(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
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
|X| Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Medford 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 of 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 of 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:
[MEDFORD BANCORP LOGO]
29 HIGH STREET
MEDFORD, MASSACHUSETTS 02155
TELEPHONE: (781) 395-7700
March 22, 2002
Dear Stockholder:
You are cordially invited to attend the 2002 Annual Meeting of
Stockholders of Medford Bancorp, Inc. (the "Company") to be held on Monday,
April 29, 2002, at 10:00 a.m., local time, at Anthony's of Malden, 105 Canal
Street, Malden, Massachusetts.
The Annual Meeting has been called for the following purposes:
1. To elect three Directors of the Company for a three-year term;
2. To approve the 2002 Stock Option Plan; and
3. To transact such other business as may properly come before the
meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 4, 2002,
as the record date for determining stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT AT THE ANNUAL
MEETING YOU VOTE "FOR" PROPOSALS ONE AND TWO.
Very truly yours,
/s/ Arthur Meehan
ARTHUR H. MEEHAN
Chairman, President and Chief Executive Officer
IMPORTANT
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 EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
[MEDFORD BANCORP LOGO]
29 HIGH STREET
MEDFORD, MASSACHUSETTS 02155
TELEPHONE: (781) 395-7700
----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 2002
----------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Medford
Bancorp, Inc. (the "Company") will be held at Anthony's of Malden, 105 Canal
Street, Malden, Massachusetts on Monday, April 29, 2002, at 10:00 a.m., local
time, for the following purposes:
1. To elect three Directors of the Company for a three-year term;
2. To approve the 2002 Stock Option Plan; and
3. To transact such other business as may properly come before the
meeting and any adjournments or postponements thereof.
The Board of Directors of the Company has fixed the close of business on
March 4, 2002, as the record date for determining stockholders entitled to
notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof. Only holders of record of the Company's common stock at
the close of business on that date will be entitled to notice of and to vote at
the Annual Meeting and any adjournments or postponements thereof.
In the event that there are not sufficient votes to approve the foregoing
proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned
or postponed in order to permit further solicitation of proxies by the Company.
The above matters are described in detail in the accompanying Proxy
Statement.
By Order of the Board of Directors
EDWARD J. GAFFEY
Clerk
March 22, 2002
Medford, Massachusetts
IMPORTANT
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 EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
[MEDFORD BANCORP LOGO]
29 HIGH STREET
MEDFORD, MASSACHUSETTS 02155
TELEPHONE: (781) 395-7700
----------------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 2002
----------------------------
VOTING, REVOCATION AND SOLICITATION OF PROXIES
Annual Meeting
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Medford Bancorp, Inc. (the
"Company") for use at its 2002 Annual Meeting of Stockholders to be held at
Anthony's of Malden, 105 Canal Street, Malden, Massachusetts, on Monday, April
29, 2002, at 10:00 a.m., local time, and any adjournments or postponements
thereof.
At the Annual Meeting, stockholders of the Company will be asked to
consider and vote upon the following matters:
1. To elect three Directors of the Company for a three-year term;
2. To approve the 2002 Stock Option Plan; and
3. To transact such other business as may properly come before the
meeting and any adjournments or postponements thereof.
The accompanying Notice of Meeting and this Proxy Statement are initially
being mailed on or about March 22, 2002 to record holders of the Company's
common stock as of March 4, 2002 (the "Record Date").
Annual Report
The Company's 2001 Annual Report, including the Company's Annual Report on
Form 10-K, for the year ended December 31, 2001 (the "Annual Report"), which
contains the Company's consolidated financial statements audited by its
independent certified public accountants and their report thereon, is being
delivered simultaneously with this Proxy Statement to stockholders of record of
the Company as of the Record Date. The Annual Report, however, is not part of
the Company's proxy soliciting material. Additional copies of the Annual Report,
and copies of the Company's Annual Report on Form 10-K, for the year ended
December 31, 2001 as filed with the Securities and Exchange Commission (the
"SEC") are available upon written request, without charge, from the Company.
Such requests should be directed to: Medford Bancorp, Inc., 29 High Street,
Medford, Massachusetts 02155, Attention: Shareholder Relations.
Record Date; Voting
The Board of Directors of the Company has fixed the close of business on
March 4, 2002, as the record date (the "Record Date") for determining
stockholders entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof. Only holders of record of Common Stock of
the Company 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. At the close of business on the Record Date, there were
7,755,300 shares of Common Stock of the Company issued and outstanding and
entitled to vote at the Annual Meeting and any adjournments or postponements
thereof. As of such date, there were approximately 1,007 holders of record of
the Company's Common Stock. The holders of the Company's Common Stock
outstanding as of the close of business on the Record Date will be entitled to
one vote for each share held upon each matter properly submitted to the Annual
Meeting and any adjournments or postponements thereof.
Proxies
Holders of the Company's Common Stock are requested to complete, date,
sign and promptly return the accompanying proxy card in the enclosed envelope.
The proxy card must be signed and dated for it to be properly executed. If the
enclosed proxy card is properly executed and returned to the Company in time to
be voted at the Annual Meeting, the shares represented thereby will, unless such
proxy has previously been revoked, be voted in accordance with the instructions
marked thereon. Executed proxies with no instruction indicated thereon will be
voted "FOR" Proposal One (the election of the three nominees of the Board of
Directors of the Company) and Proposal Two (the approval of the 2002 Stock
Option Plan). In their discretion, the persons named in the proxy card are each
authorized to vote upon such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
The presence of a stockholder at the Annual Meeting will not automatically
revoke the stockholder's proxy. A stockholder of record may, however, revoke a
proxy at any time prior to the voting thereof on any matter by filing with the
Clerk of the Company a written notice of revocation, by delivering to the
Company a duly executed proxy bearing a later date, or by attending the Annual
Meeting and voting in person. All written notices of revocation and other
communications with respect to revocation of proxies in connection with the
Annual Meeting should be addressed as follows: Medford Bancorp, Inc., 29 High
Street, Medford, Massachusetts 02155, Attention: Shareholder Relations.
In addition to the use of the mails, proxies may be solicited personally
or by telephone by officers, Directors and employees of the Company who will not
be specially compensated for such solicitation activities. Arrangements will
also be made with brokerage firms and other custodians, nominees and fiduciaries
for forwarding solicitation materials to the beneficial owners of shares held of
record by such persons, and the Company will reimburse such persons for their
reasonable out-of-pocket expenses incurred in that connection. The Company has
also retained Georgeson Shareholder, a proxy soliciting firm, to assist in the
solicitation of proxies at a fee of approximately $4,000 plus reimbursement of
certain out-of-pocket costs. The cost of soliciting proxies, including the fee
of Georgeson Shareholder, will be borne by the Company.
Quorum and Stockholder Vote Required
The presence, in person or by proxy, of at least a majority of the total
number of issued and outstanding shares of Common Stock is necessary to
constitute a quorum for the transaction of business at the Annual Meeting. If a
quorum is present, a plurality of the votes cast at the Annual Meeting is
necessary to elect each of the nominees for Director. A majority of the shares
of the Company's common stock present in person or represented by proxy at the
Annual Meeting and voting on the matter is required to approve the 2002 Stock
Option Plan.
In accordance with the By-laws of the Company and applicable state law,
abstentions, votes withheld for director nominees and broker non-votes (that is,
shares represented at the meeting that are held by a broker or other nominee and
as to which (i) instructions have not been received from the beneficial owner or
the person entitled to vote and (ii) the broker or nominee does not have
discretionary voting power) shall be treated as shares that are present and
entitled to vote for the purpose of determining whether quorum is present.
Abstentions and broker non-
2
votes will not be counted as voting at the Annual Meeting and, therefore, will
have no effect on the outcome of Proposal One and Proposal Two.
PROPOSAL ONE
ELECTION OF CLASS OF DIRECTORS
The Board of Directors of the Company currently consists of eleven members
and is divided into three classes. Two of the three classes of Directors consist
of four members and one class consists of three members. The term of office of
the Directors in one of the classes expires in each year, and their successors
are elected at each annual meeting of stockholders for a term of three years and
until their successors are elected and qualified. The terms of David L.
Burke,Mary Lou Doherty, Arthur H. Meehan and John J. Sheehan, as Directors of
the Company expire in 2001. Mary Lou Doherty will retire from the Board of
Directors upon the conclusion of her term in April 2002 and therefore will not
be standing for reelection. The Board of Directors has determined not to
nominate a director to replace Ms. Doherty at this time; the Board of Directors
will then consist of ten members, divided into three classes, with two classes
consisting of three members and one class consisting of four members.
At the Annual Meeting, three persons will be elected Directors of the
Company to serve for a three-year term until the 2005 Annual Meeting of
Stockholders and until their successors are elected and qualified. The Board of
Directors of the Company has nominated David L. Burke, Arthur H. Meehan and John
J. Sheehan, for reelection as Directors of the Company for three-year terms.
Unless authority to do so has been withheld or limited in the proxy, it is
the intention of the persons named in the proxy to vote the shares represented
by each properly executed proxy "FOR" the election of each of the nominees named
above as Directors of the Company. The affirmative vote of a plurality of the
shares present and voting in person on the matter in person or by proxy at the
Annual Meeting is necessary to elect each of these individuals as Directors. The
Board of Directors believes that each of the nominees will stand for election
and, if elected, will serve as a Director. However, if any nominee fails to
stand for election or is unable to accept election, the proxies will be voted
for the election of such other person or persons as the Board of Directors may
recommend.
