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MADISON BANCSHARES GROUP, LTD.
MADISON BANK BUILDING
1767 SENTRY PARKWAY WEST
BLUE BELL, PA 19422 - (215) 641-1111
May 9, 1996
Dear Fellow Shareholder:
A group of two dissident shareholders (the "Schiffman Group") headed
by Alan Schiffman has announced it will seek to elect four candidates to your
Company's Board in opposition to the nominees recommended by your Board of
Directors. The stated goal of the Schiffman Group is to attempt to force an
immediate sale of your Company, despite its solid record of profitability and
performance. Your Company has established a firm foundation for future growth
and is poised to take advantage of promising growth opportunities in its market
area resulting from the consolidation of regional banks. Your Board has
adopted a long term growth strategy which we believe will capitalize on The
Madison Bank's established reputation, in the communities in which we work and
live, for customer service and satisfaction. As a result, we don't believe the
Schiffman Group's nominees have the Company's best interests in mind. DO NOT
SIGN ANY GREEN PROXY SENT TO YOU BY THE SCHIFFMAN GROUP.
Your Board of Directors believes that Mr. Schiffman is acting in his
own personal interests and not in the interests of all shareholders. You should
be aware that the Board decided it was in the best interests of shareholders not
to renew Mr. Schiffman's employment contract as Chairman upon its expiration in
December 1994. During 1995, your Board was forced to reduce Mr. Schiffman's
duties as Chairman, President and Chief Executive Officer of your Company and
ultimately had to strip him of these titles in March 1996. Once your Board of
Directors decided to remove Mr. Schiffman from office, it appears that Mr.
Schiffman decided to seek board representation for his candidates for the
purpose of pursuing his strategy of a possible immediate sale of the Company.
Your Board believes that it would be premature to sell the Company at this time
and that such a sale would not, in the long run, result in maximum value to you
and to us as shareholders. FOR THESE AND THE OTHER REASONS DISCUSSED IN THE
STATEMENT WHICH ACCOMPANIES THIS LETTER, YOUR BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE IN FAVOR OF ITS NOMINEES BY SIGNING AND RETURNING THE ENCLOSED WHITE
PROXY CARD TODAY IN THE POSTAGE PAID ENVELOPE PROVIDED.
If you have signed a GREEN PROXY CARD, we strongly urge you to revoke
such proxy by signing, dating and returning the enclosed WHITE PROXY CARD. ONLY
YOUR LATEST DATED AND SIGNED PROXY WILL COUNT AT THE ANNUAL MEETING.
Signing a GREEN PROXY CARD will result in you voting against your
Board of Directors. Please do not sign any GREEN PROXY CARDS in the future.
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ADDITIONAL INFORMATION AND REASONS TO SUPPORT YOUR BOARD
- YOUR BOARD PROPERLY RESPONDED TO THE PROPOSALS. In his proxy
materials, Mr. Schiffman alleges that the Board rejected two proposals
to sell the Company without adequate consideration of such proposals.
In fact, the Board engaged Janney Montgomery Scott, Inc. ("Janney"), a
well-respected investment banking firm, to assist it in evaluating the
two proposals. Contrary to Mr. Schiffman's assertion in his proxy
materials, Janney had no conflict of interest but was in the best
position, given its knowledge of the Company, to evaluate the
proposals. After consulting with Janney, the Negotiating Committee of
the Board (and subsequently, the Board itself), concluded that the
proposals should not be pursued. Contrary to Mr. Schiffman's
assertion in his proxy materials that the Board rejected these
proposals over his "opposition", Mr. Schiffman DID NOT vote against
the Board's determination on this matter but merely abstained from the
Board vote on this issue. Your Board strongly believes that there is
substantial growth opportunity for an independent, community oriented
bank like The Madison Bank and that, in the long run, it is in the
best interests of the shareholders that The Madison Bank remain
independent.
- YOUR BOARD OF DIRECTORS HAS A SUBSTANTIAL INVESTMENT IN THE COMPANY.
Your Directors are shareholders just like you. In fact, in the
aggregate they are the largest body of shareholders in the Company.
