<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, INC.
(Name of Registrant as Specified In Its Charter)
NAME OF COMPANY
(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
(781) 273-0300
March 27, 1998
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 ("BFS") and Broadway National Bank
("BNB"), Burlington, Massachusetts, which will be held on April 29, 1998, at
2:00 p.m., 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" PROPOSAL 2.
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
Chairman, 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 29, 1998
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the
"Annual Meeting") of BostonFed Bancorp, Inc. (the "Company") will be held on
April 29, 1998, at 2:00 p.m., 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 two directors to three-year terms of office
each;
2. The ratification of the appointment of KPMG Peat Marwick LLP
as independent auditors of the Company for the fiscal year
ending December 31, 1998; and
3. 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 6, 1998, 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
Executive Vice President and
Corporate Secretary
Burlington, Massachusetts
March 27, 1998
<PAGE> 4
BOSTONFED BANCORP, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 1998
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 29, 1998 (the "Annual
Meeting"), and at any adjournments thereof. The 1997 Annual Report to
Shareholders, including consolidated financial statements for the fiscal year
ended December 31, 1997, accompanies this proxy statement, which is first being
mailed to record holders on or about March 27, 1998.
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
AND FOR THE RATIFICATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS OF THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
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, Inc., a proxy solicitation firm, will assist
the Company in soliciting proxies for the Annual Meeting and will be paid a fee
of $3,500, 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.
<PAGE> 5
The close of business on March 6, 1998, 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 5,492,637 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.
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 Proposal 2.
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 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.
2
<PAGE> 6
<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NATURE OF BENEFICIAL OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
- ------------ ----------------------------------------- -------------------- -----------
<S> <C> <C> <C>
Common Stock..................... Wellington Management Company 557,762(1) 10.2%
75 State Street
Boston, Massachusetts 02109
Common Stock..................... Boston Federal Savings Bank 529,000(2) 9.6
Employee Stock Ownership Plan
("ESOP")
17 New England Executive Park
Burlington, Massachusetts 01803
Common Stock..................... Thomson Horstmann & Bryant, Inc. 473,300(3) 8.6
Park 80 West/Plaza Two
Saddle Brook, New Jersey 07663
Common Stock..................... John Hancock Advisors, Inc. 447,000(4) 8.1
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
Common Stock..................... First Union Corporation 350,240(5) 6.4
One First Union Center
Charlotte, NC 28288-0137
</TABLE>
(1) Based on information in a Schedule 13G dated January 13, 1998, Wellington
Management Company, LLP in its capacity as an investment advisor, may be deemed
the beneficial owner of 557,762 shares.
(2) 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 6, 1998, 211,621 shares
had been allocated under the ESOP and 317,379 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").
(3) Based upon information filed in a Schedule 13G dated January 26, 1998,
Thomson Horstmann & Bryant, Inc. in its capacity as an investment advisor, may
be deemed the beneficial owner of 473,300 shares.
(4) Based upon information in a Schedule 13G dated 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 in a Schedule 13G dated February 11, 1998, First
Union Corporation in its capacity as holding company, may be deemed the
beneficial owner of 350,240 shares also deemed to be beneficially owned by its
subsidiary, Keystone Investment Management Company, in its capacity as an
investment advisor.
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 "BFS") and Broadway National Bank ("BNB"), 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
3
<PAGE> 7
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 two nominees proposed for election at this Annual Meeting are David
F. Holland and Irwin W. Sizer, Ph.D. 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; 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.
<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
David F. Holland...................................... 56 1986(3) 2001 152,561(4),(5) 2.75%
Chairman, President and Chief Executive
Officer of the Company and Chief
Executive Officer of BFS.
Irwin W. Sizer, Ph.D.................................. 87 1986(3) 2001 27,351(6),(7) *
Retired Professor from Massachusetts
Institute of Technology and the former
President of Whitaker Health Services Fund,
a not-for-profit medical research fund.
CONTINUING DIRECTORS
Edward P. Callahan.................................... 69 1982 2000 25,602(6),(7) *
Former Executive Vice President of BFS.
David P. Conley....................................... 54 1992 1999 92,571(4),(5) 1.67
Executive Vice President, Assistant Secretary
and Assistant Treasurer of the Company and
President of BFS and Chief Executive Officer
of BNB.