The Board of Directors recommends that stockholders vote "FOR" the
election of each of the nominees proposed for Directors named herein.
DIRECTORS
The following table sets forth as of January 1, 2002, information supplied
by each person who is currently a Director and/or a nominee for election as a
Director of the Company with respect to such person's age, principal occupation
for the past five years and the year in which the person began serving as a
Director or Trustee of Medford Savings Bank (the "Bank") (prior to the formation
of the Company).
3
NOMINEES FOR ELECTION AT THE ANNUAL MEETING FOR A THREE-YEAR TERM
Director
Name Age Since Principal Occupation
- ---- --- ----- --------------------
David L. Burke 58 1995 President and Treasurer of Boston Steel &
Manufacturing Company in Malden,
Massachusetts
Arthur H. Meehan 66 1992 Chairman of the Board of Directors of the
Company and the Bank; President and Chief
Executive Officer of the Company;
President, Chief Executive Officer and a
Director of the Bank since 1993
John J. Sheehan 53 2001 Attorney in private practice in
Somerville, Massachusetts
DIRECTORS WHOSE TERMS WILL EXPIRE AT THE 2003 ANNUAL MEETING
Director
Name Age Since Principal Occupation
- ---- --- ----- --------------------
Edward D. Brickley 66 1973 Manager of Corporate International
Accounting at Polaroid Corporation in
Cambridge, Massachusetts (retired)
Robert A. Havern III 52 1981 Attorney in private practice in Arlington,
Massachusetts; Member of State Legislature
of the Commonwealth of Massachusetts since
1987
Francis D. Pizzella 74 1976 Attorney at law; President of Savings Bank
Life Insurance Company of Massachusetts
and President of the Savings Bank
Employees Retirement Association (retired)
Deborah A. Burke-Santoro 46 1999 Marketing and Communications Director,
Office of the Mayor, City of Malden
DIRECTORS WHOSE TERMS WILL EXPIRE AT THE 2004 ANNUAL MEETING
Director
Name Age Since Principal Occupation
- ---- --- ----- --------------------
Paul J. Crowley 71 1993 Founder and Chairman Emeritus of Computer
Partners and former President of C.S.C.
Consulting Group (retired)
Edward J. Gaffey 64 1984 Clerk of the Company and of the Bank.
President of Country Way Trust; former
President and Treasurer of Edward J.
Gaffey & Sons, Inc., operating funeral
homes in Medford, Arlington and Scituate,
Massachusetts
Andrew D. Guthrie, Jr., M.D. 72 1983 Physician, President of Mystic Pediatric
Associates (retired)
4
PROPOSAL TWO
APPROVAL OF 2002 STOCK OPTION PLAN
On January 29, 2002, the Board of Directors voted to adopt the Medford
Bancorp, Inc. 2002 Stock Option Plan (the "2002 Option Plan"), subject to the
approval of the stockholders at the Annual Meeting.
The 2002 Option Plan would authorize the Company to issue up to 350,000
shares of common stock pursuant to various stock incentive awards under the 2002
Option Plan. The number of shares of common stock reserved for issuance under
the 2002 Option Plan is subject to adjustment for stock splits, stock dividends
and similar events.
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "Code") generally would disallow a federal income
tax deduction to the Company for compensation in excess of $1 million paid in
any year to any of those executive officers included in the summary compensation
table who are employed by the Company on the last day of the taxable year
("Covered Employees"). However, this limitation on compensation expense does not
apply to payments of "performance-based compensation," the material terms of
which have been approved by stockholders. To satisfy the requirements of Section
162(m) of the Code, stock options with respect to no more than 50,000 shares of
common stock (subject to adjustment for stock splits and similar events) may be
granted to any one individual during any one calendar-year period.
Based solely on the closing sale price of common stock as reported on the
Nasdaq National Market on March 4, 2002 of $24.75 per share, the maximum
aggregate market value of the 350,000 shares of common stock reserved for
issuance under the 2002 Option Plan would be $8,662,500.
The 2002 Option Plan will become effective only if Proposal 2 is approved
by the stockholders.
Reasons for Adoption
The Board of Directors believes that stock options and other stock-based
awards play an important role in the success of the Company and that this role
must increase if the Company is to continue to attract, motivate and retain the
caliber of directors, officers and other employees necessary for its future
growth and success. The Board of Directors believes that adopting the 2002
Option Plan will help the Company achieve its goals by keeping its incentive
compensation program competitive with those of other companies.
Summary of the 2002 Option Plan
The following description of material terms of the 2002 Option Plan is
intended to be a summary only. This summary is qualified in its entirety by the
full text of the 2002 Option Plan, which is attached to this proxy statement as
Exhibit A.
2002 Option Plan Administration. The 2002 Option Plan provides for
administration by a committee of not fewer than three Directors, as appointed by
the Board of Directors from time to time. The Compensation and Options Committee
will serve as administrator of the 2002 Option Plan. The Company intends that
each member of the Compensation and Options Committee shall be both a
"non-employee director," as defined by Rule 16b-3(b)(3)(i) or any successor rule
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and an "outside director" within the meaning
of Section 162(m) of the Code.
The Compensation and Options Committee has full power to select, from
among the employees eligible for awards, the individuals to whom awards will be
granted, to make any combination of awards to participants, and to determine the
specific terms and conditions of each award, subject to the provisions of the
2002 Option Plan. The Compensation and Options Committee may also adjust the
number of shares subject to outstanding awards and the exercise price and the
terms of outstanding awards to take into consideration material changes in
accounting practices or principles, extraordinary dividends, acquisitions or
dispositions of stock or property or any other event.
5
Eligibility and Limitations on Grants. All officers, employees and
directors of the Company are eligible to participate in the 2002 Option Plan,
subject to the discretion of the Compensation and Options Committee. In no event
may any one participant receive stock options with respect to more than 50,000
shares of common stock (subject to adjustment for stock splits and similar
events) during any one-calendar-year period, as stated above.
Stock Options. Options granted under the 2002 Option Plan may be either
Incentive Stock Options ("Incentive Options") (within the definition of Section
422 of the Code) or Non-Qualified Stock Options ("Non-Qualified Options").
Options granted under the 2002 Option Plan will be Non-Qualified Options if they
(i) fail to meet such definition of Incentive Options, (ii) are granted to a
person not eligible to receive Incentive Options under the Code, or (iii)
otherwise so provide. Incentive Options may be granted only to officers or other
employees of the Company. Non-Qualified Options may be granted to persons
eligible to receive Incentive Options and to non-employee directors and other
key persons.
Other Option Terms. The Compensation and Options Committee has authority
to determine the terms of options granted under the 2002 Option Plan. The option
exercise price of each option will be determined by the Compensation and Options
Committee but may not be less than 100% of the fair market value of the common
stock on the date of grant. The 2002 Option Plan provides that such fair market
value will be determined by reference to market quotations.
The term of each option will be fixed by the Compensation and Options
Committee and may not exceed ten years from date of grant. The Compensation and
Options Committee will determine at what time or times each option may be
exercised. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the Compensation and Options
Committee. In general, unless otherwise permitted by the Compensation and
Options Committee, no option granted under the 2002 Option Plan is transferable
by the optionee other than by will or by the laws of descent and distribution,
and options may be exercised during the optionee's lifetime only by the
optionee, or by the optionee's legal representative or guardian in the case of
the optionee's incapacity.
Options granted under the 2002 Option Plan may be exercised for cash or,
if permitted by the Compensation and Options Committee, by transfer to the
Company (either actually or by attestation) of shares of common stock that have
been held by the optionee for at least six months or were purchased on the open
market, and that have a fair market value equivalent to the option exercise
price of the shares being purchased, or by compliance with certain provisions
pursuant to which a securities broker delivers the purchase price for the shares
to the Company.
To qualify as Incentive Options, options must meet additional Federal tax
requirements, including a $100,000 limit on the value of shares subject to
Incentive Options which first become exercisable in any one calendar year, and a
shorter term and higher minimum exercise price in the case of certain large
stockholders.
Stock Options Granted to Non-Employee Directors. The 2002 Option Plan
provides for the automatic grant of Non-Qualified Options to non-employee
directors. Each non-employee director who is elected or re-elected as a director
of the Company at each annual meeting of stockholders, commencing with the
annual meeting in 2002, will automatically be granted as of such date a
Non-Qualified Option to acquire 2,000 shares of common stock. Except as stated
above, the exercise price of each such Non-Qualified Option is the fair market
value of common stock on the date of grant. Each such Non-Qualified Option is
exercisable with respect to 1,000 of the underlying shares on date of grant and
with respect to the remaining 1,000 shares on the first anniversary of the grant
date. Such Non-Qualified Options will expire ten years from the date of grant.
Tax Withholding. Participants under the 2002 Option Plan are responsible
for the payment of any federal, state or local taxes that we are required by law
to withhold upon any option exercise or vesting of other awards. Participants
may elect to have the minimum tax withholding obligations satisfied either by
authorizing us to withhold shares of common stock to be issued pursuant to an
option exercise or other award, or by transferring to the Company shares of
common stock having a value equal to the amount of such taxes.