Your Directors (excluding Mr. Schiffman) beneficially own, in the
aggregate, 27% of the Company's Common Stock (including shares
issuable upon exercise of options and warrants). In most cases, your
Directors purchased these shares at the Company's formation and have
always attempted to protect the best short, and LONG-TERM, Interests
of shareholders. The four nominees of the Company beneficially own,
in the aggregate, 15% of the Company's Common Stock (including shares
issuable upon exercise of options and warrants). Consequently, the
Directors should have voted overwhelmingly to pursue proposals
relating to a possible sale of the Company, if the pursuit of the
proposals were in the best economic interests of the shareholders.
The fact that none of the Directors did so speaks volumes about their
personal and fiduciary views about the benefits to the shareholders of
an immediate sale of the Company.
- YOUR BOARD OF DIRECTORS' FOUR NOMINEES ARE BOTH LONG-STANDING MEMBERS
OF OUR BOARD AND DISTINGUISHED MEMBERS OF OUR COMMUNITY. Three of the
nominees have served as directors of the Company since its inception
in 1989, and the remaining nominee has served as a director of the
Company since 1991. In contrast, the Schiffman Group's nominees have
no ties to the Company. We believe that the nominees of the Schiffman
Group are not depositors in or borrowers from The Madison Bank.
Despite their business interests cited in Mr.
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Schiffman's proxy materials, they have never brought any of their
business to The Madison Bank. Three of the Schiffman Group's nominees
do not even own a single share of the Company's Common Stock. While
there is no requirement that directors own shares of stock in the
Company, the Company believes that, at the very least, substantial
stock ownership evidences a strong commitment to the Company and
aligns the interests of the Board with those of the shareholders. As
directors AND shareholders, we believe Mr. Schiffman's nominees will
only promote Mr. Schiffman's interests, rather than the interests of
all shareholders.
- OTHER MATTERS. As a result of the Board's dissatisfaction with his
performance in 1994, Mr. Schiffman's salary was drastically reduced
and his employment contract was not renewed. In 1995, Mr. Schiffman
was removed from many areas of responsibility. Ultimately, he was
removed as Chairman and an officer of the Company in March, 1996. Mr.
Schiffman concurred with (and is on record as approving) the Board's
long-term strategic plan of increased growth through improved earnings
and branch expansion. This plan also includes the possibility of
raising additional capital. We believe that, unbeknownst to the
Board, Mr. Schiffman used his title and position to approach other
parties about an immediate sale. On April 18, 1996, the Company filed
an action in the Court of Common Pleas, Montgomery County,
Pennsylvania, under the caption, THE MADISON BANCSHARES GROUP LTD. AND
MADISON BANK V. ALAN T. SCHIFFMAN (Civ. Act. No. 96-07167), seeking
an injunction to prohibit Mr. Schiffman from (i) the use of a
shareholder list which it is alleged he improperly obtained under
false pretenses, and (ii) from taking actions and engaging in a
pattern of conduct which it is alleged constitutes a breach of his
fiduciary duty as a director. Contrary to Mr. Schiffman's assertion in
his proxy material, the court has not denied the Company injunctive
relief but has merely not granted "emergency relief" leaving open the
question of the preliminary injunction and damages.
FOR THE FOREGOING REASONS, WE BELIEVE THAT YOUR BOARD OF DIRECTORS,
WHICH HAS SIGNIFICANT EXPERIENCE IN BANKING AND HAS MANAGED THE COMPANY IN A
SUCCESSFUL MANNER, IS IN A BETTER POSITION TO REPRESENT THE INTERESTS OF ALL THE
SHAREHOLDERS OF THE COMPANY AND TO MAXIMIZE SHAREHOLDER VALUE. WE STRONGLY URGE
YOU TO SIGN THE ENCLOSED WHITE PROXY CARD AND RETURN IT TODAY IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
On behalf of the Board of Directors,
Peter D. DePaul
Chairman of the Board
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- Please be sure your latest dated proxy is a WHITE card. A later
dated green card, even if marked "withhold authority" to vote for the
Schiffman Group, will revoke your vote for the current Board.
