<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
BOSTONFED BANCORP
(Name of Registrant as Specified In Its Charter)
BOSTONFED BANCORP
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
BOSTONFED BANCORP, INC.
17 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS 01803
(617) 273-0300
March 28, 1997
Fellow Shareholders:
You are cordially invited to attend the annual meeting of shareholders (the
"Annual Meeting") of BostonFed Bancorp, Inc. (the "Company"), the holding
company for Boston Federal Savings Bank (the "Bank"), Burlington, Massachusetts,
which will be held on April 28, 1997, at 2:00 p.m., Eastern Standard Time, at
the Burlington Marriott, 1 Mall Road, Burlington, Massachusetts.
The attached Notice of the Annual Meeting and the Proxy Statement describe
the formal business to be transacted at the Annual Meeting. Directors and
officers of BostonFed Bancorp, Inc., as well as a representative of KPMG Peat
Marwick LLP, the Company's independent auditors, will be present at the Annual
Meeting to respond to any questions that our shareholders may have regarding the
business to be transacted.
The Board of Directors of BostonFed Bancorp, Inc. has determined that the
matters to be considered at the Annual Meeting are in the best interests of the
Company and its shareholders. FOR THE REASONS SET FORTH IN THE PROXY STATEMENT,
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE NOMINEES AS
DIRECTORS SPECIFIED UNDER PROPOSAL 1 AND "FOR" PROPOSALS 2 AND 3.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOUR COOPERATION
IS APPRECIATED SINCE A MAJORITY OF THE COMMON STOCK MUST BE REPRESENTED, EITHER
IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM FOR THE CONDUCT OF BUSINESS.
On behalf of the Board of Directors and all of the employees of the Company
and the Bank, I thank you for your continued interest and support.
Sincerely yours,
David F. Holland
President and Chief Executive Officer
<PAGE> 3
BOSTONFED BANCORP, INC.
17 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS 01803
----------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1997
----------------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the "Annual
Meeting") of BostonFed Bancorp, Inc. (the "Company") will be held on April 28,
1997, at 2:00 p.m., Eastern Standard Time, at the Burlington Marriott, 1 Mall
Road, Burlington, Massachusetts.
The purpose of the Annual Meeting is to consider and vote upon the
following matters:
1. The election of three directors to three-year terms of office each;
2. The ratification of the BostonFed Bancorp, Inc. 1997 Stock Option
Plan.
3. The ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the fiscal year ending
December 31, 1997; and
4. Such other matters as may properly come before the meeting and at any
adjournments thereof, including whether or not to adjourn the meeting.
The Board of Directors has established March 7, 1997, as the record date
for the determination of shareholders entitled to receive notice of and to vote
at the Annual Meeting and at any adjournments thereof. Only record holders of
the common stock of the Company as of the close of business on such record date
will be entitled to vote at the Annual Meeting or any adjournments thereof. In
the event there are not sufficient votes for a quorum or to approve or ratify
any of the foregoing proposals at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit further solicitation of proxies by
the Company. A list of shareholders entitled to vote at the Annual Meeting will
be available at BostonFed Bancorp, Inc., 17 New England Executive Park,
Burlington, Massachusetts 01803, for a period of ten days prior to the Annual
Meeting and will also be available at the Annual Meeting itself.
By Order of the Board of Directors
John A. Simas
Senior Vice President and
Corporate Secretary
Burlington, Massachusetts
March 28, 1997
<PAGE> 4
BOSTONFED BANCORP, INC.
-----------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1997
-----------------------
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is being furnished to shareholders of BostonFed
Bancorp, Inc. (the "Company") in connection with the solicitation by the Board
of Directors ("Board of Directors" or "Board") of proxies to be used at the
annual meeting of shareholders, to be held on April 28, 1997 (the "Annual
Meeting"), and at any adjournments thereof. The 1996 Annual Report to
Shareholders, including consolidated financial statements for the fiscal year
ended December 31, 1996, accompanies this Proxy Statement, which is first being
mailed to record holders on or about March 28, 1997.
Regardless of the number of shares of common stock owned, it is important
that record holders of a majority of the shares be represented by proxy or in
person at the Annual Meeting. Shareholders are requested to vote by completing
the enclosed proxy card and returning it signed and dated in the enclosed
postage-paid envelope. Shareholders are urged to indicate their vote in the
spaces provided on the proxy card. PROXIES SOLICITED BY THE BOARD OF DIRECTORS
OF THE COMPANY WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN THEREIN.
WHERE NO INSTRUCTIONS ARE INDICATED, SIGNED PROXY CARDS WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES FOR THE DIRECTOR NAMED IN THIS PROXY STATEMENT, FOR THE
RATIFICATION OF THE BOSTONFED BANCORP, INC. 1997 STOCK OPTION PLAN AND FOR THE
RATIFICATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR
THE FISCAL YEAR ENDING DECEMBER 31, 1997.
Other than the matters listed on the attached Notice of Annual Meeting of
Shareholders, the Board of Directors knows of no additional matters that will be
presented for consideration at the Annual Meeting. EXECUTION OF A PROXY,
HOWEVER, CONFERS ON THE DESIGNATED PROXY HOLDERS DISCRETIONARY AUTHORITY TO VOTE
THE SHARES IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH OTHER BUSINESS, IF
ANY, THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND AT ANY ADJOURNMENTS
THEREOF, INCLUDING WHETHER OR NOT TO ADJOURN THE ANNUAL MEETING.
A proxy may be revoked at any time prior to its exercise by filing a
written notice of revocation with the Corporate Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. However, if you are a
shareholder whose shares are not registered in your own name, you will need
appropriate documentation from your record holder to vote personally at the
Annual Meeting.
The cost of solicitation of proxies on behalf of management will be borne
by the Company. In addition to the solicitation of proxies by mail, Corporate
Investor Communications,
<PAGE> 5
Inc., a proxy solicitation firm, will assist the Company in soliciting proxies
for the Annual Meeting and will be paid a fee of $3,000, plus out-of-pocket
expenses. Proxies may also be solicited personally or by telephone by directors,
officers and other employees of the Company and its subsidiaries, without
additional compensation therefor. The Company will also request persons, firms
and corporations holding shares in their names, or in the name of their
nominees, which are beneficially owned by others, to send proxy material to and
obtain proxies from such beneficial owners, and will reimburse such holders for
their reasonable expenses in doing so.
VOTING SECURITIES
The securities which may be voted at the Annual Meeting consist of shares
of common stock of the Company ("Common Stock"), with each share entitling its
owner to one vote on all matters to be voted on at the Annual Meeting, except as
described below. There is no cumulative voting for the election of directors.
The close of business on March 7, 1997, has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
shareholders of record entitled to notice of and to vote at the Annual Meeting
and at any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 5,962,502 shares.
As provided in the Company's Certificate of Incorporation, record holders
of Common Stock who beneficially own in excess of 10% of the outstanding shares
of Common Stock (the "Limit") are not entitled to any vote in respect of the
shares held in excess of the Limit. A person or entity is deemed to beneficially
own shares owned by an affiliate of, as well as, by persons acting in concert
with, such person or entity. The Company's Certificate of Incorporation
authorizes the Board of Directors (i) to make all determinations necessary to
implement and apply the Limit, including determining whether persons or entities
are acting in concert, and (ii) to demand that any person who is reasonably
believed to beneficially own stock in excess of the Limit to supply information
to the Company to enable the Board of Directors to implement and apply the
Limit.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote (after
subtracting any shares in excess of the Limit pursuant to the Company's
Certificate of Incorporation) is necessary to constitute a quorum at the Annual
Meeting. In the event that there are not sufficient votes for a quorum or to
approve or ratify any proposal at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit the further solicitation of proxies.
As to the election of directors, the proxy card being provided by the Board
of Directors enables a shareholder to vote "FOR" the election of the nominees
proposed by the Board of Directors, or to "WITHHOLD" authority to vote for one
or more of the nominees being proposed. Under Delaware law and the Company's
Bylaws, directors are elected by a plurality of votes cast, without regard to
either (i) broker non-votes, or (ii) proxies as to which authority to vote for
one or more of the nominees being proposed is withheld.
2
<PAGE> 6
As to the ratification of the BostonFed Bancorp, Inc. 1997 Stock Option
Plan (the "Stock Option Plan"), by checking the appropriate box, you may: (i)
vote "FOR" the item; (ii) vote "AGAINST" the item; or (iii) "ABSTAIN" with
respect to the item.
As to the approval of KPMG Peat Marwick LLP as independent auditors of the
Company and all other matters that may properly come before the Annual Meeting,
by checking the appropriate box, a stockholder may: (i) vote "FOR" the item;
(ii) vote "AGAINST" the item; or (iii) "ABSTAIN" from voting on such item.
Under Delaware law and the Company's Bylaws, an affirmative vote of a
majority of the votes cast at the Annual Meeting, in person or by proxy, and
entitled to vote is required to constitute stockholder ratification of Proposals
2 and 3. Accordingly, shares as to which the "ABSTAIN" box has been selected on
the proxy card will not be counted as votes cast. Shares underlying broker
non-votes or in excess of the Limit will not be counted as a present and
entitled to vote or as votes cast and will have no effect.
Proxies solicited hereby will be returned to the Company's transfer agent,
Boston EquiServe. The Board of Directors have designated Boston EquiServe to act
as inspectors of election and tabulate the votes at the Annual Meeting. Boston
EquiServe is not otherwise employed by, or a director of, the Company or any of
its affiliates. After the final adjournment of the Annual Meeting, the proxies
will be returned to the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to those persons believed by
management to be beneficial owners of more than 5% of the Company's outstanding
shares of Common Stock on the Record Date or as disclosed in certain reports
received to date regarding such ownership filed by such persons with the Company
and with the Securities and Exchange Commission ("SEC"), in accordance with
Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended
("Exchange Act"). Other than those persons listed below, the Company is not
aware of any person, as such term is defined in the Exchange Act, that owns more
than 5% of the Company's Common Stock as of the Record Date.
3
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
- -------------------------- ------------------------------------------------- ----------- -----------
<S> <C> <C> <C>
Common Stock Wellington Management Company 619,762(1) 10.4%
75 State Street
Boston, Massachusetts 02109
Common Stock First Financial Fund, Inc. 443,000(2) 7.4%
Gateway Center Three
100 Mulberry St., 9th Floor
Newark, New Jersey 07102-4077
Common Stock Boston Federal Savings Bank 529,000(3) 8.9%
Employee Stock Ownership Plan
("ESOP")
17 New England Executive Park
Burlington, Massachusetts 01803
Common Stock John Hancock Advisors, Inc. 447,000(4) 7.5%
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
Common Stock Thomson Horstmann & Bryant, Inc. 413,000(5) 6.9%
Park 80 West/Plaza Two
Saddle Brook, New Jersey 07663
- -----------------
(1) Based on information provided to the Company by Wellington Management
Company.
(2) Based upon information filed in a Schedule 13G on February 18, 1997, First
Financial Fund, Inc., in its capacity as an investment company, may be
deemed the beneficial owner of 443,000 shares.
(3) The First National Bank of Boston has been appointed as the corporate
trustee for the ESOP ("ESOP Trustee"). The ESOP Trustee, subject to its
fiduciary duty, must vote all allocated shares held in the ESOP in
accordance with the instructions of the participants. As of March 7, 1997,
136,071 shares had been allocated under the ESOP and 392,929 shares remain
unallocated. With respect to unallocated shares, such unallocated shares
will be voted by the ESOP Trustee in a manner calculated to most accurately
reflect the instructions received from participants regarding the allocated
stock so long as such vote is in accordance with the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(4) Based upon information filed in a Schedule 13G on January 24, 1997, John
Hancock Advisors, Inc. in its capacity as an investment advisor, may be
deemed the beneficial owner of 447,000 shares.
(5) Based upon information filed in a Schedule 13G on January 8, 1997, Thomson
Horstmann & Bryant, Inc. in its capacity as an investment advisor, may be
deemed the beneficial owner of 413,000 shares.