Change of Control Provisions. The 2002 Option Plan provides that in the
event of a "change of control" as defined in the 2002 Option Plan, all stock
options will automatically become fully exercisable.
6
Adjustments for Stock Dividends, Mergers, etc. The 2002 Option Plan
authorizes the Compensation and Options Committee to make appropriate
adjustments to the number of shares of common stock that are subject to the 2002
Option Plan and to any outstanding stock options to reflect stock dividends,
stock splits and similar events. In the event of certain transactions, such as a
merger, consolidation, dissolution or liquidation of the Company, the 2002
Option Plan will terminate and all outstanding stock options will automatically
be fully exercisable for at least 15 days prior to such termination.
Amendments and Termination. The Board of Directors may at any time amend
or discontinue the 2002 Option Plan and the Compensation and Options Committee
may at any time amend or cancel any outstanding award for the purpose of
satisfying changes in law or for any other lawful purpose, but no such action
shall adversely affect the rights under any outstanding awards without the
holder's consent. To the extent required by the Code to ensure that options
granted under the amended and restated 2002 Option Plan qualify as Incentive
Options or that compensation earned under stock options granted under the 2002
Option Plan qualify as performance-based compensation under the Code, 2002
Option Plan amendments shall be subject to approval by our stockholders.
New 2002 Option Plan Benefits
No grants have been made with respect to the shares of common stock
reserved for issuance under the 2002 Option Plan. The number of shares of common
stock that may be granted to executive officers and non-executive officers
pursuant to awards and the value of those awards is indeterminable at this time,
as such grants are subject to the discretion of the Compensation and Options
Committee.
Tax Aspects Under the U.S. Internal Revenue Code
The following is a summary of the principal federal income tax
consequences of transactions under the 2002 Option Plan. It does not describe
all federal tax consequences under the 2002 Option Plan, nor does it describe
state or local tax consequences.
Incentive Options. No taxable income is generally realized by the optionee
upon the grant or exercise of an Incentive Option. If shares of common stock
issued to an optionee pursuant to the exercise of an Incentive Option are sold
or transferred after two years from the date of grant and after one year from
the date of exercise, then (i) upon sale of such shares, any amount realized in
excess of the option price (the amount paid for the shares) will be taxed to the
optionee as a long-term capital gain, and any loss sustained will be a long-term
capital loss, and (ii) there will be no deduction for the Company for federal
income tax purposes. The exercise of an Incentive Option will give rise to an
item of tax preference that may result in alternative minimum tax liability for
the optionee.
If shares of common stock acquired upon the exercise of an Incentive
Option are disposed of prior to the expiration of the two-year and one-year
holding periods described above (a "disqualifying disposition"), generally (i)
the optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of the shares of
common stock at exercise (or, if less, the amount realized on a sale of such
shares of common stock) over the option price thereof, and (ii) the Company will
be entitled to deduct such amount. Special rules will apply where all or a
portion of the exercise price of the Incentive Option is paid by tendering
shares of common stock.
If an Incentive Option is exercised at a time when it no longer qualifies
for the tax treatment described above, the option is treated as a Non-Qualified
Option. Generally, an Incentive Option will not be eligible for the tax
treatment described above if it is exercised more than three months following
termination of employment (or one year in the case of termination of employment
by reason of disability). In the case of termination of employment by reason of
death, the three-month rule does not apply.
Non-Qualified Options. With respect to Non-Qualified Options under the
2002 Option Plan, no income is realized by the optionee at the time the option
is granted. Generally (i) at exercise, ordinary income is realized by the
optionee in an amount equal to the difference between the option price and the
fair market value of the shares of common stock on the date of exercise, and the
Company receives a tax deduction for the same amount, and (ii) at
7
disposition, appreciation or depreciation after the date of exercise is treated
as either short-term or long-term capital gain or loss depending on how long the
shares of common stock have been held. Special rules will apply where all or a
portion of the exercise price of the Non-Qualified Option is paid by tendering
shares of common stock.
Parachute Payments. The vesting of any portion of any option or other
award that is accelerated due to the occurrence of a change of control may cause
a portion of the payments with respect to such accelerated awards to be treated
as "parachute payments" as defined in the Code. Any such parachute payments may
be non-deductible to the Company, in whole or in part, and may subject the
recipient to a non-deductible 20% federal excise tax on all or a portion of such
payment (in addition to other taxes ordinarily payable).
Limitation on the Company's Deductions. As a result of Section 162(m) of
the Code, the Company's deduction for certain awards under the 2002 Option Plan
may be limited to the extent that a Covered Employee receives compensation in
excess of $1,000,000 in such taxable year of the Company (other than
performance-based compensation that otherwise meets the requirements of Section
162(m) of the Code).
The Board of Directors recommends a vote "FOR" the approval of the Medford
Bancorp, Inc. 2002 Stock Option Plan.
The Board of Directors, Its Committees and Compensation
The following is a description of the Executive, Audit, and Compensation
and Options Committees of the Board of Directors of the Company. The Board of
Directors acts as a nominating committee, selecting nominees for election or
reelection as Directors and officers. The Board of Directors will consider a
nominee for election to the Board of Directors recommended by a stockholder of
record if the stockholder submits the nomination in compliance with the
requirements of the Company's By-Laws. See "STOCKHOLDER PROPOSALS" for a summary
of these requirements.
Executive Committee. The Bank's Executive Committee met 12 times and the
Company's Executive Committee did not meet during fiscal year 2001. The members
of the Executive Committees of the Company and of the Bank during 2001 were
Messrs. Meehan (Chairman), Crowley, Gaffey, Havern (as of May 2001) and
Pizzella. The Executive Committee is vested with the authority of the Board of
Directors in most matters between meetings of the Board of Directors. Except for
Mr. Meehan, who received no compensation for his service, members of the Bank's
Executive Committee received $500 for each meeting they attended, as well as an
annual fee of $8,600, during fiscal year 2001.
Audit Committee. The Company's Audit Committee met 5 times. The members of
the Company's Audit Committee during 2001 were Messrs. Brickley (Chairman and
Clerk, as of May 2001), Burke (as of May 2001), Gaffey and Pizzella. The Audit
Committee, among other matters, reviews the financial statements and the scope
of the independent annual audit, reviews the Audit Committee Charter, reviews
the independence of the independent public accountants, monitors internal
financial and accounting controls, and appoints the independent certified public
accountants. Members of the Company's Audit Committee received $500 for each
meeting they attended, as well as an annual fee of $4,000, during fiscal year
2001.
Audit Committee Report
The Audit Committee has:
o reviewed and discussed the audited financial statements with
management;
o discussed with the independent auditors the matters required to be
discussed by SAS 61; and
o received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1
("Independence Discussion with Audit Committees"), and has discussed
with the independent auditors the auditors' independence.
8
Based on the review and discussions above, the Audit Committee has
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2001 for filing with the SEC.
The Board of Directors has determined that the members of the Audit
Committee are "independent" under the rules of the NASDAQ Stock Market. The
Audit Committee has adopted a written charter.
Members of the Audit Committee:
Edward D. Brickley, Chairman and Clerk
David L. Burke
Edward J. Gaffey
Francis D. Pizzella
Compensation and Options Committee. The Company's Compensation and Options
Committee met 4 times during 2001. The Compensation and Options Committee of the
Company consists of Messrs. Burke (Chairman, as of May 2001), Crowley, Gaffey,
Guthrie (as of May 2001) and Pizzella. The Compensation and Options Committee
establishes salary increases and other compensation-related issues for the
Chairman, President and Chief Executive Officer, and reviews the proposed salary
increases of all other senior executives and all officers as a group. The
Compensation and Options Committee also determines, pursuant to the Medford
Bancorp, Inc. Stock Option Plan, the persons to whom options will be granted,
the number of shares underlying the options, the types of options and other
terms and conditions of the options. Members of the Company's Compensation and
Options Committee received $500 for each meeting they attended during fiscal
year 2001.
The Board of Directors of the Company held 5 meetings during fiscal 2001.
Each of the Directors attended at least 75% of the aggregate of the total number
of meetings of the Board of Directors of the Company and the total number of
meetings held by all committees of the Board of Directors on which such Director
served. Except for Mr. Meehan, who received no compensation for his service,
directors of the Company received $400 for each meeting of the Board of
Directors that they attended during fiscal year 2001.
Pursuant to the Company's Directors Deferred Compensation Plan for Outside
Directors, non-employee Directors may defer payment of all or any part of annual
fees, meeting fees, committee fees, and other payments for services rendered by
the Directors ("Fees") and may invest such Fees in the Company's Common Stock.
Under this plan, Fees earn interest and dividends and are payable at the
Director's election in installments over a three-year period following the
Director's retirement from the Board of Directors, death, or disability.
9
OWNERSHIP BY MANAGEMENT AND OTHER STOCKHOLDERS
The following table sets forth certain information with respect to the
number of shares of the Company's Common Stock beneficially owned as of February
1, 2002, by the Chairman, President and Chief Executive Officer, the other four
most highly compensated executive officers (including executive officers of the
Bank), each Director and all Directors and executive officers as a group.