Richard J. Dennis, Sr................................. 72 1986(3) 2000 33,001(6),(7) *
Sole proprietor of Casey and Dennis,
a real estate appraisal firm.
Charles R. Kent....................................... 69 1986(3) 2000 28,001(6),(7) *
President of the Rush-Kent Insurance Agency
</TABLE>
(Continued on the following page)
4
<PAGE> 8
<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>
W. Robert Mill........................................ 68 1977 1999 26,301(6),(7) *
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.
NAMED EXECUTIVE OFFICERS
WHO ARE NOT DIRECTORS
John A. Simas......................................... 48 -- -- 65,880(4),(5) 1.19
Executive VP, Chief Financial
Officer and Secretary of the
Company and BFS and Director of BNB.
Donald R. Draper...................................... 56 -- -- 4,000(5) *
Director, President and Secretary of BNB.
Dennis J. Furey....................................... 49 -- -- 34,035(4),(5) *
Senior VP - Commercial and Construction
Lending of BFS.
Stock Ownership of all Directors
and Executive Officers as a Group (16 persons)...... 629,201(8) 10.96%
</TABLE>
* 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 52,000, 31,200, 20,800 and 10,000 unvested shares of the 65,000,
39,000, 26,000 and 12,500 shares that were awarded to Messrs. Holland,
Conley, Simas and Furey, respectively, under the Incentive Plan. Such
awards commenced vesting at a rate of 20% per year beginning on April 30,
1997 but all unvested shares will vest immediately upon death, disability,
retirement or a change in control. Each participant presently has voting
power as to the unvested shares.
(5) Includes 64,000, 38,000, 26,000, 3000 and 12,000 shares subject to options
granted to Messrs. Holland, Conley, Simas, Draper and Furey, respectively,
which are currently exercisable or will become exercisable within 60 days
and excludes 96,000, 57,000, 39,000, 12,000 and 18,000 shares subject to
unexercisable options granted to Messrs. Holland, Conley, Simas, Draper
and Furey, respectively, under the Incentive Plan. Shares subject to
options granted under the Incentive Plan commence vesting at a rate of 20%
per year beginning on April 30, 1997 for Messrs. Holland, Conley, Simas
and Furey and on April 30, 1998 for Mr. Draper. All unvested shares,
however, will vest immediately upon death, disability, retirement or a
change in control.
(6) Includes 8,000 unvested shares of the 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
commenced vesting at a rate of 20% per year beginning on April 30, 1997
but all unvested shares will vest immediately upon death, disability,
retirement or a change in control. Each participant presently has voting
power as to the unvested shares.
(7) Includes 8,000 options granted to each outside director under the
Incentive Plan which are currently exercisable or will become exercisable
within 60 days and excludes 12,000 shares subject to unexercisable options
granted to each outside director under the Incentive Plan. Shares subject
to options granted under the Incentive Plan commenced vesting at a rate of
20% per year beginning on April 30, 1997 but all unvested shares will vest
immediately upon death, disability, retirement or a change in control.
(8) Includes a total of 195,120 shares awarded under the Incentive Plan as to
which voting may be directed. Includes a total of 246,000 options granted
under the Incentive Plan which are currently exercisable or will become
exercisable within 60 days.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers (as
defined in regulations promulgated by the SEC thereunder) and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the SEC. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on a review of copies of such reports of
ownership furnished to the Company, or written representations that no forms
were necessary, the Company believes that during the past fiscal year all filing
5
<PAGE> 9
requirements applicable to its officers, directors and greater than ten percent
beneficial owners were complied with except that the Form 3 of Mr. Donald R.
Draper, Director and Vice President of a Subsidiary of the Company was not
reported on a timely basis.
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 1997, the Board of Directors of the Company,
held six meetings. All of the directors of the Company attended at least 80% of
the total number of the Company's Board meetings held and committee meetings on
which such directors served during fiscal 1997. 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 two times in 1997.
NOMINATING COMMITTEE. The Company's Nominating Committee for the 1998
Annual Meeting consists of Callahan, Kent and Mill. 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 25, 1998.
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 no meeting during 1997.
