<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)
BOSTONFED BANCORP, INC.
(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 28, 2000
Fellow Shareholders:
You are cordially invited to attend the annual meeting of shareholders
of BostonFed Bancorp, Inc., the holding company for Boston Federal Savings Bank
and Broadway National Bank, Burlington, Massachusetts, which will be held on
April 26, 2000, at 2:00 p.m., at The Renaissance Bedford Hotel, 44 Middlesex
Turnpike, Bedford, 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
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 banks, 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 26, 2000
----------------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
BostonFed Bancorp, Inc. will be held on April 26, 2000, at 2:00 p.m., at The
Renaissance Bedford Hotel, 44 Middlesex Turnpike, Bedford, Massachusetts.
The purpose of the annual meeting is to consider and vote upon the
following matters:
1. The election of four directors to three-year terms of office;
2. The ratification of the appointment of KPMG LLP as independent
auditors of the company for the fiscal year ending December
31, 2000; 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 3, 2000, 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.
By Order of the Board of Directors
John A. Simas
Executive Vice President and
Corporate Secretary
Burlington, Massachusetts
March 28, 2000
<PAGE> 4
BOSTONFED BANCORP, INC.
-----------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 2000
-----------------------
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 26, 2000 (the "Annual
Meeting"), and at any adjournments thereof. The 1999 Annual Report to
Shareholders, including consolidated financial statements for the fiscal year
ended December 31, 1999, accompanies this proxy statement, which is first being
mailed to record holders on or about March 28, 2000.
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 DIRECTOR NAMED IN THIS PROXY STATEMENT AND
FOR THE RATIFICATION OF KPMG LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2000.
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 vote instruction from such beneficial owners, and
will reimburse such holders for their reasonable expenses in doing so.
<PAGE> 5
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 3, 2000, 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 4,907,481 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 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, EquiServe. The Board of Directors has designated EquiServe to act as the
inspector of election and to tabulate the votes at the Annual Meeting. 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.
2
<PAGE> 6
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, who owns more
than 5% of the Company's Common Stock as of the Record Date. The Record Date is
defined as the date for the determination of shareholders entitled to receive
notice of and to vote at the Annual Meeting.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Title of Class Name and Address of Beneficial Owner Beneficial Ownership Class
- -------------- ------------------------------------------- --------------------- ----------
<S> <C> <C> <C>
Common Stock.................. Boston Federal Savings Bank 529,000 (1) 10.8%
Employee Stock Ownership Plan ("ESOP")
17 New England Executive Park
Burlington, Massachusetts 01803
Common Stock.................. Thomson Horstmann & Bryant, Inc. 503,100 (2) 10.3
Park 80 West/Plaza Two
Saddle Brook, New Jersey 07663
Common Stock.................. John Hancock Advisers, Inc. 436,700 (3) 8.9
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
</TABLE>
- -------------------------
(1) The Investors Bank and Trust 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 3, 2000, 362,721 shares
had been allocated under the ESOP and 166,279 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").
(2) Based upon information in an amendment to the Schedule 13G filed on January
11, 2000.
(3) Based upon information filed in a Schedule 13G amended on January 15, 1999.
PROPOSALS TO BE VOTED ON AT THE MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of ten
directors and is divided into three classes. Each of the ten members of the
Board of Directors of the Company also presently serves as a director of the
Boston Federal Savings Bank ("BFS") and Broadway National Bank ("BNB")
(collectively, the "Banks"), both of which are the wholly-owned primary
operating subsidiaries of the Company. Directors are elected for staggered
terms, with the term of office of only one of the three classes of directors
expiring
3
<PAGE> 7
each year. Directors serve until their successors are elected and
qualified. Under the Company's Bylaws, a person may only serve as a director
until the later of reaching age 72 or, in the case of a director serving in such
capacity as of August 1, 1995, until April 30, 2001 or until their successor is
elected and qualified.