Amount and Nature of Percentage of
Beneficial Outstanding
Executives Ownership (1)(2)(3) Common Stock
- ---------- ------------------- ------------
Arthur H. Meehan........................... 275,946(4) 3.51%
Chairman, President, Chief Executive
Officer and Director of the Company
Phillip W. Wong............................ 81,867 1.05%
Executive Vice President,
Chief Financial Officer and
Treasurer of the Company
George A. Bargamian ....................... 85,640 1.10%
Executive Vice President of the Bank
Eric B. Loth .............................. 72,419 *
Senior Vice President of the Bank
William F. Rivers.......................... 72,888 *
Senior Vice President of the Bank
Directors
- ---------
Edward D. Brickley......................... 28,759(5) *
David Burke ............................... 12,224(6) *
Deborah A. Burke-Santoro................... 3,422 *
Paul J. Crowley............................ 115,418(7) 1.48%
Mary Lou Doherty........................... 18,072 *
Edward J. Gaffey........................... 110,730(8) 1.43%
Andrew D. Guthrie.......................... 56,835 *
Robert A. Havern III....................... 28,596 *
Francis D. Pizzella........................ 177,555(9) 2.29%
John J. Sheehan ........................... 900(10) *
All Directors and Executive
Officers as a Group (16 persons)....... 1,151,772 14.20%
- ----------
* Less than 1%
(1) Unless otherwise noted in the footnotes to this table, each of the
Directors, nominees and executive officers has sole or shared voting and
investment power for the shares of Common Stock beneficially owned by
him/her. The amounts set forth for Messrs. Meehan, Wong, Bargamian, Loth
and Rivers include 10,548, 2,867, 13,235, 115, and 24,888 shares,
respectively, allocated to their accounts under the Bank's Employees'
Stock Ownership Plan (the "ESOP").
(2) The shares of Common Stock in this column include those shares which may
be acquired by the persons or group indicated pursuant to the exercise of
stock options within 60 days of February 1, 2002 in the following amounts:
Mr. Meehan, 110,472 shares of Common Stock; Mr. Wong, 57,000 shares of
Common Stock; Mr. Bargamian, 12,000 shares of Common Stock; Mr. Loth,
71,000 shares of Common Stock, Mr. Rivers, 12,000 shares of Common Stock;
Mr. Brickley, 12,792 shares of Common Stock; Mr. Burke, 6,000 shares of
Common Stock; Ms. Burke-Santoro, 2,000 shares of Common Stock; Mr.
Crowley, 17,792 shares of Common
10
Stock; Ms. Doherty, 6,000 shares of Common Stock; Mr. Gaffey, 5,000 shares
of Common Sock; Mr. Guthrie, 11,792 shares of Common Stock; Mr. Havern,
6,000 shares of Common Stock; Mr. Pizzella, 14,000 shares of Common Stock;
and all directors and executive officers as a group, 354,348 shares of
Common Stock.
(3) This share ownership table includes shares of Common Stock allocated to
the account of Directors under the Deferred Investment Plan for Outside
Directors as of December 31, 2001 as follows: 9,024, 4,636, 15,626,
40,280, 21,043, 38,030 and 1,357 shares of Common Stock have been
allocated to the accounts of Messrs. Brickley, Burke, Crowley, Gaffey,
Guthrie, Pizzella and Ms. Burke-Santoro, respectively.
(4) This share ownership includes Mr. Meehan's interest in a 401(k) Plan Share
Fund which may invest in the Company's stock. He does not have voting
power over the shares, but does have the right to dispose of them.
(5) Of the shares of Common Stock listed as owned by Mr. Brickley, 4,000
shares are owned by Mr. Brickley's wife. Mr. Brickley disclaims beneficial
ownership of these shares.
(6) Of the shares of Common Stock listed as owned by Mr. Burke, 1,488 shares
are owned by Mr. Burke's wife. Mr. Burke disclaims beneficial ownership of
these shares.
(7) Of the shares of Common Stock listed as owned by Mr. Crowley, 10,000
shares are owned by Mr. Crowley's wife. Mr. Crowley disclaims beneficial
ownership of these shares.
(8) Of the shares of Common Stock listed as owned by Mr. Gaffey, 19,550 shares
are owned by Mr. Gaffey's wife. Mr. Gaffey disclaims beneficial ownership
of these shares.
(9) Of the shares of Common Stock listed as owned by Mr. Pizzella, 36,279
shares are owned by Mr. Pizzella's wife. Mr. Pizzella disclaims beneficial
ownership of these shares.
(10) Mr. Sheehan also serves as trustee for the Deferred Investment Plan for
Outside Directors, which holds 129,996 shares for which Mr. Sheehan has
the fiduciary authority to vote the shares.
The following table presents information as to the entities known to the
Company to be beneficial owners of more than five percent of the Common Stock of
the Company as of December 31, 2001.
Amount and Nature of Percentage of
Beneficial Outstanding
Name and Address of Beneficial Owner Ownership Common Stock
- ------------------------------------ --------- ------------
Dimensional Fund Advisors Inc............. 632,300(1) 8.15%
1299 Ocean Avenue, 11th Floor,
Santa Monica, California 90401
Banc Fund III L.P......................... 516,800(2) 6.66%
Banc Fund III Trust
Banc Fund IV L.P.
Banc Fund V L.P.
208 South LaSalle Street, Suite 200
Chicago, Illinois 60604
(1) The Company has relied upon the information set forth in the Schedule
13G/A filed with the SEC by Dimensional Fund Advisors Inc. on February 12,
2002.
(2) The Company has relied upon the information set forth in the Schedule
13G/A filed with the SEC by the Banc Fund entities on February 14, 2002.
11
Executive Officers of the Company and the Bank
The executive officers of the Company and/or the Bank, their positions with the
Company and/or the Bank and their ages as of February 28, 2002 are as follows:
Name Age Position
- ---- --- --------
Arthur H. Meehan 66 President and Chief Executive Officer of the
Company and the Bank; Chairman of the Board of
Directors of the Company and the Bank
Phillip W. Wong 52 Executive Vice President, Chief Financial
Officer and Treasurer of the Company; Executive
Vice President and Chief Financial Officer of
the Bank
George A. Bargamian 53 Executive Vice President of the Bank (Retail)
Eric B. Loth 59 Senior Vice President of the Bank (Lending)
William F. Rivers 46 Senior Vice President of the Bank
(Administration)
Arthur H. Meehan. Mr. Meehan commenced his employment with the Bank in February
1992. Prior to this date, Mr. Meehan served as Executive Vice President of the
Bank of New England Corporation.
Phillip W. Wong. Mr. Wong commenced his employment with the Bank as Senior Vice
President in December 1992 and was promoted to Executive Vice President in 1997.
Previously, Mr. Wong served as Chief Financial Officer of Guaranty-First Trust
Co. in Waltham, Massachusetts.
George A. Bargamian. Mr. Bargamian was hired by the Bank as Director of
Marketing in January 1988, and was promoted to Senior Vice President in 1988 and
Executive Vice President of the Bank in 1999. Mr. Bargamian formerly served as
Assistant Vice President of Marketing for First Mutual of Boston.
Eric B. Loth. Mr. Loth commenced his employment with the Bank as Senior Vice
President in August 1994. Prior to this date, Mr. Loth served as Vice President
of Lending at Sterling Bank in Waltham, Massachusetts.
William F. Rivers. Mr. Rivers commenced his employment with the Bank in January
1974, served as Assistant Treasurer from 1980-1985, Vice President from
1985-1988, and was promoted to Senior Vice President in 1988.
EXECUTIVE COMPENSATION
Executive officers of the Company currently receive no compensation in
their capacities as executive officers of the Company but are compensated as
employees of the Bank.
The following table sets forth information concerning the compensation for
services rendered in all capacities during the three fiscal years through 2001
earned by the Chairman, President and Chief Executive Officer, and the four
other most highly compensated executive officers of the Bank (who, in the case
of Messrs. Meehan and Wong, are also officers of the Company).
12
I. Summary Compensation Table
Annual Compensation(1) Long term
Compensation
Awards(3)
Securities
Name and Principal Position Underlying All Other
with the Bank Year Salary($) Bonus(2)($) Options(#) Compensation($)
- --------------------------- ---- --------- ----------- ---------- ---------------
Arthur H. Meehan 2001 $486,200 $175,000 -0- $ 39,150(4)
Chairman, President and 2000 463,050 100,000 8,000 197,984(4)
Chief Executive Officer 1999 441,000 100,000 8,000 242,200(4)
Phillip W. Wong 2001 $180,500 $50,000 1,700 $7,650(5)
Executive Vice President, 2000 165,500 25,000 5,000 6,734(5)
Chief Financial Officer 1999 150,500 25,000 5,000 2,500(5)
and Treasurer
George A. Bargamian 2001 $146,500 $30,000 1,000 $7,501(6)
Executive Vice President 2000 136,500 20,000 3,000 6,204(6)
1999 130,000 25,000 3,000 2,150(6)
Eric B. Loth 2001 $141,000 $5,000 500 $6,349(7)
Senior Vice President 2000 136,000 0 2,000 5,883(7)
1999 130,000 5,000 2,000 1,952(7)
William F. Rivers 2001 $135,000 $20,000 1,500 $6,755(8)
Senior Vice President 2000 129,000 15,000 2,000 5,809(8)
1999 122,600 20,000 3,000 2,111(8)
- ----------
(1) Excludes the value of certain perquisites and benefits furnished by the
Company or Bank to its executive officers to facilitate the conduct of its
business. The aggregate amount of such benefits for each executive officer
did not exceed the lesser of $50,000 or 10% of the compensation reported
in the table for such individual.