</TABLE>
4
<PAGE> 8
PROPOSALS TO BE VOTED ON AT THE MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of seven (7)
directors and is divided into three classes. Each of the seven members of the
Board of Directors of the Company also presently serves as a director of the
Boston Federal Savings Bank (the "Bank") and Broadway National Bank
("Broadway"), both of which are the wholly-owned primary operating subsidiaries
of the Company. Directors are elected for staggered terms of three years each,
with the term of office of only one of the three classes of directors expiring
each year. Directors serve until their successors are elected and qualified.
The three nominees proposed for election at this Annual Meeting are Edward
P. Callahan, Richard J. Dennis, Sr., and Charles R. Kent. No person being
nominated as a director is being proposed for election pursuant to any agreement
or understanding between any such person and the Company.
In the event that any such nominee is unable to serve or declines to serve
for any reason, it is intended that the proxies will be voted for the election
of such other person as may be designated by the present Board of Directors. The
Board of Directors has no reason to believe that any of the persons named will
be unable or unwilling to serve. UNLESS AUTHORITY TO VOTE FOR THE NOMINEE IS
WITHHELD, IT IS INTENDED THAT THE SHARES REPRESENTED BY THE ENCLOSED PROXY CARD,
IF EXECUTED AND RETURNED, WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
PROPOSED BY THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
INFORMATION WITH RESPECT TO THE NOMINEES, CONTINUING DIRECTORS AND CERTAIN
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth, as of the Record Date, the names of the
nominees, continuing directors and "named executive officers" of the Company, as
defined below; their ages; a brief description of their recent business
experience, including present occupations and employment; certain directorships
held by each; the year in which each became a director and the year in which
their terms (or in the case of the nominees, their proposed terms) as director
of the Company expire. The table also sets forth the amount of Common Stock and
the percent thereof beneficially owned by each director and named executive
officer and all directors and executive officers as a group as of the Record
Date.
5
<PAGE> 9
<TABLE>
<CAPTION>
SHARES OF
NAME AND PRINCIPAL EXPIRATION COMMON STOCK PERCENT
OCCUPATION AT PRESENT DIRECTOR OF TERM AS BENEFICIALLY OF
AND FOR PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED(2) CLASS
- ----------------------- --- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
NOMINEES
Edward P. Callahan 68 1982 2000 21,501(4)(6) *
Former Executive Vice President of the
Bank.
Richard J. Dennis, Sr. 71 1986(3) 2000 29,501(4)(6) *
Sole proprietor of Casey and Dennis, a
real estate appraisal firm.
Charles R. Kent 68 1986(3) 2000 24,001(4)(6) *
President of the Rush-Kent Insurance
Agency.
CONTINUING DIRECTORS
David F. Holland 55 1986(3) 1998 118,204(5)(7) 1.98%
President and Chief Executive Officer of
the Company and the Bank.
David P. Conley 53 1992 1999 72,606(5)(7) 1.19%
Executive Vice President and Assistant
Secretary of the Company and the Bank;
Assistant Treasurer of Company; and
President of Broadway National Bank.
W. Robert Mill 67 1977 1999 22,001(4)(6) *
Consultant to Middleton and Co., Inc.,
an investment advisory firm, since 1993.
Prior to that, Mr. Mill was Senior Vice
President and Director of Middleton and
Co., Inc.
Irwin W. Sizer, Ph.D. 86 1986(3) 1998 24,001(4)(6) *
Retired Professor from Massachusetts
Institute of Technology and the former
President of Whitaker Health Services
Fund, a not-for-profit medical research
fund.
NAMED EXECUTIVE OFFICERS
WHO ARE NOT DIRECTORS
John A. Simas 47 -- -- 50,599(5)(7) *
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer of the
Company and the Bank.
Dennis J. Furey 48 -- -- 27,291(5)(7) *
Vice President - Commercial and
Construction Lending of the Bank
Stock Ownership of all Directors 488,088(8) 8.03%
and Executive Officers as a Group
(14 persons)
</TABLE>
(footnotes on next page)
6
<PAGE> 10
* Represents less than 1.0% of the Company's voting securities.
(1) Includes years of service as a director of the Company's predecessor, the
Bank.
(2) Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting or dispositive power as to shares reported
herein (except as noted).
(3) Reflects service as a director of Leader Federal Savings and Loan
Association ("LFS"), which was merged with and into Boston Federal Savings
Bank on October 1, 1986. Messrs. Holland, Sizer, Dennis and Kent began
service on the LFS Board in 1982, 1966, 1978 and 1978, respectively.
(4) Includes 10,000 shares awarded to each outside director under the Amended
and Revised BostonFed Bancorp, Inc. 1996 Stock-Based Incentive Plan (the
"Incentive Plan"). Such awards commence vesting at a rate of 20% per year
beginning on April 30, 1997 but will vest immediately upon death,
disability, retirement or a change in control. Each participant presently
has voting power as to the shares awarded.
(5) Includes 65,000, 39,000, 26,000 and 12,500 shares awarded to Messrs.
Holland, Conley, Simas and Furey, respectively, under the Incentive Plan.
Such awards commence vesting at a rate of 20% per year beginning on April
30, 1997 but will vest immediately upon death, disability, retirement or a
change in control. Each participant presently has voting power as to the
shares awarded.
(6) Includes 4,000 options granted to each outside director under the Incentive
Plan which are currently exercisable or will become exercisable within 60
days and excludes 16,000 shares subject to unexercisable options granted to
each outside director under the Incentive Plan. Shares subject to options
granted under the Incentive Plan vest at a rate of 20% per year commencing
on April 30, 1997 but will vest immediately upon death, disability,
retirement or a change in control.
(7) Includes 32,000, 19,000, 13,000, and 6,000 shares subject to options
granted to Messrs. Holland, Conley, Simas and Furey, respectively, which
are currently exercisable or will become exercisable within 60 days and
excludes 128,000, 76,000, 52,000 and 24,000 shares subject to unexercisable
options granted to Messrs. Holland, Conley, Simas and Furey, respectively,
under the Incentive Plan. Shares subject to options granted under the
Incentive Plan vest at a rate of 20% per year commencing on April 30, 1997
but will vest immediately upon death, disability, retirement or a change in
control.
(8) Includes a total of 243,900 shares awarded under the Incentive Plan as to
which voting may be directed. Includes a total of 114,000 options granted
under the Incentive Plan which are currently exercisable or will become
exercisable within 60 days.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company conducts its business through
meetings of the Board of Directors and through activities of its committees. The
Board of Directors of the Company meets quarterly and may have additional
meetings as needed. During fiscal 1996, the Board of Directors of the Company,
held 12 meetings. All of the directors of the Company attended at least 90% of
the total number of the Company's Board meetings held and committee meetings on
which such directors served during fiscal 1996. The Board of Directors of the
Company maintains committees, the nature and composition of which are described
below:
AUDIT AND COMPLIANCE COMMITTEE. The Audit and Compliance Committee of the
Company consists of Messrs. Dennis, Mill and Sizer, who are outside directors.
The purposes of this Committee are to review financial statements and scope of
the annual audit, to monitor financial and accounting controls, to recommend
appointment of the independent auditor and to review management's actions
regarding the implementation of audit findings and compliance with all relevant
laws and regulations. The Audit and Compliance Committee of the Company met
three times in 1996.
NOMINATING COMMITTEE. The Company's Nominating Committee for the 1997
Annual Meeting consists of Messrs. Conley, Mill and Sizer. The committee
considers and recommends the nominees for director to stand for election at the
Company's annual meeting of shareholders. The Company's Certificate of
Incorporation and Bylaws provide for shareholder nominations of directors. These
provisions require such nominations to be made pursuant to timely notice in
writing to the Secretary of the Company. The shareholder's notice of nomination
must contain all information relating to the nominee which is required to be
disclosed by the Company's Bylaws and by the Exchange Act. The Nominating
Committee met on February 19, 1997.
7
<PAGE> 11
EXECUTIVE COMMITTEE. The Company's Executive Committee consists of Messrs.
Conley, Holland and Kent. The Executive Committee acts on issues delegated to
the Committee by the Board of Directors. The Executive Committee held one
meeting during 1996.
COMPENSATION COMMITTEE. The Compensation Committee of the Company and the
Personnel Committee of the Bank (collectively, the "Compensation Committee")
consists of Messrs. Dennis, Kent and Sizer. The Compensation Committee meets to
establish compensation and benefits for the executive officers and to review the
incentive compensation programs when necessary. The Compensation Committee is
also responsible for establishing certain guidelines and limits for compensation
for other salaried officers and employees of the Company and the Bank. The
Compensation Committee of the Company met four times in fiscal 1996.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. Non-employee directors of the Bank are currently paid an
annual retainer of $4,000 and $500 per Board meeting. Non-employee directors are
also currently paid a fee of $250 to $500 for meetings of Committees of the Bank
Board on which they serve. Mr. Holland and Mr. Conley receive Board meeting fees
for their services as directors of the Bank but not an annual retainer fee or
committee fees. Members of the Board of Directors of the Company currently
receive an annual retainer fee of $1,000 and a fee of $500 for each Board
meeting and a fee of $250 to $500 for each committee meeting attended. Mr.
Holland and Mr. Conley receive Board meeting fees for their services as
directors of the Company but do not receive an annual retainer fee or committee
fees.
INCENTIVE PLAN. The Company maintains the Incentive Plan, under which all
directors of the Company and the Bank are eligible to receive awards. The
Incentive Plan was approved by shareholders on April 30, 1996. Under the
Incentive Plan, each outside director was granted non-statutory options to
purchase 20,000 shares of Common Stock (with dividend equivalent rights
("DERs"), as discussed below) and stock awards for 10,000 shares of Common Stock
(collectively, the "Directors' Awards"). The DERs provide a separate cash
benefit equal to 100% of the amount of any extraordinary dividend declared by
the Company on shares of Common Stock subject to an option. The exercise price
for the stock option awards is $12.44 per share, which was the fair market value
of the shares on the date of grant, April 30, 1996. The Directors' Awards become
exercisable in five (5) equal annual installments of 20% commencing one year
from the date of grant. All Directors' Awards will immediately vest upon
termination due to death, disability, retirement or a change in control.
EXECUTIVE COMPENSATION
The report of the Compensation Committee and the stock performance graph
shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933, as amended (the "Securities Act") or
8
<PAGE> 12
the Exchange Act, except as to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. Under rules
established by the Securities and Exchange Commission ("SEC"), the Company is
required to provide certain data and information in regard to the compensation
and benefits provided to the Company's Chief Executive Officer and other
executive officers of the Company. The disclosure requirements for the Chief
Executive Officer and other executive officers include the use of tables and a
report explaining the rationale and considerations that led to fundamental
compensation decisions affecting those individuals. In fulfillment of this
requirement, the Personnel Committee of the Board of Directors of the Bank and
the Compensation Committee of the Company (collectively the "Compensation
Committee") have prepared the following report for inclusion in this proxy
statement.
The Bank's and the Company's Executive Compensation Policies reflect the
status of the Company as a public company and assure competitive compensation
levels. Policies adopted during 1996 for use in 1997 include such performance
related goals such as appreciation of the Company's stock, other financial
results, and accomplishment of corporate objectives.
Executive salary levels were set at the time of the Bank's conversion to
stock ownership in October 1995 and remained in effect from such time until
December 31, 1996. Therefore, Executive Officer salaries were not reviewed
during 1996. However, Executive Officers were eligible to earn performance based
bonuses in 1996. A Short Term Incentive Plan was adopted for 1997 which
specifies objective financial performance criteria of the Company must achieve
as the basis for any award under such plan. The first possible date of payment
of awards under such plan will be the first quarter of 1998.
The following policy was adopted in 1996 for use in determining
compensation levels for 1997. The primary quantitative measurement utilized
during 1996 was appreciation in the price of BostonFed Bancorp. Inc. stock.