COMPENSATION COMMITTEE. The Compensation Committee of the Company and
the Personnel Committees of BFS and BNB (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 Banks. The Compensation Committee of the Company met three times
in fiscal 1997.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. Non-employee directors of BFS 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 BFS
Board on which they serve. Mr. Holland and Mr. Conley receive Board meeting fees
for their services as directors of BFS but not an annual retainer fee or
committee fees. BNB's Directors are paid a fee of $250 per Board or Committee
Meeting attended. Members of the Board of Directors of the Company currently
receive an annual retainer fee of $2,500 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 PLANS. The Company maintains the 1996 Stock-Based Incentive
Plan and the 1997 Stock Option Plan under which all directors of the Company and
the Banks are eligible to receive awards of options to purchase Common Stock or
shares of common stock. The 1996 Stock-Based Incentive Plan was approved by
shareholders on
6
<PAGE> 10
April 30, 1996 and the 1997 Stock Option Plan was approved by shareholders on
April 28, 1997. Under the 1996 Stock- Based Incentive Plan, each outside
director was granted on April 30, 1997, 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 to directors under the 1996 plan 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 on April 30, 1997. All Directors' Awards will immediately vest upon
termination due to death, disability, retirement or a change in control. No
Company Directors have received awards under the 1997 Stock Option Plan.
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 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 Banks' and the Company's Executive Compensation Policies assure
competitive compensation levels to retain and attract able management. The
Compensation Policies were adopted for the Company and BFS in 1996 to be used in
determining compensation levels in subsequent years. A Short Term Incentive Plan
("STIP") (described elsewhere in the proxy statement) was adopted by BFS in 1997
which measures specific objective financial performance results upon which to
base payouts to executives and other employees. The initial payout under the BFS
STIP occurred in February 1998. BNB had a bonus plan in effect at the time of
acquisition which had a payout in December 1997. BNB's bonus plan has been
replaced by a BNB STIP which will have its first possible payout in the first
quarter of 1999.
Executive salary levels of BFS and BNB were reviewed in December 1997
and certain increases were approved in accordance with the General Policy
detailed below. The primary quantitative measurement utilized in the December
1997 compensation review was the 1997 appreciation in the price of BostonFed
Bancorp, Inc. stock. Said appreciation was evaluated by comparison to several
indices including the Amex Market Index, the MG Index for Savings Institutions,
the Dow Jones Industrial Average, the S&P 500, and Nasdaq. Other criteria
considered were the successful acquisition of BNB by the Company in February
1997 and the improvement in such measurements as earnings per share and return
on equity.
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.
7
<PAGE> 11
The Banks participate in a number of a salary surveys each year to
obtain contemporaneous compensation data. The Company and the Banks engaged KPMG
Peat Marwick LLP Compensation and Benefits Consultants to update its review of
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 1997 KPMG Peat Marwick Compensation and Benefits Survey, the 1997 W. M.
Sheehan & Company ("Sheehan") Banking Compensation Report, and 1997 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 Company 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 of BFS evaluates the performance of all BFS
executive officers reporting to him and the President of BFS evaluates the
performance of all executive officers reporting to him. The BNB Chief Executive
Officer evaluates the performance of all BNB executive officers. The Company's
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, short-term cash incentives,
perquisites, deferred compensation, 401(k) contributions, short or long term
stock-based grants or incentives, ESOP allocations, fringe benefits, and any
other type of remuneration deemed by each Board to be appropriate. Salaries are
determined based upon the guidelines specified above. 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.
Short-term cash incentives are determined primarily by the objective criteria
in the STIP, but the Compensation Committee may at its discretion grant
Performance Bonuses after review of management's recommendations. A Performance
Bonus was earned by Mr. Simas during 1997. No other Performance Bonuses were
earned by executive officers during 1997. Mr. Holland was paid a Performance
Bonus during 1997 that was earned in 1996.
Chief Executive Officer. The salary of the Chief Executive Officer was
reviewed in December 1997 and set at $300,000 effective January 1998. In
determining the Chief Executive Officer's salary level, the Compensation
Committee reviewed four compensation surveys, including a special updated survey
by KPMG Peat Marwick LLP of compensation levels of peer financial institutions
to the Company and the Banks.
The survey material indicated that the new salary of the Chief
Executive Officer was below the average paid at comparably sized financial
institutions. The Chief Executive Officer received a bonus in 1997 upon
completion of the acquisition of BNB. The Chief Executive Officer earned a STIP
bonus in 1997 which was paid in February 1998. Total cash compensation of the
Chief Executive Officer was below the average paid at comparably sized financial
institutions as indicated by the data in the compensation surveys reviewed by
the Committee.