(2) Amounts paid under the Bank's Incentive Compensation Program for services
rendered in the year reported.
(3) None of the executives listed received any restricted stock awards or LTIP
payouts during the three years reported.
(4) A contribution of $7,650, $5,834 and $2,500 was made to Mr. Meehan's
401(k) account in 2001, 2000 and 1999, respectively. A contribution of
$31,500, $31,500 and $24,000 was made to Mr. Meehan's Supplemental
Executive Retirement Plan in 2001, 2000 and 1999, respectively. A
contribution of $160,650 and $215,700 was made to Mr. Meehan's Executive
Supplemental Benefit Agreement in 2000 and 1999, respectively.
(5) A contribution of $7,650, $6,734 and $2,500 was made to Mr. Wong's 401(k)
account in 2001, 2000 and 1999, respectively.
(6) A contribution of $7,501, $6,204 and $2,150 was made to Mr. Bargamian's
401(k) account in 2001, 2000 and 1999, respectively.
(7) A contribution of $6,349, $5,883 and $1,952 was made to Mr. Loth's 401(k)
account in 2001, 2000 and 1999, respectively.
(8) A contribution of $6,755, $5,809 and $2,111 was made to Mr. Rivers' 401(k)
account in 2001, 2000 and 1999, respectively.
13
II. Stock Options Granted in Fiscal 2001
The following table sets forth information concerning individual grants of
stock options made during fiscal 2001 to each executive officer of the Company
and/or the Bank listed below. Neither the Company nor the Bank granted any stock
appreciation rights during fiscal 2001.
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
----------------- -----------
Percentage
of Total
Number of Options
Securities Granted to Exercise
Underlying Employees or Base
Options in Fiscal Price Expiration
Name Granted Year ($/sh) Date 5%($) 10%($)
- ---- ------- ---- ------ ---- ----- ------
Arthur H. Meehan -0- N/A N/A N/A N/A N/A
Philip W. Wong 1,700 13.4% $21.68 12/20/11 $23,179 $58,739
George A. Bargamian 1,000 7.9% $21.68 12/20/11 $13,634 $34,552
Eric B. Loth 500 3.9% $21.68 12/20/11 $6,817 $17,276
William F. Rivers 1,500 11.8% $21.68 12/20/11 $20,452 $51,829
III. Option Exercises and Year-End Value Table
The following table sets forth the aggregate number of stock options
exercised by each executive officer of the Company and/or the Bank listed below
and, for each such executive officer, the number of exercisable and
unexercisable stock options and the value of exercisable and unexercisable
"in-the-money" stock options at the end of fiscal 2001.
Aggregated Option Exercises in Last Fiscal Year, and FY-End Option Value
------------------------------------------------------------------------
Number of Value of
Securities Unexercised
Underlying In-The-Money
Unexercised Options at
Options at FY-End ($)
FY-End (#) ----------
----------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized($)(1) Unexercisable Unexercisable(1)
- ---- ------------ -------------- ------------- ----------------
Arthur H. Meehan 51,316(2) $779,427 115,512/-0- $1,232,399/-0-
Phillip W. Wong -0- -0- 57,000/1,700 $702,933/-0-
George A. Bargamian -0- -0- 12,000/1,000 $45,670/-0-
Eric B. Loth -0- -0- 71,000/ 500 $744,173/-0-
William F. Rivers -0- -0- 12,000/1,500 $45,670/-0-
14
(1) Market value of underlying securities at exercise or year-end minus the
exercise or base price. Market value is calculated on the basis of the
closing price for the Common Stock as reported on the NASDAQ National
Market of $21.16 on December 31, 2001.
(2) 33,772 shares have not been sold, and these shares are reflected in the
beneficial ownership table.
Employment Contract, Special Termination Agreements, Other Agreements
The Bank and the Company entered into an amended and restated employment
agreement with Mr. Meehan, effective November 26, 1997, to include the Company
as a party (the "Amended and Restated Agreement"). Although the Amended and
Restated Agreement has an initial term of three years, on April 27, 1998, and on
each successive anniversary of that date, unless the Company and the Bank, or
Mr. Meehan, have previously given the specified notice to the other of its or
his election not to extend the Amended and Restated Agreement, an additional
one-year period will be added to the Amended and Restated Agreement. The Amended
and Restated Agreement provides that Mr. Meehan will receive minimum annual
compensation equal to a current base salary ($498,355 as of January 1, 2002),
subject to no less than an annual cost of living increase, in addition to all
regular benefits provided by the Bank and any sums that may be awarded under the
Bank's discretionary bonus plan. Under the terms of the Amended and Restated
Agreement, the Company and the Bank may terminate Mr. Meehan's employment,
without incurring any continuing obligations to him, at any time for "cause,"
which is defined by the Amended and Restated Agreement to mean his deliberate
dishonesty to the Company or the Bank, conviction of a crime involving moral
turpitude, or gross and willful failure to perform his duty. If the Company and
the Bank terminate Mr. Meehan's employment for any reason other than "cause," or
if Mr. Meehan terminates his employment under certain conditions, the Company
and the Bank will remain obligated to continue providing the compensation and
benefits specified in the Amended and Restated Agreement for the duration of
what otherwise would have been the term of the Amended and Restated Agreement.
The Bank entered into amended and restated special termination agreements
with each of Messrs. Meehan, Wong, Bargamian, Loth and Rivers, effective
November 26, 1997, to include certain references to change in control (as
defined in the Amended and Restated Special Termination Agreements) of the
Company (the "Special Termination Agreements"). In addition, the Special
Termination Agreements of Messrs. Meehan and Wong include the Company as a
party. The Special Termination Agreements provide that (A) if there is a Change
in Control and (B) if, at any time during the three-year period following such
Change in Control, the Bank (and the Company, in the case of Messrs. Meehan and
Wong) terminates the contracting officer's employment for any reason other than
for "cause" (as defined in the Special Termination Agreement), or the
contracting officer terminates his own employment following (i) his demotion;
(ii) his loss of title, office or significant authority; (iii) a reduction in
his annual base salary; (iv) the failure to pay the officer his current or
deferred compensation for seven days; (v) the failure to continue in effect any
material compensation, incentive, bonus or benefit plan, unless an alternative
equitable arrangement is agreed upon; (vi) the failure to continue to provide
the officer with certain benefits; or (vii) the failure to obtain a satisfactory
agreement from any successor to assume and agree to perform the Special
Termination Agreements, the officer will be entitled to receive the severance
benefits provided to him in his respective agreement as described below. In the
case of such a termination, Mr. Meehan 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 the Bank, and
each of Mr. Wong, Bargamian, Loth and Rivers would be entitled to receive an
amount equal to approximately two times his average annual compensation over the
same period.
The Bank entered into a Supplemental Executive Retirement Plan with Mr.
Meehan, effective November 1, 1994. The agreement is designed to provide the
benefits which he would have been entitled to under defined benefit plans but
for the reduction in the IRC 401 (a) (17) compensation ceiling to $150,000
effective November 1, 1994.
The Bank also entered into an Executive Supplemental Benefit Agreement
with Mr. Meehan, effective October 28, 1997. The Executive Supplemental Benefit
Agreement generally provides for fifteen annual payments of $70,000 to Mr.
Meehan upon his retirement or to a beneficiary if Mr. Meehan dies before
receiving all fifteen annual payments. The annual payments are conditioned upon
Mr. Meehan's fulfilling certain specified duties to render services to the Bank
in an advisory or consulting capacity at the request of the Bank.
15
Compensation Committee Report on Executive Compensation
The following report reflects the work of the Company's Compensation and
Options Committee.
The Company's executive compensation philosophy is to provide competitive
levels of compensation, integrate management's pay with the achievement of the
Company's performance goals, reward above average corporate performance,
recognize individual initiative and achievement, and assist the Company in
attracting and retaining qualified management.
At the end of each fiscal year, the Compensation and Options Committee
reviews the performance of the Chairman, President and Chief Executive Officer
(the "CEO"), evaluates the performance of the Company, and establishes an
appropriate salary increase for recommendation to and approval by the Board of
Directors. In addition, the Compensation and Options Committee reviews the
proposed salary increases for all other senior executives, and all officers as a
group. In establishing the salary for the CEO, the Compensation and Options
Committee (i) considers financial performance data, including, without
limitation, return on assets, return on equity, asset growth and quality, and
capital position, (ii) utilizes a comparison of the compensation package for
comparable positions in financial institutions within the Company's peer group
provided by outside consulting services and (iii) makes a subjective evaluation
of the individual performance of the CEO in carrying out his or her duties and
responsibilities. The committee's salary practice is to compensate the CEO to
attract and retain a qualified incumbent.
Additional short-term incentives can be earned through a discretionary
bonus plan, administered by the Compensation and Options Committee. Senior
executive officers as well as other officers are eligible to receive a bonus
payable prior to the end of the first quarter of the following year if the
Company or the Bank meets or exceeds certain base standards and individual
performance warrants consideration. The base standards for 2001 were the
budgeted financial goals and results of the Company and the Bank, which included
earnings per share as well as other financial achievements, and the
discretionary evaluation of individual performance and contributions towards
those results.