Other measures include accomplishment of various corporate objectives.
General Policy. It is the responsibility of the Compensation Committee to
recommend the amount and composition of Executive Compensation paid to the
executive officers. It is the responsibility of the Boards of Directors to
review and approve such compensation. Any Director who is also a member of
management shall abstain from any vote regarding his or her own compensation.
The Compensation Committee shall review Executive compensation not less
than annually and more often if necessary to effectively implement this policy.
The Compensation Committee will utilize whatever means necessary to obtain
adequate compensation information upon which to base their recommendations.
These means include, but are not limited to, reviews of the results of
compensation surveys and the utilization of consultants or other compensation
experts.
9
<PAGE> 13
The Bank participates in a number of a salary surveys each year to obtain
contemporaneous salary data. The Bank engaged KPMG Peat Marwick LLP Compensation
and Benefits Consultants to review the salary structure of the executive
officers of the Company and its subsidiaries in relation to peer institutions
operating within the Northeast Region of the United States. In addition, the
Compensation Committee utilized the 1996 KPMG Peat Marwick Compensation and
Benefits Survey, the 1996 W. M. Sheehan & Company ("Sheehan") Banking
Compensation Report, and 1996 America's Community Bankers Compensation Survey
for Savings Institutions to evaluate salary and bonus amounts paid for
comparable industry positions.
In preparation of comparative compensation data, factors most similar to
the Bank are evaluated. Corporate considerations include asset size, earnings,
type of operation, corporate structure, and geographic location. Considerations
for management are scope and similarity of positions, experience, and the
complexity of managing. As a result, the Compensation Committee is provided with
relevant, timely, and reliable data which permit the Committee to evaluate
compensation and make recommendations to the Boards of Directors.
The Chief Executive Officer evaluates the performance of all executive
officers reporting to him and the Executive Vice President evaluates the
performance of all executive officers reporting to him. The Executive Vice
President then provides his evaluations to the Chief Executive Officer. The
Chief Executive Officer then prepares performance based recommendations of all
executive officers for the Compensation Committee.
The Compensation Committee then evaluates the performance of the Chief
Executive Officer and other executive officers. The Compensation Committee then
recommends appropriate compensation for all executive officers to the respective
Boards of Directors. Upon review, the Boards then set all compensation. Messrs.
Holland and Conley abstain from voting on matters related to their compensation.
Components of Salary. Compensation is defined as cash or non-cash
remuneration in the form of salary, bonus, profit sharing, perquisites, deferred
compensation, 401(k) contributions, short or long term stock-based grants or
incentives, ESOP allocations, fringe benefits, SERP payments, and any other type
of remuneration deemed by each Board to be appropriate. Salaries are determined
based upon the guidelines specified above. During 1996, the Company and Bank did
not maintain a SERP or a deferred compensation plan. The amount of benefits
provided by the ESOP and 401(k) are determined solely by the participants' level
of compensation under set guidelines provided for in such plans. Benefits under
the ESOP and 401(k) plan are also subject to limitations imposed by ERISA.
Bonuses are determined at the discretion of the Compensation Committee after
review of management's recommendations. Performance Bonuses were earned by Mr.
Holland and Mr. Simas for performance during 1996. No bonuses were earned or
paid to the other six persons who were Executive Officers during all of 1996.
Chief Executive Officer. The salary of the Chief Executive Officer was set
in October 1995 and remained in effect until December 31, 1996. Accordingly, the
Chief Executive Officer's salary was not reviewed during 1996. During 1996, the
Chief Executive Officer was
10
<PAGE> 14
eligible for a bonus based on the Compensations Committee's subjective
consideration of the Chief Executive Officer's performance during 1996.
In particular, the Compensation Committee placed emphasis on the Chief
Executive Officer's success in reaching an agreement during 1996 to acquire
another financial institution that is expected to be accretive to the Company's
earnings. During 1996 an agreement of acquisition was executed with Broadway
National Bank and its holding company Broadway Capital Corp. The acquisition
occurred in early 1997 and is expected to be accretive to the Company's
earnings. As a result, the Chief Executive Officer earned a bonus in 1996 but
such bonus was paid in 1997 as it was contingent upon the completion of the
acquisition of Broadway. Total cash compensation to the Chief Executive Officer
for 1996 fell within the average range of the salary surveys discussed above for
institutions of comparable size.
The goal of the above referenced compensation policies, as implemented by
the Compensation Committee, is to be certain that all Executives are compensated
consistent with the above guidelines. Compensation levels will be reviewed as
frequently as necessary to ensure this result.
The Compensation Committee
--------------------------
Richard J. Dennis, Sr.
Charles R. Kent
Irwin W. Sizer
The Board of Directors
----------------------
Edward P. Callahan
David P. Conley
Richard J. Dennis, Sr.
David F. Holland
Charles R. Kent
W. Robert Mill
Irwin W. Sizer, Ph.D.
11
<PAGE> 15
STOCK PERFORMANCE GRAPH. The following graph shows a comparison of total
shareholder return on the Company's Common Stock, based on the market price of
the Common Stock with the cumulative total return of companies in the American
Stock Exchange and the Media General Industry Group Index for the period
beginning on October 24, 1995, the day the Company's Common Stock began trading,
through December 31, 1996. The graph was derived from a limited period of time,
and, as a result, may not be indicative of possible future performance of the
Company's Common Stock. The data was supplied by Media General Financial
Services.
COMPARATIVE TOTAL RETURNS
BOSTONFED BANCORP, INC., AMEX MARKET INDEX
AND MG INDEX FOR SAVINGS INSTITUTIONS
[LINE CHART]
<TABLE>
SUMMARY
<CAPTION>
10/24/95 12/31/95 3/29/96 6/28/96 9/30/96 12/31/96
-------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
BOSTONFED BANCORP, INC. 100.00 117.50 122.50 120.00 132.50 147.50
AMEX MARKET INDEX 100.00 104.99 109.65 110.89 109.29 111.00
MG INDEX FOR SAVINGS INSTITUTIONS 100.00 107.53 108.80 111.41 122.30 138.97
NOTES:
A. THE LINES REPRESENT QUARTERLY INDEX LEVELS DERIVED FROM COMPOUNDED DAILY
RETURNS THAT INCLUDE ALL DIVIDENDS.
B. THE INDEXES ARE REWEIGHTED DAILY, USING THE MARKET CAPITALIZATION ON THE
PREVIOUS TRADING DAY.
C. IF THE QUARTERLY INTERVAL, BASED ON THE FISCAL YEAR-END, IS NOT A TRADING
DAY, THE PRECEDING TRADING DAY IS USED.
D. THE INDEX LEVEL FOR ALL SERIES WAS SET TO $100.00 ON 10/24/95.
</TABLE>
12
<PAGE> 16
<TABLE>
SUMMARY COMPENSATION TABLE. The following table shows, for the years ended
December 31, 1996, 1995 and 1994, the cash compensation paid by the Bank, as
well as certain other compensation paid or accrued for those years, to the chief
executive officer and the three highest paid executive officers of the Company
and the Bank who earned and/or received salary and bonus in excess of $100,000
in fiscal year 1996 ("Named Executive Officers"). No other executive officer of
the Company and the Bank earned and/or received salary and bonus in excess of
$100,000 in fiscal year 1996.
<CAPTION>
- --------------------------------------------------------------------------------- ---------------------------------------------
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
---------------------------------- ------------------------- -------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
POSITIONS (2) YEAR SALARY($) BONUS($) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David F. Holland 1996 $286,536 $50,000 - $808,600 160,000 None $29,608
President and Chief 1995 247,477 - - - - None 31,414
Executive Officer 1994 209,254 23,000 - - - None 4,351
David P. Conley 1996 172,296 - - $485,160 95,000 None 29,826
Executive Vice President 1995 151,458 - - - - None 29,656
1994 131,492 17,000 - - - None 3,706
John A. Simas 1996 120,767 15,000 - $323,440 65,000 None 23,783
Senior Vice President, 1995 107,154 30,000 - - - None 22,317
Treasurer, Secretary and 1994 94,077 10,500 - - - None 2,702
Chief Financial Officer
Dennis J. Furey 1996 100,084 - - $155,500 30,000 None 19,135
Vice President of the Bank 1995 97,250 - - - - None 19,111
1994 84,000 20,000 - - - None 2,207
<FN>
- ----------------
(1) Under Annual Compensation, the column titled "Salary" includes directors'
fees and amounts deferred by the named executive officer pursuant to the
Bank's 401(k) Plan as hereinafter defined, pursuant to which employees may
defer up to 15% of their compensation, up to the maximum limits under the
Code. Bonuses reported under Annual Compensation are reported in the year
earned regardless of when paid.
(2) For 1996, there were no (a) perquisites over the lesser of $50,000 or 10%
of the individual's total salary and bonus for the year; (b) payments of
above-market preferential earnings on deferred compensation; (c) payments
of earnings with respect to long-term incentive plans prior to settlement
or maturation; (d) tax payment reimbursements; or (e) preferential
discounts on stock.
(3) Pursuant to the Incentive Plan, Messrs. Holland, Conley, Simas and Furey
were awarded 65,000, 39,000, 26,000 and 12,500 shares of Common Stock,
respectively, in fiscal year 1996 which had a market value at December 31,
1996 of $958,750, $575,250, $383,500 and $184,375. The dollar amounts set
forth in the table represent the market value of the shares awarded on the
date of grant. Such awards vest in equal installments at a rate of 20% per
year beginning on April 30, 1997. When shares become vested and are
distributed, the recipient will also receive an amount equal to accumulated
dividends and earnings thereon (if any). All awards vest immediately upon
termination due to death, disability, retirement or following a change in
control. See "- Compensation Committee Report on Executive Compensation."
(4) The Company maintains the Incentive Plan for the benefit of officers and
key employees. See - "Incentive Plan."
(5) For 1996, 1995 and 1994, there were no payouts or awards under any
long-term incentive plan.
(6) For 1996, such amounts include (a) $2,980, $3,198, $2,037 and $2,004
contributed by the Bank under the Bank's 401(k) Plan to the account of
Messrs. Holland, Conley, Simas and Furey, respectively, and (b) $26,628,
$26,628, $21,746 and $17,131 representing the value of shares allocated
under the ESOP for the benefit of Messrs. Holland, Conley, Simas and Furey,
respectively, as of December 31, 1996.
</TABLE>
13
<PAGE> 17
EMPLOYMENT AGREEMENTS. The Bank and the Company have entered into
employment agreements with Messrs. Holland, Conley and Simas, (individually, the
"Executive"). These employment agreements are intended to ensure that the Bank
and the Company will be able to maintain a stable and competent management base.
The continued success of the Bank and the Company depends to a significant
degree on the skills and competence of Messrs. Holland, Conley and Simas.
The employment agreements provide for a three-year term for Messrs.
Holland, Conley and Simas. The Bank employment agreements provide that,
commencing on the first anniversary date and continuing each anniversary date
thereafter, the Board of Directors may extend the agreement for an additional
year so that the remaining term shall be three years, unless written notice of
non-renewal is given by the Board of Directors after conducting a performance
evaluation of the Executive. The terms of the Company employment agreements
shall be extended on a daily basis unless written notice of non-renewal is given
by the Board of the Company. The agreements provide that the Executive's base
salary will be reviewed annually. As of January 1, 1997,. the base salaries for
Messrs. Holland, Conley and Simas are $280,000, $162,000, and $130,000,
respectively. In addition to the base salary, the agreements provide for, among
other things, participation in stock benefits plans and other fringe benefits
applicable to executive personnel. The agreements provide for termination by the
Bank or the Company for cause as defined in the agreements at any time. In the
event the Bank or the Company chooses to terminate the Executive's employment
for reasons other than for cause, or in the event of the Executive's resignation
from the Bank and the Company upon: (i) failure to re-elect the Executive to his
current offices; (ii) a material demotive change in the Executive's functions,
duties or responsibilities; (iii) a relocation of the Executive's principal
place of employment by more than 25 miles; (iv) a material reduction in benefits
or perquisites being provided to the Executive under the Agreement; (v)
liquidation or dissolution of the Bank or the Company; or (vi) a breach of the
agreement by the Bank or the Company, the Executive or, in the event of death,
his beneficiary would be entitled to receive an amount equal to the remaining
base salary payments due to the Executive and the contributions that would have
been made on the Executive's behalf to any employee benefit plans of the Bank or
the Company during the remaining term of the agreement. The Bank and the Company
would also continue and pay for the Executive's life, health and disability
coverage for the remaining term of the Agreement. Upon any termination of the
Executive, the Executive is subject to a one year non-competition agreement.