When reviewing the 1997 performance of the Chief Executive Officer, the
Committee relied primarily on the following criteria. The first criteria was the
successful acquisition of BNB which was significantly accretive to the company's
earnings. The second criteria was the appreciation in the price of the Company's
stock. The third criteria was the improvement in financial measurements such as
earnings per share and return on equity.
8
<PAGE> 12
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.
<TABLE>
<CAPTION>
The Compensation Committee The Board of Directors
-------------------------- ----------------------
<S> <C> <C>
Richard J. Dennis, Sr. Edward P. Callahan David F. Holland
Charles R. Kent David P. Conley Charles R. Kent
Irwin W. Sizer Richard J. Dennis, Sr. W. Robert Mill
Irwin W. Sizer, Ph.D.
</TABLE>
STOCK PERFORMANCE GRAPH. The following graph shows a comparison of
cumulative 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, 1997. 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.
[GRAPH]
<TABLE>
<CAPTION>
10/24/95 12/31/95 12/31/96 12/31/97
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
BostonFed Bancorp, Inc. $100.00 $117.50 $149.25 $223.92
MG Index for Savings Institutions 100.00 107.53 140.63 236.72
AMEX Market Index 100.00 104.99 110.79 133.31
</TABLE>
Note: The lines represent quarterly index levels derived from compounded daily
returns that include all dividends. The indexes are reweighted daily, using the
market capitalization on the previous trading day. If the quarterly interval,
based on the fiscal year-end, is not a trading day, the preceding trading day is
used. The index level for all series was set to $100.00 on 10/24/95.
9
<PAGE> 13
SUMMARY COMPENSATION TABLE. The following table shows, for the years
ended 1997, 1996 and 1995 cash compensation paid by Boston Federal Savings Bank
or Broadway National Bank, as well as certain other compensation paid or accrued
for those years, to the Chief Executive Officer of the Company and the four
highest paid executive officers of the Company and the Banks who earned and/or
received salary and bonus in excess of $100,000 in fiscal year 1997 ("Named
Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
------------------------------- ------------------------- ----------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL
NAME AND FISCAL COMPEN- STOCK OPTIONS/ LTIP OTHER
PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) SATION(2) AWARDS($)(3) SARs(#)(4) PAYOUTS(5) COMPENSATION(6)
- ------------------- ------- --------- --------- --------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David F. Holland...... 1997 $291,616 $33,810 -- $ -- -- -- $51,951
Chairman, President & 1996 286,536 50,000 -- 808,600 160,000 -- 29,608
CEO of Company, 1995 247,477 -- -- -- -- -- 31,414
Chairman and CEO of
BFS, Chairman of BNB
David P. Conley....... 1997 173,629 18,371 -- -- -- -- 52,097
Director and Executive 1996 172,296 -- 485,160 95,000 -- 29,826
VP of Company, 1995 151,458 -- -- -- -- 29,656
Director and President
of BFS, Director and
CEO of BNB
John A. Simas......... 1997 130,924 21,540 -- -- -- -- 43,409
Executive V.P., Chief 1996 120,767 15,000 -- 323,440 65,000 -- 23,783
Financial Officer, 1995 107,154 30,000 -- -- -- -- 22,317
Secretary of Company
and BFS and Director of
BNB
Donald R. Draper...... 1997(7) 100,798 44,000 -- -- 15,000 -- 2,375
Director, President and
Secretary of BNB
Dennis J. Furey....... 1997 102,007 10,510 -- -- -- -- 32,821
Senior V.P. of BFS 1996 100,084 -- -- 155,000 30,000 -- 19,135
1995 97,250 -- -- -- -- -- 19,111
</TABLE>
(1) Under Annual Compensation, the column titled "Salary" includes director's
fees and amounts deferred by the Named Executive Officer pursuant to a
401(k) Plan as hereafter defined, pursuant to which employees may defer up
to 10% 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. Bonuses to Messrs. Holland, Conley, and Furey
were paid pursuant to the BFS Short Term Incentive Plan (STIP) as
described later in this document. Mr. Simas' bonus consisted of $14,040
paid pursuant to the BFS STIP plus an additional $7,500. Mr. Draper's
bonus was paid pursuant to a BNB Discretionary Bonus Plan (DBP). The BNB
DBP will be replaced in 1998 by a STIP.