Long-term incentives are provided through the grant of stock options.
These plans are administered by the Compensation and Options Committee, which
has the authority to determine the individuals to whom and the terms at which
option grants are made. Options are granted to individuals to reward significant
contributions to Company performance or to attract and retain qualified
individuals. Both "incentive stock options" and "nonqualified stock options" may
be granted pursuant to these plans. All options granted under these plans are
required to have an exercise price per share equal to at least the fair market
value of a share of Common Stock on the date the option is granted and vest over
a period as determined by the Compensation and Options Committee. The Board of
Directors has adopted, subject to shareholder approval, the 2002 Stock Option
Plan, under which an additional 350,000 shares of unissued common stock of the
Company will be reserved for issuance pursuant to options granted thereunder.
See "PROPOSAL TWO: APPROVAL OF 2002 STOCK OPTION PLAN".
Based upon a review of the performance of the Company and Mr. Meehan's
performance, which review was conducted at the Committee meeting in December
2001, Mr. Meehan's salary was increased effective January 1, 2002, from $486,200
to $498,355. Additionally, Mr. Meehan was awarded a cash bonus of $175,000 in
December 2001. Mr. Meehan's compensation was based on the Company's overall
profitability, the performance of the Company's core banking business, the
Company's asset growth and quality, the Company's deposit growth and the
Company's equity growth. More specifically, the Committee acknowledged that the
Company achieved net income of $13,778,000 for 2001. Earnings per share for 2001
increased - 8 cents or 5.0% compared to the previous year. At year end, total
assets increased 7.9% to $1.4 billion from the prior year and total deposits
increased 12.3% to $1.096 billion. Return on equity was reported at 12.81%. In
addition, the Committee reviewed comprehensive surveys obtained from outside
consulting services, as well as compensation information of a select peer group,
comparing Mr. Meehan's overall compensation to that of chief executive officers
of comparable banking institutions in the Northeast, Massachusetts and the local
peer group.
Messrs. Wong, Bargamian, Loth and Rivers were also granted salary
increases effective January 1, 2002, based upon their individual performance and
that of the Company, as described above. In addition, Messrs. Wong, Bargamian,
Loth and Rivers were granted stock options, and were also awarded a cash bonus
in December 2001 based upon assessments of individual performance as well as
comparison to peer group compensation packages.
16
Members of the Compensation and Options Committee:
David Burke, Chairman
Paul J. Crowley
Edward J. Gaffey
Andrew Guthrie., Jr.
Francis D. Pizzella
RELATIONSHIPS AND TRANSACTIONS WITH THE COMPANY
Certain Directors and officers of the Company and the Bank and members of
their immediate family are at present, as in the past, customers of the Bank and
have transactions with the Bank in the ordinary course of business. In addition,
certain of the Directors are also at present, as in the past, directors,
officers or stockholders of corporations or members of partnerships that are
customers of the Bank and have transactions with the Bank in the ordinary course
of business. Such transactions with Directors and officers of the Company and
the Bank and their families and with such corporations and partnerships were
made in the ordinary course of business, were made on substantially the same
terms, including interest rates and collateral on loans, as those prevailing at
the time for comparable transactions with other persons, and did not involve
more than the normal risk of collectibility or present other features
unfavorable to the Bank.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock (or the
Bank's common stock, prior to the formation of the Company), based on the market
price of the Company's (or Bank's) common stock and assuming reinvestment of
dividends, with the total return of companies within the Standard & Poor's 500
Stock Index and the NASDAQ Bank Index. The NASDAQ Bank Index is a broad-based
capitalization-weighted index of domestic and foreign common stocks of banks
that are traded on the NASDAQ National Market System as well as the SmallCap
Market. The calculation of total cumulative return assumes a $100 investment in
the Company's (or Bank's) common stock, the S&P 500 and the NASDAQ Bank Index on
December 31, 1996.
[PERFORMANCE GRAPH]
Medford Bancorp, Inc. (MDBK) Vs. The Five Year Total Return for the
NASDAQ Bank Index and S&P 500 Index
- --------------------------------------------------------------------------------
INDEX OF TOTAL RETURN (12/31/96 = 100)
- --------------------------------------------------------------------------------
S&P 500 NASDAQ MDBK Price Plus
DATE Index Bank Index Index Cumulative Dividends
- --------------------------------------------------------------------------------
12/31/96 100.00 100.00 100.00 $12.875
3/31/97 102.70 108.71 95.84 $12.339
6/30/97 120.59 128.05 115.13 $14.823
9/30/97 129.61 150.68 142.41 $18.335
12/31/97 133.32 166.45 156.69 $20.174
- --------------------------------------------------------------------------------
3/31/98 151.88 177.78 176.45 $22.718
6/30/98 156.88 171.08 165.22 $21.272
9/30/98 141.30 140.04 130.77 $16.837
12/31/98 171.34 149.35 137.46 $17.698
- --------------------------------------------------------------------------------
3/31/99 179.87 142.94 132.20 $17.021
6/30/99 192.53 153.36 152.74 $19.665
9/30/99 180.53 139.00 128.72 $16.573
12/31/99 207.35 140.74 140.69 $18.114
- --------------------------------------------------------------------------------
3/31/00 212.07 128.23 121.60 $15.656
6/30/00 206.43 126.32 121.56 $15.651
9/30/00 204.44 151.01 139.81 $18.001
12/31/00 188.46 165.55 135.77 $17.480
- --------------------------------------------------------------------------------
3/31/01 166.17 161.70 162.10 $20.870
6/30/01 175.90 181.84 181.55 $23.375
9/30/01 150.13 178.90 172.49 $22.208
12/31/01 166.16 186.51 190.46 $24.522
- --------------------------------------------------------------------------------
Source: Bloomberg: MDBK-Equity-COMP
- --------------------------------------------------------------------------------
17
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
-------- -------- --------- --------- --------
Medford Savings Bank/Medford Bancorp, Inc. $100.00 $156.69 $137.46 $140.69 $135.77 $190.46
% change 56.69 (12.27) 2.35 (3.50) 40.28
S & P 500 $100.00 $133.32 $171.34 $207.35 $188.46 $166.16
% change 33.32 28.52 21.02 (9.11) (11.83)
NASDAQ Bank Index $100.00 $166.45 $149.35 $140.74 $165.55 $186.51
% change 66.45 (10.27) (5.76) 17.63 12.66
-------- -------- --------- --------- --------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and SEC
regulations, the Company's executive officers and directors must file reports of
ownership and changes in ownership with the SEC and the NASDAQ Stock Market,
Inc. and furnish the Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company, no executive officer or director of either the Bank or
the Company failed to file any such reports.
ACCOUNTANTS
The firm of Wolf & Company, P.C. served as the Company's independent
certified public accountants for the year ended December 31, 2001 and is
expected to serve as the Company's independent certified public accountants for
2002. Representatives of Wolf & Company, P.C. are expected to be present at the
Annual Meeting to be available to respond to appropriate questions, and to have
the opportunity to make a statement if they so desire.
For the year ended December 31, 2001, the Company paid the following fees
to Wolf & Company, P.C. for services rendered:
- --------------------------------------------------------------------------------
Fees
- --------------------------------------------------------------------------------
Audit service, includes quarterly reviews of $98,100
interim financial information
- --------------------------------------------------------------------------------
Financial information systems design and
implementation $ 0
- --------------------------------------------------------------------------------
All other, including tax compliance $25,500
- --------------------------------------------------------------------------------
The Audit Committee has considered whether the provision of the non-audit
services above is compatible with maintaining the auditor's independence.
OTHER MATTERS
It is not anticipated that any matters other than those set forth in this
Proxy Statement will be brought before the Annual Meeting. If any other matters
properly come before the Annual Meeting, the persons named as proxies will vote
upon such matters in their discretion in accordance with their best judgment.
18
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2003 Annual Meeting
of Stockholders of the Company must be received in writing by the Company at its
principal executive offices on or before November 27, 2002 in order to be
considered for inclusion in its proxy statement and form of proxy relating to
the 2003 Annual Meeting. These proposals must also comply with the rules of the
SEC governing the form and content of proposals in order to be included in the
Company's proxy statement and form of proxy. The Company's By-Laws also provide
that any stockholder wishing to have a proposal or director nomination
considered at the 2003 Annual Meeting must provide written notice of such
proposal or director nomination, along with appropriate supporting materials as
set forth in the Company's By-laws, to the Clerk of the Company at the Company's
principal executive office not less than 75 days nor more than 120 days prior to
April 29, 2003; provided, however, that in the event the Annual Meeting is
scheduled to be held on a date more than 30 days before April 29, 2003, or more
than 60 days after April 29, 2003, a stockholder's notice shall be timely if
delivered to, or mailed to and received by, the Company at its principal
executive office not later than the close of business on the later of (a) the
75th day prior to the scheduled date of such Annual Meeting, or (b) the 15th day
following the day on which public disclosure of the date of such Annual Meeting
is first made by the Company. Any proposals or nominations that are not received
during this period will not be considered at the 2003 Annual Meeting. Any
stockholder wishing to submit a proposal or director nomination should review
the By-law requirements regarding proposals and director nominations and should
submit any such proposal or director nomination and appropriate supporting
documentation to: Medford Bancorp, Inc., 29 High Street, Medford, Massachusetts
02155, Attention: Shareholder Relations. Proxies solicited by the Board of
Directors will confer discretionary voting authority with respect to these
proposals or nominations, subject to SEC rules governing the exercise of this
authority.
