director of Andover Bank, is the General Manager
and Publisher of the Eagle-Tribune, Publisher of the Andover Townsman, and
Publisher of the Derry N.H. News, all of which are local newspapers. Andover
Bank, in the normal course of business, advertises in local newspapers,
including the Eagle-Tribune, the Andover Townsman, and the Derry N.H. News. The
amounts paid by Andover to the Andover Townsman, Eagle-Tribune, and the Derry
N.H. News totalled $120,525 in fiscal year 1998.
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 1999 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 1999 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 1999 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, 1999 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> <C>
Banc Funds........................................................ 271,000 (3) 4.15%
Thomas F. Caffrey................................................. 11,517 (4) *
Clifford E. Elias................................................. 40,450 (5) *
Naomi A. Gardner.................................................. 10,626 (6) *
Cornelius J. McCarthy............................................. 11,275 (7) *
Robert J. Scribner................................................ 21,500 (8) *
Fred P. Shaheen................................................... 27,590 (9) *
Gerald T. Mulligan................................................ 279,216 (10) 4.28%
John R. Heerwagen................................................. 62,353 (11) *
Michael J. Ecker.................................................. 62,587 (12) *
Joseph F. Casey................................................... 45,274 (13) *
Raymond P. Smith.................................................. 16,320 (14) *
All Nominees, continuing Directors,
Named Executive Officers and executive
officers of Andover and Andover Bank
as a group (18 persons)........................................... 753,127 (15) 11.55%
=======================================================================================================
*Less than 1%
</TABLE>
(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,
1999.
(2) Computed on the basis of 6,523,212 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 one for five stock split declared on October 17,
1996, nor the one for four stock split declared on April 23, 1998.
(4) Includes 4,112 shares owned by certain of Mr. Caffrey's family members,
as to which Mr. Caffrey disclaims beneficial ownership, and 101 shares
owned by a professional corporation. Also includes 2,750 shares which
Mr. Caffrey has the right to acquire under options granted pursuant to
Andover's Stock Incentive Plan.
17
<PAGE> 21
(5) Includes 15,000 shares beneficially owned by a trust of which Mr. Elias
is a trustee and shares voting and investment power and 7,508 shares
owned by his wife, as to which Mr. Elias disclaims beneficial
ownership. Also includes 1,250 shares which Mr. Elias has the right to
acquire under options granted pursuant to Andover's Stock Incentive
Plan.
(6) Includes 6,227 shares owned by certain of Mrs. Gardner's family members
as to which Mrs. Gardner disclaims beneficial ownership. Also includes
2,750 shares which Mrs. Gardner has the right to acquire under options
granted pursuant to Andover's Stock Incentive Plan.
(7) Includes 35 shares beneficially owned by C.J. McCarthy Insurance
Agency, Inc., of which Mr. McCarthy is president and sole stockholder,
and 8,299 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 2,750 shares which Mr. McCarthy has
the right to acquire under options granted pursuant to Andover's Stock
Incentive Plan.
(8) Includes 2,750 shares which Mr. Scribner has the right to acquire under
options granted pursuant to Andover's Stock Incentive Plan.
(9) Includes 22,425 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 2,750 shares which Mr. Shaheen
has the right to acquire under options granted pursuant to Andover's
Stock Incentive Plan.
(10) Includes 187,018 shares which Mr. Mulligan has the right to acquire
under options previously granted pursuant to Andover's Stock Incentive
Plan and 21,696 owned by his wife. Also includes 4,952 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 46,161 shares which Mr. Heerwagen has the right to acquire
under options granted pursuant to Andover's Stock Incentive Plan. Also
includes 3,477 shares allocated to Mr. Heerwagen's account under the
ESOP as to which he may direct the vote.
(12) Includes 43,664 shares which Mr. Ecker has the right to acquire under
options granted pursuant to Andover's Stock Incentive Plan. Also
includes 3,423 shares allocated to Mr. Ecker's account under the ESOP
as to which he may direct the vote. Also includes 450 shares owned by
one of Mr. Ecker`s family members.
(13) Includes 37,140 shares which Mr. Casey has the right to acquire under
options granted pursuant to Andover's Stock Incentive Plan. Also
includes 4,019 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 870 shares allocated to Mr. Smith's account under the ESOP as
to which he may direct the vote.
(15) Includes a total of 23,884 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
445,908 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 1998, 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).
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of shareholders intended to be presented at Andover's 2000
Annual Meeting must be received in writing by Andover at its principal executive
offices on or before November 22, 1999, 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 matters 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 19, 1999
19
<PAGE> 23
0685PS99
<PAGE> 24
[0685 - ANDOVER BANCORP, INC.] [FILE:ABI26B.ELX] [VERSION - 5] [03/10/99]
AB126B DETACH HERE
PROXY
ANDOVER BANCORP, INC.
61 MAIN STREET
ANDOVER, MASSACHUSETTS 01810
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 29, 1999
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
8, 1999, at the Annual Meeting of Shareholders to be held at the Andover Town
House, 20 Main Street, Andover, Massachusetts on April 29, 1999 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 THREE
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, 1999 (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. Except if voted by telephone or over the Internet, shares cannot be
voted by the Proxies unless this Proxy Card is signed and returned.
- ------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------- -------------
<PAGE> 25
ANDOVER BANCORP, INC.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
- -----------------
Vote by Telephone
- -----------------
It's fast, convenient, and immediate!
Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683) or call collect on a
touch-tone phone 1-201-536-8073.
- --------------------------------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 1-877-PRX-VOTE (1-877-779-8683) OR CALL COLLECT
ON A TOUCH-TONE PHONE 1-201-536-8073.
3. ENTER YOUR 14-DIGIT CONTROL NUMBER LOCATED ON YOUR PROXY CARD ABOVE YOUR
NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS.
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE to vote anytime prior to
3:00 p.m. on April 28, 1999.
- ----------------
Vote by Internet
- ----------------
It's fast, convenient, and your vote is immediately confirmed and posted.
- --------------------------------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AND PROXY CARD.
2. GO TO THE WEBSITE HTTP://WWW.EPROXYVOTE.COM/ANDB
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER LOCATED ON YOUR PROXY CARD ABOVE
YOUR NAME.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Go to HTTP://WWW.EPROXYVOTE.COM/ANDB to vote
anytime prior to 3:00 p.m. on April 28, 1999.
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
AB126A DETACH HERE
[0685 - ANDOVER BANCORP, INC.] [FILE:ABI26A.ELX] [VERSION - 5] [03/10/99]
Please mark
[X] votes as in
this example.
THE UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF A NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS AND RELATED PROXY STATEMENT AND HEREBY REVOKE(S) ANY PROXY OR
PROXIES HERETOFORE GIVEN. THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS
EXERCISED.
1. Proposal to elect the following individuals as Class III Directors to serve
until the 2002 Annual Meeting of Shareholders and until their respective
successors are duly elected and qualified.
NOMINEES: (01) Clifford E. Elias, (02) Gerald T. Mulligan
and (03) Fred P. Shaheen
[ ] FOR [ ] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[ ]
--------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Proposal to ratify the appointment of [ ] [ ] [ ]
KPMG Peat Marwick LLP as Andover's
independent auditors for the current
fiscal year ending December 31, 1999.
3. In their discretion, the Proxies are each authorized to vote upon such
other business as may properly come before the Annual Meeting and any
adjournments or postponements thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
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:
---------------------------------------- --------------------
Signature: Date:
---------------------------------------- --------------------