(2) For 1997 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 1996 Incentive Plan, Messrs. Holland, Conley, Simas and
Furey were awarded 65,000,39,000,26,000 and 12,500 shares of Common Stock
in fiscal 1996. The dollar amounts set forth in the table represent the
market value of the shares on the date of grant. Such awards vest in equal
installments at a rate of 20% per year commencing on April 30, 1997. All
awards vest immediately on termination due to death, disability,
retirement, or change in control.
(4) See discussion and tables under "Incentive Plans" elsewhere in the proxy
statement.
(5) For 1997, 1996, and 1995, there were no payouts or awards under any
long-term incentive plan.
(6) For 1997, such amounts (a) include $1,724, $1,870, $2,600, $2,375, and
$1,900 contributed by the respective banks' 401(k) Plans to Messrs.
Holland, Conley, Simas, Draper, and Furey, and (b) $50,227, $50,227,
$40,809 and $30,921 representing the value of shares allocated under the
BFS ESOP for the benefit of Messrs. Holland, Conley, Simas and Furey.
(7) Salary from February 8, 1997, the date of acquisition of BNB by the
Company, and directors' fees. Total salary paid in 1997 was $110,000.
10
<PAGE> 14
EMPLOYMENT AGREEMENTS. BFS 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 BFS and
the Company will be able to maintain a stable and competent management base. The
continued success of BFS 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. BFS 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, 1998 the base salaries for Messrs. Holland,
Conley and Simas are $300,000, $175,000, and $137,500 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 BFS or the
Company for cause as defined in the agreements at any time. In the event BFS 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 BFS 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 BFS or the Company; or (vi) a breach of the agreement by BFS
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 BFS or the Company during
the remaining term of the agreement. BFS 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 BFS 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. BFS
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.
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 BFS.
Payments to the Executive under BFS's agreement will be guaranteed by the
Company in the event that payments or benefits are not paid by BFS. 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 BFS or
the Company, respectively, if the Executive is successful on the merits pursuant
to a legal judgment, arbitration or settlement. The employment agreements also
provide that BFS and the 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, BFS and BNB (the "Banks") and the Company have entered into Change
in Control Agreements with Messrs. Draper and 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 Banks 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
11
<PAGE> 15
Executive terminates his 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, as applicable, 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 Banks' Change in Control Agreements are similar to that of the
Company except that they are subject to renewal by the Boards on an annual
basis. Any payments to the Executive under the Banks' 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.
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 and other covered
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 PLANS. The Company maintains the 1996 Stock-Based Incentive
Plan and the 1997 Stock Option Plan (referred to herein, collectively, as
"Incentive Plans") which provides discretionary awards to officers and key
employees as determined by a committee of non-employee directors. The following
table lists all grants of options to the Named Executive Officers for fiscal
1997 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.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTIONS(1)
- -------------------------------------------------------------------------------------------------------- ----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTION/SARs EXERCISE OR
UNDERLYING GRANTED TO BASE PRICE
OPTIONS/SARs EMPLOYEES IN PER EXPIRATION
NAME GRANTED(#)(2),(3),(4),(5),(6) FISCAL YEAR SHARE DATE(7) 5% 10%
- ------ ----------------------------- ------------ ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Draper.............. 15,000 11.07% $18.82 07/22/07 $178,000 $450,000
</TABLE>
(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 Plans are exercisable in equal
installments at an annual rate of 20% beginning April 30, 1998; 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 becomes
exercisable in the event of a change in control of the Company or Banks
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.
12
<PAGE> 16
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, 1997. 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.
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARs AT OPTION/SARs AT
FISCAL YEAR END(#) FISCAL YEAR END($)
------------------------------- -------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(3)
- -------------------------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C>
David F. Holland(1)......................... 32,000 128,000 $301,920 $1,207,680
David P. Conley(1).......................... 19,000 76,000 179,265 717,060
John A. Simas(1)............................ 13,000 52,000 122,655 490,620
Donald R. Draper(2)......................... 0 15,000 0 45,825
Dennis J. Furey(1).......................... 6,000 24,000 56,610 226,440
</TABLE>
(1) The options 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) The options have an exercise price of $18.82 and become exercisable at a
rate of 20% beginning April 30, 1998. The options will expire ten (10)
years from the date of grant.