- If you own shares in the name of a brokerage firm, your broker cannot
vote your shares on the election of directors unless the broker receives
your specific instructions. To be certain that your vote is counted,
please make sure your broker executes and returns a WHITE Proxy Card on
your behalf.
- Even though you may have signed and mailed a GREEN PROXY CARD, you have
every right to change your vote simply by signing, dating and mailing
management's WHITE Proxy Card.
- REMEMBER, only your latest dated and signed proxy counts. If you have
any questions regarding how to vote your shares, please call our proxy
solicitor, Georgeson and Company Inc., toll free at (800) 223-2064.
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MADISON BANCSHARES GROUP, LTD.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS - MAY 21, 1996
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The undersigned shareholder of MADISON BANCSHARES, LTD. (the "Company"),
revoking all previous proxies, hereby constitutes and appoints E. Cheryl Hinkle
and Thomas J. Coletti, and each of them acting individually, as the attorney and
proxy of the undersigned, with full power of substitution for and in the nature
and stead of the undersigned, to attend the Annual Meeting of Shareholders of
the Company to be held on Tuesday, May 21, 1996 at 10:00 A.M. at the Madison
Bank Building, 1767 Sentry Parkway West, Blue Bell, Pennsylvania, and will vote
all shares of Common Stock of the Company which the undersigned would be
entitled to vote if personally present at such Annual Meeting, and at any
adjournment or postponement thereof; provided that said proxies are authorized
and directed to vote as indicated with respect to the following matters:
1. / / FOR all nominees for director named below.
/ / WITHHOLD AUTHORITY to vote for all nominees for director named below.
/ / FOR all nominees for diector named below, except WITHHOLD AUTHORITY to
vote for the nominee(s) whose name(s) is (are) lined through.
Nominees: Peter D. DePaul, Arnold M. Katz, Lorraine C. King and
Michael O'Donoghue
2. / / FOR the ratification of the selection of Deloitte & Touche L.L.P. as
the Company's independent auditor for 1996.
/ / AGAINST
/ / ABSTAIN
3. / / In their discretion, the proxies will vote on such other business as
may properly come before the meeting.
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This Proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholders. IF NO OBJECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE NOMINEES FOR DIRECTOR AND "FOR" THE RATIFICATION OF THE SELECTION OF
AUDITOR. This proxy plan delegates discretionary authority to vote with respect
to any other business which may properly come before the meeting or any
adjournment or postponement thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE ANNUAL REPORT, NOTICE OF SAID
MEETINGS AND THE PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH. The
undersigned also hereby ratifies all that the said attorneys and proxies may do
by virtue hereof and hereby confirms that this proxy shall be valid and may be
voted whether or not the shareholder's name is signed as set forth below or a
seal is affixed or the description, authority or capacity of the person signing
is given or other defect of signature exist.
NOTE: PLEASE MARK, DATE AND SIGN THIS PROXY CARD AND RETURN IT IN THE ENCLOSED
ENVELOPE. Please sign this proxy exactly as it appears in address below. If
shares are registered in more than one name, all owners should sign. If signing
in a fiduciary or representative capacity, such as attorney-in-fact, executor,
administrator, trustee or guardian, please give full title and attach evidence
of authority. Corporations please sign with full corporate name by a duly
authorized officer and affix the corporate seal.
Date_________________________. 1996
______________________________(SEAL)
Shareholder's Signature)
______________________________(SEAL)
Shareholder's Signature)
______________________________SHARES
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[LOGO]
[MADISON BANK LETTERHEAD]
Vito A DeLisi
President/CEO
May 7, 1996
Dear Shareholder,
Please be advised that our annual meeting will be held at 10:00 AM on
Tuesday, May 21, 1996. The location is Plymouth Country Club, Sandy Hill
and Balvoir Roads, Norristown, PA. The telephone number is 610-272-4050.
If you have any questions please do not hesitate to contact me.
Sincerely,
/s/ Vito A. DeLisi
Vito A. DeLisi
President/CEO