Under the agreements, if voluntary or involuntary termination follows a
change in control of the Bank or the Company (as defined in the Employment
Agreement), the Executive or, in the event of the Executive's death, his
beneficiary, would be entitled to a severance payment equal to the greater of:
(i) the payments due for the remaining terms of the agreement; or (ii) three
times the average of the five preceding taxable years' annual compensation. The
Bank and the Company would also continue the Executive's life, health, and
disability coverage for thirty-six months. Notwithstanding that both agreements
provide for a severance payment in the event of a change in control, the
Executive would only be entitled to receive a severance payment under one
agreement. Based solely on the compensation reported in the summary compensation
table for 1996 and excluding any benefits under any employee plan which may be
payable, following
14
<PAGE> 18
a change in control and termination of employment Messrs. Holland, Conley and
Simas would receive severance payments in the amount of approximately
$1,009,608, $516,888 and $407,301, respectively.
Payments under the Employment Agreements in the event of a change in
control may constitute some portion of an excess parachute payment under Section
280G of the Internal Revenue Code (the "Code") for executive officers, resulting
in the imposition of an excise tax on the recipient and denial of the deduction
for such excess amounts to the Company and the Bank.
Payments to the Executive under the Bank's agreement will be guaranteed by
the Company in the event that payments or benefits are not paid by the Bank.
Payment under the Company's agreement would be made by the Company. All
reasonable costs and legal fees paid or incurred by the Executive pursuant to
any dispute or question of interpretation relating to the Agreements shall be
paid by the Bank or Company, respectively, if the Executive is successful on the
merits pursuant to a legal judgment, arbitration or settlement. The employment
agreements also provide that the Bank and Company shall indemnify the Executive
to the fullest extent allowable under federal and Delaware law, respectively.
CHANGE IN CONTROL AGREEMENTS. For similar reasons as with the Employment
Agreements, the Bank and the Company have entered into Change in Control
Agreements with Mr. Furey (the "Executive"). Each Change in Control Agreement
provides for a two year term. Commencing on the date of the execution of the
Company's Change in Control Agreement, the term shall be extended for one day
each day until such time as the Board of Directors of the Company or the
Executive elects by written notice not to extend the term, at which time the
Change in Control Agreement will end on the second anniversary of the date of
notice. The Company's Change in Control Agreement provides that at any time
following a change in control of the Bank or the Company (as defined in the
agreement), if the Company terminates the Executive's employment for any reason
other than cause, or if the Executive terminates his or her employment following
demotion, loss of title, office or significant authority, a reduction in
compensation, or relocation of the principal place of employment of more than 25
miles, the Executive, or in the event of Executive's subsequent death,
Executive's beneficiary or beneficiaries or estate, as the case may be, would be
entitled to a sum equal to two (2) times Executive's annual compensation,
including bonuses, cash and stock compensation and other benefits for the
preceding twelve months. The Company would also continue the Executive's life,
medical and disability coverage for thirty-six (36) full calendar months from
the date of termination. The Bank's Change in Control Agreement is similar to
that of the Company except that it is subject to renewal by the Board on an
annual basis. Any payments to the Executive under the Bank's Change in Control
Agreement would be subtracted from any amount due simultaneously under the
Company's Change in Control Agreement. Payments to the Executive under the
Bank's Change in Control Agreement will be guaranteed by the Company in the
event that payments or benefits are not paid by the Bank. Based solely on the
Compensation reported in the summary compensation table for 1996 and excluding
any benefits under any employee plan which may be payable, following a change in
control and termination of employment Mr. Furey would receive a severance
payment in the amount of approximately $200,168.
15
<PAGE> 19
Payments under the Change in Control Agreements in the event of a change in
control may constitute some portion of an excess parachute payment under Section
280G of the Code for executive officers, resulting in the imposition of an
excise tax on the recipient and denial of the deduction for such excess amounts
to the Company and the Bank.
INCENTIVE PLAN. The Company maintains the Incentive Plan which provides
discretionary awards to officers and key employees as determined by a committee
of non-employee directors. The Incentive Plan was approved by shareholders on
April 30, 1996. The following table lists all grants of options under the
Incentive Plan to the Named Executive Officers for fiscal 1996 and contains
certain information about potential value of those options based upon certain
assumptions as to the appreciation of the Company's stock over the life of the
option.
<TABLE>
<CAPTION>
OPTIONS GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTIONS(1)
- ----------------------------------------------------------------------------------------- ----------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTION/SARS EXERCISE OR
OPTIONS/ GRANTED TO BASE PRICE
SARS GRANTED EMPLOYEES IN PER EXPIRATION
NAME (#)(2)(3)(4)(5)(6) FISCAL YEAR SHARE DATE(7) 5% 10%
- -------------------- ------------------ ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David F. Holland 160,000 26.47 $12.44 04/30/06 $1,251,000 $3,173,000
David P. Conley 95,000 15.72 12.44 04/30/06 743,000 1,884,000
John A. Simas 65,000 10.75 12.44 04/30/06 508,000 1,289,000
Dennis J. Furey 30,000 4.96 12.44 04/30/06 235,000 595,000
- ---------------------
(1) The amounts represent certain assumed rates of appreciation. Actual gains,
if any, on stock option exercises and Common Stock holdings are dependent
on the future performance of the Common Stock and overall stock market
conditions. There can be no assurance that the amounts reflected in this
table will be realized.
(2) Options granted pursuant to the Incentive Plan become exercisable in equal
installments at an annual rate of 20% beginning April 30, 1997; provided,
however, that options will be immediately exercisable in the event the
optionee terminates employment due to death, disability, retirement or upon
a change in control.
(3) The purchase price may be paid in cash, borrowed funds or Common Stock.
(4) A Limited Right was granted with each option award which become exercisable
in the event of a change in control of the Company or Bank that is not
accounted for as a "pooling of interests." Upon the exercise of Limited
Rights, the optionee will be entitled to receive a lump sum cash payment
equal to the difference between the exercise price of the related option
and the fair market value of the shares of Common Stock subject to options
on the date of exercise.
(5) An Equitable Adjustment Right was granted with each option award which
provides that upon the payment of an extraordinary dividend, the Committee
may adjust the number of shares and/or the exercise price of the options
underlying the Equitable Adjustment Right, as the Committee deems
appropriate.
(6) All options are intended to be Incentive Stock Options, to the extent
permissible under Section 422 of the Internal Revenue Code of 1986, as
amended.
(7) The option term is ten years.
</TABLE>
16
<PAGE> 20
The following table provides certain information with respect to the number
of shares of Common Stock represented by outstanding options held by the Named
Executive Officers as of December 31, 1996. Also reported are the values for
"in-the-money" options which represent the positive spread between the exercise
price of any such existing stock options and the year end price of the Common
Stock.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION/SAR VALUES
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTION/SARS AT
FISCAL YEAR END(#) FISCAL YEAR END($)
----------------------------------- ---------------------------------
NAME EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(2)
- --------------------- ----------------------------------- ---------------------------------
<S> <C> <C>
David F. Holland 0/160,000 0/369,600
David P. Conley 0/95,000 0/219,450
John A. Simas 0/65,000 0/150,150
Dennis J. Furey 0/30,000 0/69,300
- ------------------
(1) The options in this table have an exercise price of $12.44 and become
exercisable at an annual rate of 20% beginning April 30, 1997. The options
will expire ten (10) years from the date of grant.
(2) Based on market value of the underlying stock at the fiscal year end, minus
the exercise price. The market price on December 31, 1996 was $14.75.
</TABLE>
PENSION PLAN. The Bank participates in the Financial Institutions
Retirement Plan, administered by the Pentegra Group, which is a defined benefit
pension plan, for its employees (the "Pension Plan"). The following table
indicates the annual retirement benefit that would be payable under the Pension
Plan upon retirement at age 65 to a participant electing to receive his
retirement benefit in the standard form of benefit, assuming various specified
levels of plan compensation and various specified years of credited service. A
fully vested participant may elect early retirement as of age 45. However, for
each full year prior to age 65 the benefit is reduced by 3% at the time the
benefit is distributed. The benefits listed in the retirement benefit table are
based upon salary only and are not subject to any social security adjustment.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
--------------------------------------------------------------
FINAL AVERAGE
EARNINGS 15 20 25 30 35
------------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 50,000 15,000 20,000 25,000 30,000 35,000
75,000 22,000 30,000 37,500 45,000 52,500
100,000 30,000 40,000 50,000 60,000 70,000
125,000 37,500 50,000 62,500 75,000 87,500
150,000(1) 45,000 60,000 75,000 90,000 105,000
--------------------
(1) The maximum allowable salary for 1996 is $150,000.
</TABLE>
17
<PAGE> 21
The following table sets forth the years of credited service (i.e., benefit
service) as of December 31, 1996 for each executive officer.
<TABLE>
<CAPTION>
CREDITED SERVICE
-------------------------------------------
YEARS MONTHS
<S> <C> <C>
David F. Holland .......... 21 10
David P. Conley............ 27 0
John A. Simas.............. 18 5
Dennis J. Furey............ 17 11
</TABLE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Company intends to adopt a
non-qualified Supplemental Retirement Plan ("SERP") to provide certain officers
and highly compensated employees with additional retirement benefits. The
benefits provided under the SERP would make up the benefits lost to the SERP
participants due to application of limitations on compensation and maximum
benefits applicable to the Company's tax-qualified 401(k) Plan, ESOP and the
Pension Plan. The SERP may also provide additional retirement benefits to
participants, including benefits which mitigate the effect of early retirement
under the Pension Plan to the extent that the Pension Plan is not amended to
eliminate such reduction. Benefits may be provided under the SERP at the same
time and in the same form as the benefits will be provided under the 401(k)
Plan, ESOP and the Pension Plan.
The Company may also establish an irrevocable grantor's trust ("rabbi
trust") in connection with the SERP for the purpose of providing the benefits
promised under the terms of the SERP. The rabbi trust may hold a variety of
assets including the Company's stock, other securities, insurance contracts and
cash. The SERP participants would have only the rights of unsecured creditors
with respect to the trust's assets, and will not recognize income with respect
to benefits provided by the SERP until such benefits are received by the
participants. The assets of the rabbi trust would be considered part of the
general assets of the Company and would be subject to claims of the Company's
creditors in the event of the Bank's insolvency. It is anticipated that earnings
on the trust's assets will be taxable to the Company.
18
<PAGE> 22
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Bank's current policy provides that all loans made by the Bank to its
directors and executive officers are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve more than the
normal risk of collectibility or present other unfavorable features. Prior to
the Financial Institution Recovery, Reform and Enforcement Act of 1989
("FIRREA"), the Bank made loans to executive officers with discounted interest
rates and loan origination fees.
Set forth below is certain information as of December 31, 1996, with
respect to loans made by the Bank on preferential terms, as explained above, to
executive officers whose aggregate indebtedness to the Bank exceeded $60,000 at
any time since January 1, 1996 plus any additional indebtedness even if not made
on preferential terms.