March 22, 2002
19
Exhibit A
MEDFORD BANCORP, INC.
2002 STOCK OPTION PLAN
1. PURPOSE
The Medford Bancorp, Inc. 2002 Stock Option Plan (the "Plan") is intended as a
performance incentive for directors, officers and employees of Medford Bancorp,
Inc. (the "Company") or its Subsidiaries (as hereinafter defined) to enable the
persons to whom options are granted (the "Optionees") to acquire or increase a
proprietary interest in the success of the Company. The Company intends that
this purpose will be effected by the granting of "incentive stock options"
("Incentive Options") as defined in Section 422 of the Internal Revenue Code of
1986, as amended from time to time (the "Code") and nonqualified stock options
("Nonqualified Options") under the Plan. The term "Subsidiaries" includes any
corporations in which stock possessing 50 percent or more of the total combined
voting power of all classes of stock is owned directly or indirectly by the
Company.
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan may be either Incentive Options or
Nonqualified Options.
(b) The Plan shall be administered by a committee (the "Option Committee")
of not less than three directors of the Company appointed by the Board of
Directors of the Company. None of the members of the Option Committee shall be
an officer or other full-time employee of the Company. It is the intention of
the Company that each member of the Option Committee shall be a "non-employee
director," as that term is defined and interpreted under Rule 16b-3(b)(3)(i) or
any successor rule promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended (the "1934 Act") and an "outside
director" within the meaning of Section 162(m) of the Code. Action by the Option
Committee shall require the affirmative vote of a majority of all its members.
(c) Subject to the terms and conditions of the Plan, the Option Committee
shall have the power:
(i) To determine from time to time the options to be granted to
eligible persons under the Plan (except with respect to options granted to
non-employee directors pursuant to Section 4(d) hereof) and to prescribe
the terms and provisions (which need not be identical) of each option
granted under the Plan to such persons;
(ii) To construe and interpret the Plan and options granted
thereunder and to establish, amend, and revoke rules and regulations for
administration of the Plan. In this connection, the Option Committee may
correct any defect or supply any omission, or reconcile any inconsistency
in the Plan, or in any option agreement, in the manner and to the extent
it shall deem necessary or expedient to make the Plan fully effective. All
decisions and determinations by the Option Committee in the exercise of
this power shall be final and binding upon the Company and the Optionees;
and
(iii) Generally, to exercise such powers and to perform such acts as
are deemed necessary or expedient to promote the best interests of the
Company with respect to the Plan.
3. STOCK
(a) The stock subject to the options granted under the Plan may be shares
of the Company's authorized but unissued common stock, par value $0.50 per share
(the "Common Stock") or shares of Common Stock reacquired by the Company. The
total number of shares that may be issued pursuant to
A-1
options granted under the Plan shall not exceed an aggregate of 350,000 shares
of Common Stock. Such number shall be subject to adjustment as provided in
Section 8 hereof.
(b) Whenever any outstanding option under the Plan expires, is canceled or
is otherwise terminated (other than by exercise), the shares of Common Stock
allocable to the unexercised portion of such option may again be the subject of
options under the Plan, except for shares of Common Stock surrendered as
provided in Section 7 hereof.
(c) No more than 50,000 shares of Common Stock may be granted to any one
individual Optionee during any one calendar year period (which number is subject
to adjustment as provided in Section 8 hereof).
4. ELIGIBILITY
(a) Incentive Options may be granted only to officers and other employees
of the Company or its Subsidiaries, including members of the Board of Directors
who are also employees of the Company or its Subsidiaries. Nonqualified Options
may be granted to officers or other employees of the Company or its Subsidiaries
and to members of the Board of Directors of the Company or Medford Savings Bank
(the "Bank") (including non-employee directors, subject to the terms and
conditions set forth in Section 4(d)).
(b) No person shall be eligible to receive any option under the Plan, if
at the date of grant such person beneficially owns in excess of ten percent of
the outstanding Common Stock of the Company.
(c) The aggregate fair market value, determined at the time the option is
granted, of the stock with respect to which Incentive Options under the Plan and
incentive stock options under any other option plan of the Company (or a parent
or subsidiary as defined in ss.424 of the Code) are exercisable for the first
time by any individual during any calendar year shall not exceed $100,000. Any
option granted in excess of the foregoing limitations shall be clearly and
specifically designated as not being an Incentive Option.
(d) Each non-employee director of the Company or the Bank who is elected
or reelected to the Board of Directors of the Company and the Bank shall
automatically be granted, upon each such election or reelection, a Nonqualified
Option to purchase 2,000 shares of Common Stock; provided, however, that no
non-employee director of both the Company and the Bank may be granted a
Nonqualified Option to purchase more than 2,000 shares of Common Stock at any
election or reelection. Such option shall vest as follows: 1,000 shares upon
election or reelection to the Board of Directors and 1,000 shares on the first
anniversary of such election or reelection. No options granted to non-employee
directors may be exercisable more than ten years from the date of grant. Except
as provided in this Section 4(d), the terms of such options, including without
limitation the purchase price per share of Common Stock thereunder, shall be
determined as set forth in Section 5 hereof. Notwithstanding any other
provisions of the Plan, the provisions of this Section 4(d) shall govern the
rights and obligations of the Company and non-employee directors in respect of
options granted or to be granted to non-employee directors.
5. TERMS OF THE OPTION AGREEMENTS
Each option agreement shall contain such provisions as the Option Committee
shall from time to time deem appropriate. Option agreements need not be
identical, but each option agreement by appropriate language shall include the
substance of all of the following provisions:
(a) Expiration. Notwithstanding any other provision of the Plan or of any
option agreement, each option shall expire on the date specified in the option
agreement, which date shall not be later than the tenth anniversary of the date
on which the option was granted.
A-2
(b) Minimum Shares Exercisable. The minimum number of shares with respect
to which an option may be exercised at any one time shall be 100 shares, or such
lesser number as is subject to exercise under the option at the time.
(c) Exercise.
(i) Each option shall be exercisable in such installments (which
need not be equal) and at such times as designated by the Option
Committee. To the extent not exercised, installments shall accumulate and
be exercisable, in whole or in part, at any time after becoming
exercisable, but not later than the date the option expires.
(ii) In the event of a Change in Control of the Company (as defined
in (f) below), all options outstanding as of the date of such Change in
Control shall become immediately exercisable.
(d) Purchase Price. The purchase price per share of Common Stock under
each option shall be not less than the fair market value of the Common Stock on
the date the option is granted. For the purposes of the Plan, the fair market
value of the Common Stock shall be determined in good faith by the Option
Committee; provided, however, that if the Common Stock is admitted to trading on
a national securities exchange or the NASDAQ National Market System on the date
the option is granted, fair market value shall not be less than the last sale
price reported for the Common Stock on such exchange on such date or on the last
date preceding such date on which a sale was reported.
(e) Rights of Optionees. No Optionee shall be deemed for any purpose to be
the owner of any shares of Common Stock subject to any option unless and until
(i) the option shall have been exercised pursuant to the terms thereof, (ii) the
Company shall have issued and delivered the shares to the Optionee, and (iii)
the Optionee's name shall have been entered as a stockholder of record on the
books of the Company. Thereupon, the Optionee shall have full voting, dividend
and other ownership rights with respect to such shares of Common Stock.
(f) Change in Control. For purposes of the Plan, a "Change in Control"
shall be deemed to have occurred in any one of the following events:
(i) if there has occurred a change in control which the Company
would be required to report in response to Item 1 of Form 8-K promulgated
under the 1934 Act, or, if such regulation is no longer in effect, any
regulations promulgated by the Securities and Exchange Commission pursuant
to the 1934 Act which are intended to serve similar purposes;
(ii) when any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the 1934 Act) becomes a "beneficial owner" (as such term is
defined in Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of securities of the Company or the Bank representing
twenty-five percent (25%) or more of the total number of votes that may be
cast for the election of directors of the Company or the Bank, as the case
may be;
(iii) during any period of two consecutive years (not including any
period prior to the adoption of this Plan), individuals who are Continuing
Directors (as hereinafter defined) cease for any reason to constitute at
least a majority of the Board of Directors of the Company. For this
purpose, a "Continuing Director" shall mean (a) an individual who was a
director of the Company at the beginning of such period or (b) any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
clause (ii), (iv) or (v) of this Section 5(f)) whose election by the Board
or nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved;
A-3
(iv) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (a) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (b) a merger
or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no "person" (as hereinabove defined)
acquires more than 30% of the combined voting power of the Company's then
outstanding securities; or
(v) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
(g) Transfer. No options or stock appreciation rights shall be
transferable by the Optionee other than by will or by the laws of descent and
distribution, and may be exercised during the Optionee's lifetime only by the
Optionee, his guardian or legal representative. Notwithstanding the foregoing,
the Option Committee may permit the Optionee to transfer, without consideration
for the transfer, his Nonqualified Option to members of his immediate family, to
trusts for the benefit of such family members, or to partnerships in which such
family members are the only parties, provided that the transferor agrees in
writing with the Company to be bound by all the terms and conditions of this
Plan and the applicable option agreement.