(3) Based on market value of the underlying stock at the fiscal year end,
minus the exercise price. The market price on December 31, 1997 was
$21.875.
SHORT TERM INCENTIVE PLAN (STIP). BFS adopted a Short Term Incentive
Plan (STIP) in 1997 which had its first payout in February 1998. The purpose of
the plan is to provide cash incentive bonuses upon the achievement of objective
performance goals to reward achievement and further align management's interests
with that of stockholders. The criteria used for 1997 were Earnings per Share
(EPS), Return on Equity (ROE), Return on Average Assets (ROA) and Efficiency
Ratio. Targeted goals were set for each criteria and percentage payouts
established for reaching or exceeding the specified goals. Awards under this
plan are included in the bonus column of the Summary Compensation Table. BNB has
adopted a similar STIP during 1998 with the first possible payout in 1999. The
BNB STIP replaces a bonus plan previously in effect.
PENSION PLAN. BFS 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 or her 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.
13
<PAGE> 17
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE(1)
-------------------------------------------------------------------
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 22,500 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
160,000(2) 48,000 64,000 80,000 96,000 112,000
</TABLE>
(1) Messrs. Holland, Conley, Simas and Furey are participants.
(2) The maximum allowable salary for 1997 is $160,000. As of December 31,
1997, Messrs. Holland, Conley, Simas and Furey had 22 years, 28 years, 19
years and 18 years, respectively, of credited service (i.e., benefit
service).
BNB PENSION PLAN. Mr. Draper participates in the BNB Pension Plan (a
defined benefit plan). Benefits under this plan are calculated by adding the
following: 1% of five year average salary from 1982-1986 for each year worked
prior to January 1, 1987, plus 1 1/2% of salary for each year thereafter up to
the taxable wage base, plus 2% of salary for each year of service commencing on
January 1, 1987 in excess of Social Security taxable wage base. If Mr. Draper
were to continue his employment at his current salary to normal retirement age
of 65, he would receive an annual pension plan benefit of approximately $45,000.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Company's current policy provides that all loans made by either
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"), BFS made loans to executive officers with discounted interest rates
and loan origination fees.
Set forth below is certain information as of December 31, 1997, with
respect to loans made by BFS on preferential terms, as explained above, to
executive officers whose aggregate indebtedness to BFS exceeded $60,000 at any
time since January 1, 1997 plus any additional indebtedness even if not made on
preferential terms.
<TABLE>
<CAPTION>
BALANCE INTEREST RATE
MATURITY LARGEST AMOUNT AS OF AS OF
DATE DATE OUTSTANDING SINCE DECEMBER DECEMBER TYPE OF
NAME OF EXECUTIVE OF LOAN OF LOAN JANUARY 1, 1997 31, 1997 31, 1997 LOAN
- ----------------- --------- --------- --------------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
John A. Simas 7/82 7/07 $77,412 $71,300 5.25% ARM(1)
</TABLE>
(1) Variable rate first mortgage on primary residence. Rate adjusted annually
based on BFS's cost of funds. Loan granted under the BFS Employee Loan
Plan in 1982.
14
<PAGE> 18
PROPOSAL 2. RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended December
31, 1997 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, 1998, 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 IF DATED, SIGNED AND RETURNED 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 1999 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 27,
1998. Any such proposal will be subject to 17 C.F.R. Section 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 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.
15
<PAGE> 19
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, 1997, 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
Executive Vice President and
Corporate Secretary
Burlington, Massachusetts
March 27, 1998
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.
16
<PAGE> 20
DETACH HERE
PROXY
BOSTONFED BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
April 29, 1998
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 29, 1998, 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
<PAGE> 21
BFB74 F DETACH HERE
[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: David F. Holland and Irwin W. Sizer
FOR VOTE WITHHELD
ALL FROM ALL
[ ] [ ]
[ ] ___________________________________________________
For all nominees except for names(s) written above
FOR AGAINST ABSTAIN
2. The ratification of the appointment of [ ] [ ] [ ]
KPMG Peat Marwick LLP as independent
auditors of BostonFed Bancorp, Inc.
for the fiscal year ending December 31,
1998.
MARK HERE FOR ADDRESS CHANGE AND NOTE CHANGES [ ]
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 Proxy Statement dated March 27, 1998 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: _________________________