<TABLE>
<CAPTION>
LARGEST AMOUNT BALANCE INTEREST
MATURITY OUTSTANDING AS OF RATE AS OF TYPE
DATE DATE SINCE DECEMBER DECEMBER OF
NAME AND POSITION OF LOAN OF LOAN JANUARY 1, 1996 31, 1996 31, 1996 LOAN
- ----------------- --------- --------- --------------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
John A. Simas 7/82 7/07 $82,800 $77,412 5% ARM(1)
Senior Vice President,
Chief Financial
Officer, Secretary and
Treasurer of the
Company and Bank
- ------------------------
(1) Variable rate first mortgage on primary residence. Rate adjusted annually
based on Bank's cost of funds. Loan granted under Employee Loan Plan in
1982.
</TABLE>
19
<PAGE> 23
PROPOSAL 2. APPROVAL OF THE BOSTONFED BANCORP, INC. 1996
STOCK OPTION PLAN
1997 STOCK OPTION PLAN - SUMMARY DESCRIPTION
The Board of Directors of the Company is presenting for stockholder
ratification the BostonFed Bancorp, Inc. 1997 Stock Option Plan (the "Stock
Option Plan"), in the form attached hereto as Exhibit A. The purpose of the
Stock Option Plan is to advance the interests of the Company and its
stockholders by providing those key employees and non-employed directors of the
Company and its affiliates, including the Bank and Broadway, upon whose
judgment, initiative and efforts the successful conduct of the business of the
Company and its affiliates largely depends, with additional incentive in the
form of a proprietary interest in the Company to perform in a superior manner. A
further purpose of the Stock Option Plan is also to attract and retain people of
experience and ability to the service of the Company and its affiliates. The
following is a summary of the material terms of the Stock Option Plan which is
qualified in its entirety by the complete provisions of the attached Stock
Option Plan document attached as Exhibit A.
GENERAL
The Stock Option Plan reserves 250,000 shares of Common Stock for purchase
pursuant to the exercise of options and option-related awards. All officers and
other employees of the Company and its affiliates, and directors who are not
also serving as employees of the Company or any of its affiliates ("Outside
Directors"), a potential total of approximately 200 persons, are eligible to
receive awards under the Stock Option Plan. The Stock Option Plan will be
administered by a committee of non-employee directors (the "Committee").
Authorized but unissued shares or authorized shares previously issued and
reacquired by the Company may be used to satisfy an exercise of an option under
the Stock Option Plan. If authorized but unissued shares are used to satisfy
option exercises, the number of shares outstanding would increase which would
have a dilutive effect on the holdings of existing stockholders.
AWARDS TO EMPLOYEES
TYPES OF AWARDS. The Stock Option Plan authorizes the grant to employees of
(i) options to purchase the Company's Common Stock intended to qualify as
"incentive stock options" under Section 422 of the Code (options which afford
tax benefits to the recipients upon compliance with certain conditions and which
do not result in tax deductions to the Company), referred to as "Incentive Stock
Options"; (ii) options that do not so qualify (options which do not afford
income tax benefits to recipients, but which may provide tax deductions to the
Company), referred to as "Non-statutory Stock Options"; (iii) Limited Rights
(discussed below) which are exercisable only upon a change in control (as
defined in the Stock Option Plan) of the Company; and (iv) Dividend Equivalent
Rights (discussed below) which, upon the payment by the Company of an
extraordinary dividend (as defined in the Stock Option Plan), at the sole
discretion of the Committee, would provide a grant to the holder a cash payment
equal to the amount of the
20
<PAGE> 24
extraordinary dividend multiplied by the number of shares subject to the Option
underlying the Dividend Equivalent Right.
As of the date of this proxy statement, the Board of Directors, has not yet
granted any options under the Stock Option Plan and has made no determination as
to any future grants. Pursuant to the Stock Option Plan, the Committee has the
authority to grant options and option-related awards as determined under its
sole discretion, provided, however, that all options shall become fully vested
and exercisable upon death, disability, retirement or a change of control, as
defined in the Stock Option Plan. The Committee may, in its sole discretion,
accelerate the time at which any option may be exercised in whole or in part.
The exercise price of all options granted must be 100% of the fair market value
of the underlying Common Stock at the time of grant, except as provided below.
The exercise price may be paid in cash, borrowed funds or in Common Stock.
Incentive Stock Options may only be granted to employees. In order to
qualify as Incentive Stock Options under Section 422 of the Code, in addition to
certain other restrictions, the exercise price must not be less than 100% of the
fair market value on the date of grant. Incentive Stock Options granted to any
person who is the beneficial owner of more than 10% of the outstanding voting
stock may be exercised only for a period of five years from the date of grant
and the exercise price must be at least equal to 110% of the fair market value
of the underlying common stock on the date of grant.
TERMINATION OF EMPLOYMENT. Options granted under the Stock Option Plan to
employees may be exercised at such times as the Committee determines, but in no
event shall an option be exercisable more than 10 years from the date of grant.
Unless otherwise determined by the Committee, upon the termination of an
employee's service for any reason, other than death, disability, retirement,
termination for cause or change in control, the employee's options will be
exercisable only as to those shares that were immediately exercisable by the
employee at the date of termination and only for a period of three months. In
the event of disability, death, retirement or a change in control, the period
for exercise is one year from termination of employment. In the event of an
employee's termination for cause, all rights to options granted become null and
void upon such termination.
LIMITED RIGHTS. Upon exercise of Limited Rights in the event of a change in
control of the Company, the optionee will be entitled to receive a lump sum cash
payment equal to the difference between the exercise price of the related option
and the fair market value of the shares of Common Stock subject to the option on
the date of exercise of the Limited Right in lieu of purchasing the stock
underlying the option. Upon the exercise of a Limited Right the underlying
option is terminated.
DIVIDEND EQUIVALENT RIGHTS. Simultaneously with the grant of any option to
any employee or outside director, the Committee may grant a Dividend Equivalent
Right with respect to all or some of the shares covered by such option. The
Dividend Equivalent Right provides, at the sole discretion of the Committee, in
the event of the declaration of an extraordinary
21
<PAGE> 25
dividend, a separate cash benefit equal to 100% of the amount of any
extraordinary dividend declared by the Company on shares of Common Stock subject
to an option. Under the terms of the Stock Option Plan, an extraordinary
dividend is any dividend paid on shares of Common Stock where the dividend
exceeds the Company's earnings for the period for which the dividend is declared
and the Bank's weighted average cost of funds on interest bearing liabilities
for the period for which the dividend is declared. The Dividend Equivalent Right
is transferable only when the underlying option is transferable and under the
same conditions.
CHANGE IN CONTROL. In the event of a change in control of the Company (as
defined in the Stock Option Plan), all unvested options shall become immediately
exercisable as of the date of an optionee's termination of service with the
Company, Bank or Broadway as a result of the change in control. Additionally,
all options then available for grant under the Stock Option Plan will
automatically be granted, on a pro rata basis, among current employees and
Outside Directors who have previously been granted options by the Company,
whether exercisable or unexercisable, as of the date of the change in control.
All such options that are granted upon a change in control will be 100% vested
and exercisable only upon the date of termination of the recipient's employment
or service with the Company or any affiliate Such options granted subsequent to
a change in control will have an exercise price equal to the weighted average
exercise price of all previously granted options granted to each respective
individual. Such options will remain exercisable for 10 years following the
change in control.
AMENDMENT
The Board of Directors may at any time amend the Stock Option Plan in any
respect, provided that, the provisions governing grants of Options and Limited
Rights, unless permitted by the rules promulgated under Section 16(b) of the
Exchange Act.
NONTRANSFERABILITY
An award of options under the Stock Option Plan shall not be transferable
by the optionee other than by will or the laws of intestate succession and may
only be exercised during his lifetime by the optionee, or by a guardian or legal
representative. However, with respect to Non-statutory Stock Options, the
Committee or full Board may in their sole discretion, permit transferability for
valid estate planning purposes. With the consent of the Committee, an optionee
may designate a person or his or her estate, beneficiary of any stock option,
Limited Right and Dividend Equivalent Right award to which the optionee would
then be entitled, in the event of the death of the employee.
TAX TREATMENT
An optionee will generally not be deemed to have recognized taxable income
upon grant or exercise of any Incentive Stock Option, provided that shares
transferred in connection with the exercise are not disposed of by the optionee
for at least one year after the date the shares are transferred in connection
with the exercise of the option and two years after the date of grant of
22
<PAGE> 26
the option. If the holding periods are satisfied, upon disposal of the shares,
the aggregate difference between the per share option exercise price and the
fair market value of the common Stock is recognized as income taxable at long
term capital gains rates. No compensation deduction may be taken by the Company
as a result of the grant or exercise of Incentive Stock Options, assuming these
holding periods are met. In the case of the exercise of a Non-statutory Stock
Option, an optionee will be deemed to have received ordinary income upon
exercise of the stock option in an amount equal to the aggregate amount by which
the per share exercise price is exceeded by the fair market value of the Common
Stock. In the event that a Non-statutory Stock Option is exercised during a
period that would subject the optionee to liability under Section 16(b) of the
Exchange Act (i.e., within six months of the date of grant), the optionee will
not be deemed to have recognized income until such period of liability has
expired, unless the optionee makes a Section 83(b) election under the Code. In
the event shares received through the exercise of an Incentive Stock Option are
disposed of prior to the satisfaction of the holding periods (a "disqualifying
disposition"), the exercise of the option will be treated as the exercise of a
Non-statutory Stock Option, except that the optionee will recognize the ordinary
income for the year in which the disqualifying disposition occurs. The amount of
any Ordinary income deemed to have been received by an optionee upon the
exercise of a Non-statutory Stock Option or due to a disqualifying disposition
will be a deductible expense of the Company for tax purposes. In the case of
Limited Rights, upon exercise, the option holder would have to include the
amount paid to him upon exercise in his gross income for federal income tax
purposes in the year in which the payment is made and the Company would be
entitled to a deduction for federal income tax purposes of the amount paid. The
employee will recognize taxable income for the amount of cash received under the
Dividend Equivalent Right for the year such amounts are paid. The Company may
take an off-setting deduction for such amount. Dividend Equivalent Rights have
the same tax treatment as other Non-statutory Stock Options.
AWARDS
No awards of options under the Stock Option Plan have been made to date.
Options for 250,000 shares of Common Stock are reserved under the Stock Option
Plan for future grants to employees and Outside Directors of the Company and its
affiliates, including the Bank and Broadway.
STOCKHOLDER RATIFICATION AND EFFECTIVE DATE OF THE PLAN
The Board of Directors adopted the Stock Option Plan in March 1997 and
determined to submit the Stock Option Plan for ratification by stockholders
although the Company is not required to do so. The Stock Option Plan shall
become effective upon its presentation to stockholders for approval or
ratification. Implementation of the Stock Option Plan in the absence of
stockholder ratification or approval may result in the inability of the Company
to grant Incentive Stock Options but will not impair its ability to grant
Non-statutory Stock Options. In the event the Stock Option Plan is not ratified
or approved by stockholders, the Plan provides that the Board of Directors may
terminate the Plan and any awards made pursuant to the Plan.
23
<PAGE> 27
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF
THE BOSTONFED BANCORP, INC. 1997 STOCK OPTION PLAN.
PROPOSAL 3. RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended December 31,
1996 were KPMG Peat Marwick LLP. The Company's Board of Directors has
reappointed KPMG Peat Marwick LLP to continue as independent auditors for the
Bank and the Company for the year ending December 31, 1997, subject to
ratification of such appointment by the shareholders.