6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Any option granted under the Plan may be exercised by the Optionee by
delivering to the Option Committee on any business day a written notice
specifying the number of shares of Common Stock the Optionee then desires to
purchase (the "Notice").
(b) Payment for the shares of Common Stock purchased pursuant to the
exercise of an option shall be made either (i) in cash, check or other
instrument acceptable to the Company equal to the option price for the number of
shares specified in the Notice (the "Total Option Price"), (ii) if authorized by
the applicable option agreement, shares of Common Stock of the Company that have
been beneficially owned by the Optionee for at least six months having a fair
market value, determined as provided in Section 5(d) hereof, equal to or less
than the Total Option Price, plus cash in an amount equal to the excess, if any,
of the Total Option Price over the fair market value of such shares of Common
Stock, or (iii) by the Optionee delivering the Notice to the Company together
with irrevocable instructions to a broker to promptly deliver the Total Option
Price to the Company in cash or by other method of payment acceptable to the
Company; provided, however, that the Optionee and the broker shall comply with
such procedures and enter into such agreements of indemnity or other agreements
as the Company shall prescribe as a condition of payment under this clause
(iii). Payment instruments will be received on the date of exercise subject to
collection.
(c) The delivery of certificates representing shares of Common Stock to be
purchased pursuant to the exercise of an option will be contingent upon receipt
by the Company of the Total Option Price for such shares and the fulfillment of
any other applicable requirements (including payment of any amount of taxes
required to be withheld by the corporation pursuant to any applicable law).
7. TAX WITHHOLDING
(a) Payment by Optionee. Each Optionee shall, no later than the date as of
which the value of any option granted hereunder or of any Common Stock issued
upon the exercise of such option first becomes includable in the gross income of
the Optionee for federal income tax purposes (the "Tax Date"), pay to the
Company, or make arrangements satisfactory to the Company regarding payment of
any federal, state or local taxes of any kind required by law to be withheld
with respect to such income.
A-4
(b) Payment in Shares. An Optionee may elect to have the minimum required
tax withholding obligation satisfied, in whole or in part, by (i) authorizing
the Company to withhold from shares of Common Stock to be issued pursuant to an
option exercise a number of shares with an aggregate fair market value
(determined by the Option Committee in accordance with Section 5(d) as of the
date the withholding is effected) that would satisfy the minimum required tax
withholding amount due, or (ii) transferring to the Company shares of Common
Stock owned by the Optionee with an aggregate fair market value (determined by
the Option Committee in accordance with Section 5(d) as of the date the
withholding is effected) that would satisfy the minimum required tax withholding
amount due.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) If the shares of the Company's Common Stock as a whole are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or the
like, an appropriate and proportionate adjustment, in the discretion of the
Option Committee, shall be made in the number and kind of shares subject to the
Plan, and in the number, kind, and per share exercise price of shares subject to
unexercised options or portions thereof granted prior to any such change. In the
event of any such adjustment in an outstanding option, the Optionee thereafter
shall have the right to purchase the number of shares under such option at the
per share price, as so adjusted, which the Optionee could purchase at the total
purchase price applicable to the option immediately prior to such adjustment.
(b) Adjustments under this Section 8 shall be determined by the Option
Committee and such determinations shall be conclusive. The Option Committee
shall have the discretion and power in any such event to determine and to make
effective provision for acceleration of the time or times at which any option or
portion thereof shall become exercisable. No fractional shares of Common Stock
shall be issued under the Plan on account of any adjustment specified above.
9. EFFECT OF CERTAIN TRANSACTIONS
In the case of (i) the dissolution or liquidation of the Company, (ii) a
reorganization, merger or consolidation in which the Company is acquired by
another entity or in which the Company is not the surviving corporation, or
(iii) the sale of all or substantially all of the property of the Company to
another corporation, the Plan and the options issued hereunder shall terminate,
unless provision is made in connection with such transaction for the assumption
of options theretofore granted, or the substitution for such options of new
options of the successor corporation or parent thereof, with appropriate
adjustment as to the number and kind of shares and the per share exercise
prices, as provided in Section 8. In the event of such termination, all
outstanding options shall be exercisable in full for at least 15 days prior to
the date of such termination whether or not otherwise exercisable during such
period.
10. RELEASE OF FINANCIAL INFORMATION
A copy of the Company's annual report to stockholders shall be delivered to each
Optionee at the time such report is distributed to the Company's stockholders.
Upon request, the Company shall furnish to each Optionee a copy of its most
recent annual report and each quarterly report and current report filed under
the 1934 Act since the end of the Company's prior fiscal year.
11. AMENDMENT OF THE PLAN
The Board of Directors of the Company may amend the Plan at any time, and from
time to time, subject to any required regulatory approval and to the limitation
that, except as provided in Sections 8 and 9 hereof, no amendment shall be
effective unless approved by the stockholders of the Company, where such
amendment will:
A-5
(a) increase the number of shares of Common Stock as to which options may
be granted under the Plan;
(b) change in substance Section 4 hereof relating to eligibility to
participate in the Plan;
(c) ensure that Incentive Stock Options granted under the Plan are
qualified under Section 422 of the Code; or
(d) ensure that compensation earned pursuant to option exercises qualifies
as performance-based awards under Section 162(m) of the Code.
Except as provided in Sections 8 and 9 hereof, rights and obligations under any
option granted before any amendment of the Plan shall not be altered or impaired
by such amendment, except with the consent of the Optionee.
12. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the submission of
the Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board of Directors to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
The Plan shall not be deemed to confer upon any employee of the Company or any
Subsidiary any right to continued employment.
13. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
(a) The obligation of the Company to sell and deliver shares of Common Stock
with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Option Committee.
(b) The Plan shall be governed by Massachusetts law, except to the extent that
such law is preempted by federal law.
(c) Transactions under the Plan are intended to comply with Rule 16b-3 under the
1934 Act or any successor rule. Any provision of the Plan inconsistent with such
Rule shall be inoperative and shall not affect the validity of the Plan or the
exemption from Section 16(b) of the 1934 Act provided thereunder.
14. EFFECTIVE DATE OF PLAN; STOCKHOLDER APPROVAL
The Plan shall become effective on January 29, 2002; provided, however, that the
Plan shall be subject to the approval of the Company's stockholders in
accordance with applicable laws and regulations at an annual or special meeting
held within twelve months of such effective date. No options granted under the
Plan prior to such stockholder approval may be exercised until such approval has
been obtained. No option may be granted under the Plan after the tenth
anniversary of the effective date of the Plan.
A-6
|X| Please mark
votes as in
this example.
- --------------------------------------------------------------------------------
MEDFORD BANCORP, INC.
- --------------------------------------------------------------------------------
1. Election of three directors for a three year term.
Nominees: Arthur H. Meehan
David L. Burke
John J. Sheehan
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
|_| |_|
|_|______________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Approval of the 2002 Stock Option Plan. |_| |_| |_|
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of Annual Meeting of Stockholders, the Proxy Statement with report
thereto and the Company's 2001 Annual Report to Stockholders, and hereby
revoke(s) any proxy or proxies heretofore given. This proxy may be revoked at
any time before it is exercised.
Mark box at right if an address change or comment has been |_|
noted on the reverse side of this card.
Please be sure to sign and date this Proxy.
Signature __________________________________ Date _____________________
Signature __________________________________ Date _____________________
MEDFORD BANCORP, INC.
Proxy for the Annual Meeting of Stockholders to be held on April 29, 2002
This Proxy is Solicited by the Board of Directors
The undersigned hereby constitutes and appoints Arthur H. Meehan, William F.
Rivers and George A. Bargamian, and each of them, as Proxies of the undersigned,
with full power to appoint his substitute, and authorizes each of them (each
having full power to act without the other) to represent and to vote all shares
of Common Stock of Medford Bancorp, Inc. (the "Company") held of record by the
undersigned at the close of business on March 4, 2002 at the Annual Meeting of
Stockholders to be held at Anthony's of Malden, 105 Canal Street, Malden,
Massachusetts, on Monday, April 29, 2002 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 stockholder(s). If no direction is given, this proxy will be
voted FOR the election to the Company's Board of Directors of the three nominees
listed in Proposal 1 and FOR Proposal 2 on the reverse side. In their
discretion, the Proxies are each authorized to vote upon such other business as
may properly come before the meeting and at any adjournments or postponements
thereof. A stockholder wishing to vote in accordance with the Board of
Directors' recommendation need only sign and date this proxy and return it in
the enclosed envelope prior to the Annual Meeting of Stockholders, April 29,
2002.
Proxy for the Annual Meeting of Stockholders to be held on April 29, 2002
(please date and sign on reverse side, and mail your proxy card promptly in the
enclosed envelope).
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign this proxy exactly as your name(s) appear(s) on the books of the
Company. Joint owners should each sign personally. Trustees, custodians and
other fiduciaries should indicate the capacity in which they sign, and where
more than one name appears, each person must sign. If the stockholder is a
corporation, the signature should be that of an authorized officer who should
state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
___________________________________ _________________________________________
___________________________________ _________________________________________
___________________________________ _________________________________________