Representatives of KPMG Peat Marwick LLP will be present at the Annual
Meeting. They will be given an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
shareholders present at the Annual Meeting.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP
AS THE INDEPENDENT AUDITORS OF THE COMPANY.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
ADDITIONAL INFORMATION
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy statement and form of
proxy relating to the 1998 Annual Meeting of Shareholders, a shareholder
proposal must be received by the Secretary of the Company at the address set
forth on the first page of this Proxy Statement not later than November 28,
1997. Any such proposal will be subject to 17 C.F.R. ss. 240.14a-8 of the Rules
and Regulations under the Securities Exchange Act of 1934, as amended.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The Bylaws of the Company provide an advance notice procedure for a
shareholder to properly bring business before an Annual Meeting. The shareholder
must give written advance notice to the Secretary of the Company not less than
ninety (90) days before the date originally fixed for such meeting; provided,
however, that in the event that less than one hundred (100) days notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be received not later than the close
of business on the tenth day following the date on which the Company's notice to
shareholders of the annual meeting date was mailed or such public disclosure was
made. The advance notice by
24
<PAGE> 28
shareholders must include the shareholder's name and address, as they appear on
the Company's record of shareholders, a brief description of the proposed
business, the reason for conducting such business at the Annual Meeting, the
class and number of shares of the Company's capital stock that are beneficially
owned by such shareholder and any material interest of such shareholder in the
proposed business. In the case of nominations to the Board of Directors, certain
information regarding the nominee must be provided. Nothing in this paragraph
shall be deemed to require the Company to include in its proxy statement or the
proxy relating to an annual meeting any shareholder proposal which does not meet
all of the requirements for inclusion established by the SEC in effect at the
time such proposal is received.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than as stated in the Notice of Annual
Meeting of Shareholders. If, however, other matters are properly brought before
the Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote the shares represented thereby on such matters in accordance with
their best judgment.
Whether or not you intend to be present at the Annual Meeting, you are
urged to return your proxy card promptly. If you are then present at the Annual
Meeting and wish to vote your shares in person, your original proxy may be
revoked by voting at the Annual Meeting.
A COPY OF THE FORM 10-K (WITHOUT EXHIBITS) FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE
FURNISHED WITHOUT CHARGE TO STOCKHOLDERS OF RECORD UPON WRITTEN REQUEST TO JOHN
A. SIMAS, CORPORATE SECRETARY, BOSTONFED BANCORP, INC., 17 NEW ENGLAND EXECUTIVE
PARK, BURLINGTON, MA 01803.
By Order of the Board of Directors
John A. Simas
Senior Vice President and
Corporate Secretary
Burlington, Massachusetts
March 28, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE
REQUESTED TO SIGN, DATE AND PROMPTLY RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
25
<PAGE> 29
BOSTONFED BANCORP, INC.
1997 STOCK OPTION PLAN
1. DEFINITIONS.
-----------
(a) "Affiliate" means (i) a member of a controlled group of corporations of
which the Holding Company is a member or (ii) an unincorporated trade or
business which is under common control with the Holding Company as determined in
accordance with Section 414(c) of the Internal Revenue Code of 1986, as amended,
(the "Code") and the regulations issued thereunder. For purposes hereof, a
"controlled group of corporations" shall mean a controlled group of corporations
as defined in Section 1563(a) of the Code determined without regard to Section
1563(a)(4) and (e)(3)(C).
(b) "Alternate Option Payment Mechanism" refers to one of several methods
available to a Participant to fund the exercise of a stock option set out in
Section 12. These mechanisms include a broker-assisted cashless exercise and a
stock for stock exchange.
(c) "Award" means any grant of benefits pursuant to Section 3 hereof.
(d) "Boston Federal" means Boston Federal Savings Bank.
(e) "Board of Directors" or "Board" means the board of directors of the
Holding Company.
(f) "Broadway" means Broadway National Bank.
(g) "Change in Control" means a change in control of Boston Federal,
Broadway or Holding Company of a nature that: (i) would be required to be
reported in response to Item 1(a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); or (ii) results in a
"change in control" or "acquisition of control" within the meaning of the Rules
and Regulations promulgated by the Office of Thrift Supervision ("OTS") (or its
predecessor agency) found at 12 C.F.R. Part 574 or the Rules and Regulations
promulgated by the Federal Reserve Board ("FRB") found at Subpart E of 12 C.F.R.
Part 225, as in effect on the date hereof (provided that, in applying the
definition of change in control or "acquisition of control" as set forth under
such rules and regulations, the Board shall substitute its judgment for that of
the OTS or FRB); or (iii) without limitation such a Change in Control shall be
deemed to have occurred at such time as (A) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Holding Company representing 20% or more of the
outstanding securities of or the Holding Company, except for any securities
purchased by any tax-qualified employee benefit plan of the Holding Company or
an Affiliate; or (B) individuals who constitute the Board on the Effective Date
(the "Incumbent Board") cease for any reason to constitute at
<PAGE> 30
least a majority thereof, provided that any person becoming a director
subsequent to the Effective Date whose election was approved by a vote of at
least seventy-five percent (75%) of the directors comprising the Incumbent
Board, or whose nomination for election by the Holding Company's stockholders
was approved by the same nominating committee serving under an Incumbent Board,
shall be, for purposes of this clause (B), considered as though he were a member
of the Incumbent Board; or (C) a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the Holding Company or similar
transaction occurs in which the Holding Company is not the resulting entity; or
(D) a solicitation of shareholders of the Holding Company, by someone other than
the current management of the Holding Company, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Holding Company or
similar transaction with one or more corporations, as a result of which the
outstanding shares of the class of securities then subject to the plan are
exchanged for or converted into cash or property or securities not issued by the
Holding Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Holding Company.
(h) "Committee" means a committee consisting of at least two members of the
Board of Directors who are defined as Outside Directors, all of whom are
"Disinterested Directors" as such term is defined under Rule 16b-3 under the
Securities Exchange Act of 1934 ("Exchange Act") as promulgated by the
Securities and Exchange Commission.
(i) "Common Stock" means the Common Stock of the Holding Company, par
value, $.01 per share or any stock exchanged for shares of Common Stock pursuant
to Section 17 hereof.
(j) "Date of Grant" means the effective date of an Award.
(k) "Disability" means the permanent and total inability by reason of
mental or physical infirmity, or both, of a Participant to perform the work
customarily assigned. Additionally, a medical doctor selected or approved by the
Board of Directors must advise the Committee that it is either not possible to
determine when such Disability will terminate or that it appears probable that
such Disability will be permanent during the remainder of said Participant's
lifetime.
(l) "Dividend Equivalent Right" means the right to receive an amount of
cash based upon the terms set forth in Section 9.
(m) "Effective Date" means _______, 1997.
(n) "Employee" means any person who is currently employed by the Holding
Company or an Affiliate, including officers, but such term shall not include
Outside Directors.
(o) "Exercise Price" means the purchase price per share of Common Stock
deliverable upon the exercise of each Option.
2
<PAGE> 31
(p) "Extraordinary Dividend" means a distribution to stockholders by the
Holding Company of earnings or stockholders' equity which exceeds (i) earnings
for the period for which the dividend is paid and (ii) a percentage of earnings
or stockholders' equity equal to the weighted average cost of funds of Boston
Federal for the period for which the dividend is paid, as determined for this
purpose by the Committee.
(q) "Fair Market Value" means, when used in connection with the Common
Stock on a certain date, the average of the high and low bid prices of the
Common Stock as reported by the American Stock Exchange ("AMEX") (as published
by the Wall Street Journal, if published, or other authoritative source if not
published) on such date or if the Common Stock was not traded on such date, on
the next preceding day on which the Common Stock was traded. If the Common Stock
is not reported on the AMEX, the Fair Market Value of the Common Stock is the
value so determined by the Board in good faith.
(r) "Holding Company" means BostonFed Bancorp, Inc.
(s) "Incentive Stock Option" means an Option granted by the Committee to a
Participant, which Option is designated by the Committee as an Incentive Stock
Option pursuant to Section 7.
(t) "Limited Right" means the right to receive an amount of cash based upon
the terms set forth in Section 8.
(u) "Non-statutory Stock Option" means an Option granted by the Committee
to a Participant pursuant to Section 6, which is not designated by the Committee
as an Incentive Stock Option or which is redesignated by the Committee under
Section 7 as a Non-statutory Stock Option.
(v) "Option" means the right to buy a fixed amount of Common Stock at the
Exercise Price within a limited period of time designated as the term of the
option as granted under Sections 6 and 7 of the Plan.
(w) "Outside Director" means a member of the Board of Directors of the
Holding Company or its Affiliates, who is not also an Employee of the Holding
Company or its Affiliates.
(x) "Participant" means any Employee who holds an outstanding Award under
the terms of the Plan.
(y) "Plan" means the BostonFed Bancorp, Inc. 1997 Stock Option Plan.
(z) "Retirement" means termination of a Participant's employment with the
Holding Company or an Affiliate which constitutes retirement under any
tax-qualified plan maintained by the Holding Company or an Affiliate. However,
"Retirement" will not be deemed to have occurred for purposes of this Plan if a
Participant continues to serve on the Board of Directors of the Holding Company
or its Affiliates following his termination of employment, even if such
3
<PAGE> 32
Participant is considered to have retired under any tax-qualified retirement
plan of the Holding Company or its Affiliates. With respect to an Outside
Director, "Retirement" means the termination of service from the Board of
Directors of the Holding Company or its Affiliates following written notice to
the Board as a whole of such Outside Director's intention to retire or, if
earlier, as determined by the Holding Company or applicable Affiliate's bylaws.
An Outside Director shall not be deemed to have "Retired" for purposes of the
Plan in the event he continues to serve as a consultant or advisory director to
the Holding Company or any of its Affiliates.
(aa) "Termination for Cause" shall mean termination because of a material
loss to the Holding Company or one of its Affiliates caused by the Participant's
intentional failure to perform stated duties, personal dishonesty, willful
violation of any law, rule, regulation, (other than traffic violations or
similar offenses) or final cease and desist order. No act, or the failure to
act, on Participant's part shall be "willful" unless done, or omitted to be
done, not in good faith and without reasonable belief that the action or
omission was in the best interest of the Holding Company or its Affiliates.
2. ADMINISTRATION.
--------------
Options shall be granted and administered by the Committee. The Committee
is authorized, subject to the provisions of the Plan, to establish such rules
and regulations as it deems necessary for the proper administration of the Plan
and to make whatever determinations and interpretations in connection with the
Plan it deems necessary or advisable. All determinations and interpretations
made by the Committee shall be binding and conclusive on all Participants and on
their legal representatives and beneficiaries.
3. TYPES OF AWARDS.
---------------
The following Awards may be granted under the Plan:
(a) Non-statutory Stock Options;
(b) Incentive Stock Options;
(c) Limited Rights; and
(d) Dividend Equivalent Rights.
as described below in Sections 6 through 9 of the Plan.
4. STOCK SUBJECT TO THE PLAN.
-------------------------
Subject to adjustment as provided in Section 16, the maximum number of
shares reserved hereby for purchase pursuant to the exercise of Options and
Option-related Awards granted under the Plan is 250,000 shares of Common Stock.
These shares of Common Stock subject to Options which may be awarded hereunder
may be either authorized but unissued shares or authorized shares previously
issued and reacquired by the Holding Company. To the extent that Options are
granted under the Plan, the shares underlying such Options will be unavailable
for any other use including future grants under the Plan except that, to the
extent that Options terminate, expire,
4
<PAGE> 33
are forfeited or are cancelled without having been exercised in the case of
Limited Rights, exercised for cash, new Option grants may be made with respect
to these shares.
5. ELIGIBILITY.
-----------
All Employees shall be eligible to receive Options under the Plan. Outside
Directors shall only be eligible to receive Non-statutory Stock Options under
the Plan under Section 6 of this Plan. An Outside Director who is a former
Employee may, however, continue to hold unexercised or unvested Awards granted
while such person was an Employee.
6. NON-STATUTORY STOCK OPTIONS.
---------------------------
The Committee may, subject to the limitations of the Plan, from time to
time, grant Non-statutory Stock Options to Employees and Outside Directors, and,
upon such terms and conditions as the Committee may determine, grant
Non-statutory Stock Options in exchange for and upon surrender of previously
granted Awards under this Plan. Non-statutory Stock Options granted under this
Plan are subject to the following terms and conditions:
(a) Exercise Price. The Exercise Price of each Non-statutory Stock Option
shall be determined by the Committee on the date the option is granted. Except
as to Options which may be granted under Section 12 hereof, the Exercise Price
of each Non-statutory Stock Option shall not be less than 100% of the Fair
Market Value of the Common Stock on the Date of Grant. Common Stock underlying
such Non-statutory Stock Options may be purchased only upon full payment of the
Exercise Price or upon operation of an Option Exercise Alternative set out in
Section 11 of the Plan.
(b) Terms of Options. Non-statutory Stock Options may in the discretion of
the Committee be granted at any time and subject to any conditions allowed under
this Plan. The term during which each Non-statutory Stock Option may be
exercised shall be determined by the Committee, but in no event shall a
Non-statutory Stock Option be exercisable in whole or in part more than 10 years
from the Date of Grant. The Committee shall determine the date on which each
Non-statutory Stock Option shall become exercisable. The Common Stock comprising
each installment may be purchased in whole or in part at any time during the
term of such Non-statutory Stock Option after such Non-statutory Stock Option
becomes exercisable. The Committee may, in its sole discretion, accelerate the
time at which any Non-statutory Stock Option may be exercised in whole or in
part. The acceleration of any Non-statutory Stock Option under the authority of
this paragraph will create no right, expectation or reliance on the part of any
other Participant or that certain Participant regarding any other unaccelerated
Non-statutory Stock Options.
(c) Termination of Employment. Unless otherwise determined by the
Committee and except as provided in Section 6(d) hereof, upon termination of a
Participant's employment or service for any reason other than for death,
Disability, Retirement or Termination for Cause, the Participant's Non-statutory
Stock Option shall be exercisable only as to those shares that were immediately
exercisable by the Participant at the time of termination and only for three
months
5
<PAGE> 34
after such termination. Notwithstanding any provisions set forth herein or
contained in any Non-statutory Stock Option Agreement, in the event of
termination of the Participant's employment or service for death, Disability, or
Retirement, all Non-statutory Stock Options held by such Participant shall
immediately vest and be exercisable for a period of one year after such
termination. In the event of Termination for Cause, all rights under the
Participant's Non-statutory Stock Options shall expire immediately upon
termination.
(d) Change in Control. Unless otherwise determined by the Committee, in
the event of the termination of the Participant's employment or service
following a Change in Control, all Non-statutory Stock Options held by the
Participant, whether or not exercisable at such time, shall become exercisable
by the Participant or his legal representatives or beneficiaries and remain
exercisable for one year or such longer period as determined by the Committee
following the date of the termination of employment or service, provided that in
no event shall be period extend beyond the expiration of the term of the
Non-statutory Stock Option.
7. INCENTIVE STOCK OPTIONS.
-----------------------
The Committee may, subject to the limitations of the Plan, from time to
time, grant Incentive Stock Options to Employees. Incentive Stock Options
granted pursuant to the Plan shall be subject to the following terms and
conditions:
(a) Exercise Price. The Exercise Price of each Incentive Stock Option
shall be not less than 100% of the Fair Market Value of the Common Stock on the
Date of Grant. However, if at the time an Incentive Stock Option is granted to a
Participant, the Participant owns Common Stock representing more than 10% of the
total combined voting securities of the Holding Company (or, under Section
424(d) of the Code, is deemed to own Common Stock representing more than 10% of
the total combined voting power of all classes of stock of the Holding Company,
by reason of the ownership of such classes of stock, directly or indirectly, by
or for any brother, sister, spouse, ancestor or lineal descendent of such
Participant, or by or for any corporation, partnership, estate or trust of which
such Participant is a shareholder, partner or beneficiary), ("10% Owner"), the
Exercise Price per share of Common Stock deliverable upon the exercise of each
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Date of Grant. Shares may be purchased only upon payment
of the full Exercise Price or upon operation of an Option Exercise Alternative
set forth in Section 11 of the Plan.
(b) Amounts of Incentive Stock Options. Incentive Stock Options may be
granted to any Employee in such amounts as determined by the Committee; provided
that the amount granted is consistent with the terms of Section 422 of the Code.
In the case of a stock option intended to qualify as an Incentive Stock Option,
the aggregate Fair Market Value (determined as of the time the Option is
granted) of the Common Stock with respect to which Incentive Stock Options
granted are exercisable for the first time by the Participant during any
calendar year (under all plans of the Participant's employer corporation and its
parent and subsidiary corporations) shall not exceed $100,000. The provisions of
this Section 7(b) shall be construed and applied in accordance with Section
422(d) of the Code and the regulations, if any,
6
<PAGE> 35
promulgated thereunder. To the extent an Award of an Incentive Stock Option
under this Section 7 exceeds this $100,000 limit, the portion of the Award of an
Incentive Stock Option in excess of such limit shall be deemed a Non-statutory
Stock Option. The Committee shall have discretion to redesignate Stock Options
granted as Incentive Stock Options as Non-statutory Stock Options. Such
Non-statutory Stock Options shall be subject to Section 6 of the Plan.
(c) Terms of Incentive Stock Options. Incentive Stock Options may in the
discretion of the Committee be granted at any time and subject to any conditions
allowed under this Plan. The term during which each Incentive Stock Option may
be exercised shall be determined by the Committee, but in no event shall an
Incentive Stock Option be exercisable in whole or in part more than 10 years
from the Date of Grant. If at the time an Incentive Stock Option is granted to a
Participant who is a 10% Owner, the Incentive Stock Option granted to such
Participant shall not be exercisable after the expiration of five years from the
Date of Grant. No Incentive Stock Option granted under this Plan is transferable
except by will or the laws of descent and distribution and is exercisable in his
lifetime only by the Participant to whom it is granted.
The Committee shall determine the date on which each Incentive Stock Option
shall become exercisable. The Committee may also determine as of the Date of
Grant any other specific conditions or specific performance goals which must be
satisfied prior to the Incentive Stock Option becoming exercisable. The shares
comprising each installment may be purchased in whole or in part at any time
during the term of such Incentive Stock Option after such installment becomes
exercisable. The Committee may, in its sole discretion, accelerate the time at
which any Incentive Stock Option may be exercised in whole or in part. To the
extent that such acceleration, through the operation of law, destroys incentive
treatment under the Code, then such accelerated Stock Option shall be deemed to
be a Non-statutory Stock Option. The acceleration of any Incentive Stock Option
under the authority of this paragraph will create no right, expectation or
reliance on the part of any other Participant or that certain Participant
regarding any other unaccelerated Incentive Stock Options.
(d) Termination of Employment. Unless otherwise determined by the
Committee, except as provided in Section 7(e) hereof, upon the termination of a
Participant's employment for any reason other than death, Disability, or
Retirement, the Participant's Incentive Stock Options shall be exercisable only
as to those shares that were immediately exercisable by the Participant at the
date of termination and only for a period of three months following termination;
provided, however, that, in the event that the Committee extends the
exercisability of any Incentive Stock Option beyond three months following
termination, such Incentive Stock Option shall be treated as Non-statutory Stock
Option. Notwithstanding any provisions set forth herein or contained in any
agreement relating to the award of an Incentive Stock Option, in the event of
the termination of a Participant's employment due to death, Disability, or
Retirement, all of the Participant's Incentive Stock Options shall immediately
vest and be exercisable for a period of one year after such termination,
provided, however, that in the case of Retirement, such Option shall not be
eligible for treatment as an Incentive Stock Option in the event such Option is
exercised more than three months after the Participant's termination and,
provided further, that in no event shall the period extend beyond the expiration
of the Incentive Stock Option. In the
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<PAGE> 36
event of Termination for Cause all rights under the Participant's Incentive
Stock Option shall expire immediately upon termination.
(e) Change in Control. Unless otherwise determined by the Committee, in
the event of the termination of the Participant's employment following a Change
in Control, all Incentive Stock Options held by the Participant, whether or not
exercisable at such time, shall become exercisable by the Participant or his
legal representatives or beneficiaries and remain exercisable for one year or
such longer period as determined by the Committee following the date of
termination of the Participant's employment, provided however, that such Option
shall not be eligible for treatment as an Incentive Stock Option in the event
such Option is exercised more than three months following the date of
termination of employment, and provided further, that in no event shall the
period extend beyond the expiration of the term of the Incentive Stock Option.
(f) Compliance With Code. The Incentive Stock Options granted under this
Section 7 of the Plan are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Code, but the Holding Company makes no
warranty as to the qualification of any option as an incentive stock option
within the meaning of Section 422 of the Code. All Incentive Stock Options that
do not so qualify shall be treated as Non-statutory Stock Options.
8. LIMITED RIGHTS.
--------------
Simultaneously with the grant of any Option to an Employee or Outside
Director, the Committee may grant a Limited Right with respect to all or some of
the shares covered by such Option. Limited Rights granted under this Plan are
subject to the following terms and conditions:
(a) Terms of Rights. In no event shall a Limited Right be exercisable in
whole or in part before the expiration of six months from the Date of Grant of
the Limited Right. A Limited Right may be exercised only in the event of a
Change in Control.
The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, and only when the Fair Market Value of the underlying
shares on the day of exercise is greater than the Exercise Price of the
underlying Option.
Upon exercise of a Limited Right, the underlying Option shall cease
to be exercisable. Upon exercise or termination of an Option, any related
Limited Rights shall terminate. The Limited Rights may be for no more than 100%
of the difference between the purchase price and the Fair Market Value of the
Common Stock subject to the underlying option. The Limited Right is transferable
only when the underlying option is transferable and under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall promptly
receive from the Holding Company an amount of cash or some other payment
alternative found in Section 11, equal to the difference between the Exercise
Price of the underlying option and the Fair Market Value of the Common Stock
subject to the underlying Option on the date the Limited
8
<PAGE> 37
Right is exercised, multiplied by the number of shares with respect to which
such Limited Right is being exercised. Payments shall be less an applicable tax
withholding as set forth in Section 17.
9. DIVIDEND EQUIVALENT RIGHT
-------------------------
Simultaneously with the grant of any Incentive Stock Option or a
Non-statutory Stock Option to Participants, the Committee may grant a Dividend
Equivalent Right with respect to all or some of the shares covered by such
Option. Dividend Equivalent Rights granted under this Plan are subject to the
following terms and conditions:
(a) TERMS OF RIGHTS. The Dividend Equivalent Right provides the
Participant with a cash benefit equal to the amount of any Extraordinary
Dividend declared by the Holding Company on shares of Common Stock subject to an
Option. The Dividend Equivalent Right is transferable only when the underlying
option is transferable and under the same conditions.
(b) The terms and conditions of any Dividend Equivalent Rights shall be
evidenced by an agreement (the "Dividend Equivalent Rights Agreement") which
such Dividend Equivalent Rights Agreement shall be subject to the terms and
conditions of the Plan.
(c) PAYMENT. Upon the payment of an Extraordinary Dividend, the holder of
a Dividend Equivalent Right shall promptly receive from the Holding Company an
amount of cash or some other payment option found in Section 10, equal to the
amount of the Extraordinary Dividend paid on one share of Common Stock,
multiplied by the number of shares of Common Stock subject to the underlying
Option. Payments shall be decreased by the amount of any applicable tax
withholding prior to distribution to the Participant as set forth in Section 17.
10. PAYOUT ALTERNATIVES
-------------------
Payments due to a Participant upon the exercise or redemption of an Award,
may be made under the following terms and conditions:
(a) DISCRETION OF THE COMMITTEE. The Committee has the sole discretion to
determine the form of payment (whether monetary, Common Stock, a combination of
payout alternatives or otherwise) it shall use in making distributions or
payments for all Options. If the Committee requests any or all Participants to
make an election as to form of payment or distribution, it shall not be
considered bound by the election.
(b) PAYMENT IN THE FORM OF COMMON STOCK. Any shares of Common Stock
tendered in satisfaction of an obligation arising under this Plan shall be
valued at the Fair Market Value of the Common Stock at the time of the
distribution. The Committee may use Common Stock in Treasury or may direct the
market purchase of such Common Stock to satisfy its obligations under this Plan.
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<PAGE> 38
11. OPTION EXERCISE ALTERNATIVES
----------------------------
The Committee has sole discretion to determine the form of payment it will
accept for the exercise of an Option. The Committee may indicate acceptable
forms in the Incentive Stock Option or Non-statutory Stock Option Agreement
covering such Options or may reserve its decision until the time of exercise. No
Option is to be considered exercised until payment in full is accepted by the
Committee or its agent. Form of payment for the exercise of Options which may be
acceptable by the Committee include:
(a) Cash Payment. The exercise price may be paid in cash or by certified
check.
(b) Borrowed Funds. To the extent permitted by law, the Committee may
permit all or a portion of the exercise price of an Option to be paid through
borrowed funds.
(c) Exchange of Common Stock. The Committee may, in its sole discretion,
permit payment by the tendering of previously acquired shares of Common Stock.
Any shares of Common Stock tendered in payment of the exercise price of an
Option shall be valued at the Fair Market Value of the Common Stock on the date
prior to the date of exercise.
12. GRANTS IN THE EVENT OF A CHANGE IN CONTROL
------------------------------------------
(a) In the event of a Change in Control, Options then available for grant
under this Plan pursuant to Section 4 shall be automatically granted among those
current Employees and current Outside Directors who have previously been granted
Options under this Plan or the BostonFed Bancorp, Inc. 1996 Stock-Based
Incentive Plan (the "1996 Plan"), as of the date of the Change in Control. The
number of shares subject to Options to be granted to each such individual
pursuant to this Section 12 shall be determined by multiplying the number of
Options to purchase shares of Common Stock then available for grant to Employees
and Outside Directors, respectively, pursuant to Section 4 by a fraction, the
numerator of which is the number of Options to purchase shares of Common Stock
previously granted to that individual under this Plan and the 1996 Plan, and the
denominator of which is the total number of Options to purchase shares of Common
Stock previously granted to all Employees, in the case of an Employee, and all
current Outside Directors, in the case of an Outside Director, under this Plan
and the 1996 Plan.
(b) The Exercise Price for any Option granted pursuant to this Section 12
shall be the weighted average Exercise Price of all stock options, as adjusted
pursuant to Section 16, granted under this Plan or the 1996 Plan, whether such
previously granted stock option has been exercised or is exercisable or
unexercisable, to the respective Employee or Outside Director prior to the
Change in Control.
(c) Unless otherwise determined by the Committee, all Options granted
pursuant to this Section 12 shall be 100% vested and exercisable upon the
Participant's termination of employment or service following a Change in Control
and shall remain exercisable for a period of 10 years from the date of grant.
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<PAGE> 39
13. RIGHTS OF A SHAREHOLDER: NONTRANSFERABILITY.
-------------------------------------------
(a) No Participant or Outside Director shall have any rights as a
shareholder with respect to any shares of Common Stock covered by an Option
until the date of issuance of a stock certificate for such Common Stock. Nothing
in this Plan or in any Option granted confers on any person any right to
continue in the employ or service of the Holding Company or its Affiliates or
interferes in any way with the right of the Holding Company or its Affiliates to
terminate a Participant's services as an officer or other employee at any time.
(b) No Option shall be transferred, assigned, hypothecated, or disposed of
in any manner by a Participant or Outside Director other than by will or the
laws of intestate succession; provided, however, that with respect to a
Non-statutory Stock Option, the Committee or full Board may, in their sole
discretion, permit transferability if such transfer is, in the determination of
the Committee or full Board, for valid estate planning purposes and such
transfer is permitted under the Code and Rule 16b-3 promulgated under the
Exchange Act. For the purposes of this section a transfer for valid estate
planning purposes includes, but is not limited to: (a) a transfer to revocable
intervivos trust as to which the Participant or Outside Director is both the
settlor and trustee, or (b) a transfer for no consideration to: (i) any member
of the Participant's or Outside Director's Immediate Family, (ii) any trust
solely for the benefit of members of the Participant's or Outside Director's
Immediate Family, (iii) any partnership whose only partners are members of the
Participant's or Outside Director's Immediate Family, and (iv) any limited
liability corporation or corporate entity whose only members or equity owners
are members of the Participant's or Outside Director's Immediate Family. For
purposes of this Section 13, "Immediate Family" includes, but is not necessarily
limited to, a Participant's or Outside Director's spouse, children, and
grandchildren
(c) Nothing contained in this Section 13 shall be construed to require the
Committee or full Board to give its approval to any transfer of an Option or
portion thereof, and approval to transfer any Option or portion thereof does not
mean that such approval will be given for the transfer of any other Option or
portion of an Option. The transferee of any Option shall be subject to all of
the terms and conditions applicable to such Option immediately prior to the
transfer and shall be subject to the rules and regulations proscribed by the
Committee or full Board with respect to such Option. The Committee or the full
Board may limit the amount of any Option, whether as to number or percentage of
underlying shares, for which permission to transfer is otherwise granted.
14. AGREEMENT WITH GRANTEES.
-----------------------
Each Option will be evidenced by a written agreement ("Agreement"),
executed by the Participant or Outside Director and the Holding Company or its
Affiliates that describes the terms and conditions for receiving the Option
including the date of Option, the Exercise Price if any, the term or other
applicable periods, and other terms and conditions as may be required or imposed
by the Plan, the Board of Directors, tax law consideration or applicable
securities law.
11
<PAGE> 40
15. DESIGNATION OF BENEFICIARY.
--------------------------
A Participant or Outside Director may, with the consent of the Committee,
designate a person or persons to receive, in the event of death, any Option to
which the Participant would then be entitled. Such designation will be made upon
forms supplied by and delivered to the Holding Company and may be revoked in
writing. If a Participant or Outside Director fails effectively to designate a
beneficiary, then the Participant's or Outside Director's estate will be deemed
to be the beneficiary.
16. ADJUSTMENTS.
-----------
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend, split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other similar
corporate change, or other increase or decrease in such shares without receipt
or payment of consideration by the Holding Company, the Committee will make such
adjustments to previously granted Awards, to prevent dilution or enlargement of
the rights of the Participant or Outside Director, including any or all of the
following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
or other securities that may underlie future Options under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
or other securities underlying Options already made under the Plan;
(c) adjustments in the purchase price of outstanding Incentive and/or
Non-statutory Stock Options, or any Limited Rights attached to such
Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant or Outside Director under a previously granted
Option. All awards under this Plan shall be binding upon any successors or
assigns of the Holding Company.
17. TAX WITHHOLDING.
---------------
Awards under this Plan shall be subject to tax withholding to the extent
required by any governmental authority. If this Plan meets the requirements
under 17 C.F.R. ss.240.16b-3 under the Exchange Act ("Rule 16b-3"), then any
withholding shall comply with Rule 16b-3 or any amendment or successive rule.
18. AMENDMENT OF THE PLAN.
---------------------
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect, prospectively or retroactively; provided however,
that provisions governing grants of Options and Limited Rights, unless permitted
by the rules promulgated to Section 16(b) of the Exchange Act, shall not be
amended more than once every six months other than to
12
<PAGE> 41
comport with the Internal Revenue Code or the Employee Retirement Income
Security Act, if applicable.
No such termination, modification or amendment may affect the rights of a
Participant or Outside Director under an outstanding Option without the written
permission of such Participant or Outside Directors.
19. EFFECTIVE DATE OF PLAN.
----------------------
The Plan shall become effective upon being presented to stockholders for
approval or ratification for any purpose, including: (i) obtaining favorable
treatment under Section 16(b) of the Securities Exchange Act; (ii) obtaining
preferential tax treatment for Incentive Stock Options; and (iii) maintaining
the listing of the Holding Company's common stock on AMEX. The failure to obtain
stockholder approval or ratification will not affect the validity or
effectiveness of the Plan and the Options granted hereunder, provided, however,
that if the Plan is not approved or ratified by stockholders, the Board of
Directors may, in its sole discretion, terminate the Plan and rescind any
Options granted hereunder and, to the extent the Board of Directors does not
exercise its discretion to terminate the Plan, any Incentive Stock Options
granted shall be deemed to be Non-statutory Stock Options.
20. TERMINATION OF THE PLAN.
-----------------------
The right to grant Options under the Plan will terminate upon the earlier
of (i) ten (10) years after the Effective Date or (ii) the issuance of Common
Stock or (iii) the exercise of Options, or related Limited Rights equivalent to
the maximum number of shares reserved under the Plan as set forth in Section 4.
The Board of Directors has the right to suspend or terminate the Plan or any
provision of the Plan at any time, provided that, except as to termination of
the Plan or rescission of awards pursuant to Section 20 hereof, no such action
will, without the consent of a Participant or Outside Director, adversely affect
his vested rights under a previously granted Option.
21. APPLICABLE LAW.
--------------
The Plan will be administered in accordance with the laws of the state of
Delaware.
22. DELEGATION OF AUTHORITY
-----------------------
The Committee may delegate all authority for: the determination of forms of
payment to be made by or received by the Plan; the execution of Agreements; the
determination of Fair Market Value; the determination of all other aspects of
administration of the plan to the executive officer(s) of the Holding Company.
The Committee may rely on representations, reports and estimate provided to it
by the management of the Holding Company or its Affiliates for determinations to
be made pursuant to the Plan.
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<PAGE> 42
IN WITNESS WHEREOF, BostonFed Bancorp, Inc. has established this Plan, to
be executed by a designee of the Board of Directors its duly corporate seal to
be affixed and duly attested, effective as of the _____ day of __________, 1997.
[CORPORATE SEAL] BOSTONFED BANCORP, INC.
ADOPTED BY THE BOARD OF DIRECTORS:
Date:________________________ By:_____________________________
David F. Holland
Chairman of the Board of Directors
For the Board of Directors
APPROVED OR RATIFIED BY STOCKHOLDERS:
Date:_________________________ By:____________________________
John A. Simas
Secretary
14
<PAGE> 43
[PROXY]
BOSTONFED BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
April 28, 1997
2:00 p.m. Eastern Daylight Saving Time
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints the official proxy committee of the
Board of Directors of BostonFed Bancorp, Inc. (the "Company"), each with full
power of substitution, to act as attorneys and proxies for the undersigned, and
to vote all shares of Common Stock of the Company which the undersigned is
entitled to vote only at the Annual Meeting of Shareholders, to be held on
April 28, 1997, at 2:00 p.m. Eastern Daylight Saving Time, at the Burlington
Marriott, 1 Mall Road, Burlington, Massachusetts, and at any and all
adjournments thereof, as follows on the reverse side.
This proxy is revocable and will be voted as directed, but if no instructions
are specified, this proxy will be voted FOR each of the proposals listed. If
any other business is presented at the Annual Meeting, including whether or not
to adjourn the meeting, this proxy will be voted by those named in this proxy
in their best judgment. At the present time, the Board of Directors knows of no
other business to be presented at the Annual Meeting.
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
- -------------------------------------------------------------------------------
[X]Please mark
votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
1. The election as directors of all nominees listed (except as
marked to the contrary below).
Nominees: Edward P. Callahan, Richard J. Dennis, Sr. and
Charles R. Kent.
FOR WITHHELD
[ ] [ ]
[ ]
----------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. The ratification of the BostonFed [ ] [ ] [ ]
Bancorp, Inc. 1997 Stock Option
Plan.
3. The ratification of the appointment [ ] [ ] [ ]
of KPMG Peat Marwick LLP as
Independent auditors of BostonFed
Bancorp, Inc. for the fiscal year
ending December 31, 1997.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Shareholders and
of a Proxy Statement dated March 28, 1997 and of the Annual Report to
Shareholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your
full title. If shares are held jointly, each holder may sign but only
one signature is required.
Signature: Date: Signature: Date:
---------------- ------- --------------- -------