The four nominees proposed for election at this Annual Meeting are
Edward P. Callahan, Richard J. Dennis, Sr., Patricia M. Flynn, Ph.D. 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; 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
OCCUPATION AT PRESENT OF TERM STOCK PERCENT
AND FOR PAST FIVE DIRECTOR AS BENEFICIALLY OF
YEARS AGE SINCE DIRECTOR OWNED(1) CLASS
- --------------------- --- -------- ---------- ------------ -------
NOMINEES
<S> <C> <C> <C> <C> <C>
Edward P. Callahan.......................... 71 1982(2) 2003 33,958(3,4) *
Former Executive Vice President of BFS.
Richard J. Dennis, Sr....................... 74 1986(5) 2003 41,838(3,4) *
Sole proprietor of Casey and Dennis,
a real estate appraisal firm.
Patricia M. Flynn, Ph.D..................... 49 2000 2003 2,500(6,7) *
Dean of the McCallum Graduate School
of Business and Professor of Economics
at Bentley College.
Charles R. Kent............................. 71 1986(5) 2003 36,128(3,4) *
President of the Rush-Kent Insurance
Agency.
</TABLE>
(Continued on following page)
<PAGE> 8
<TABLE>
<CAPTION>
SHARES OF
NAME AND PRINCIPAL EXPIRATION COMMON
OCCUPATION AT PRESENT OF TERM STOCK PERCENT
AND FOR PAST FIVE DIRECTOR AS BENEFICIALLY OF
YEARS AGE SINCE DIRECTOR OWNED(1) CLASS
- --------------------- --- -------- ---------- ------------ -------
CONTINUING DIRECTORS
<S> <C> <C> <C> <C> <C>
Gene J. DeFeudis............................ 58 2000 2001 2,500(6,7) *
Owns and manages DeFeudis Realty
Corporation, Ellsmere Investment
Company and the Birchwood Development
Companies. Former owner of Diversified
Ventures, Inc., d/b/a Forward Financial
Company and Ellsmere Insurance Agency.
David F. Holland............................ 58 1986(5) 2001 221,907(8,9,10) 4.40%
Chairman, President and Chief Executive
Officer of the Company and Chief
Executive Officer of BFS.
Irwin W. Sizer, Ph.D........................ 89 1986(5) 2001 34,114(3,4) *
Retired Professor from Massachusetts
Institute of Technology and the
former President of Whitaker Health
Services Fund, a not-for-profit
medical research fund.
David P. Conley............................. 56 1992 2002 133,862(8,9,10) 2.68%
Executive Vice President, Assistant
Secretary and Assistant Treasurer
of the Company and President of
BFS and President and Chief
Executive Officer of BNB.
Richard J. Fahey............................ 46 2000 2002 2,500(6,7) *
Principal of Trammell Crow Company, Inc.
W. Robert Mill.............................. 70 1977(2) 2002 32,428(3,4) *
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............................... 50 -- -- 97,303(8,9) 1.96%
Executive VP, Chief Financial
Officer and Corporate Secretary of
the Company and BFS and Executive
Vice President, Chief Financial Officer
and Director of BNB.
Dennis J. Furey............................. 51 -- -- 48,048(8,9) *
Senior VP-- Commercial, Construction
and Business Lending of BFS.
Marylea R. Oates............................ 53 -- -- 46,507(8,9) *
Senior Vice President--Residential
Lending of BFS.
Stock Ownership of all Directors
and Executive Officers as a Group
(20 persons)............................. 890,805(11) 16.53%
</TABLE>
- -------------------------------
* Represents less than 1.0% of the Company's voting securities.
1 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).
2 Includes years of service as a director of the Company's predecessor, BFS.
3 Includes 4,000 unvested shares of the 10,000 shares awarded to each outside
director, at April 30, 1996, under the Amended and Restated 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. The remaining 40% of the shares will vest 20% on April 15, 2000, and
20% on April 15, 2001. 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.
(Footnotes continued on following page)
5
<PAGE> 9
4 Includes 16,000 options granted to each outside director at April 30, 1996,
under the Incentive Plan which are currently exercisable or will become
exercisable within 60 days and excludes 4,000 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. The options
for the 40% of the remaining shares will vest 20% on April 30, 2000, and
20% on April 30, 2001. All unvested options will vest immediately upon
death, disability, retirement or a change in control.
5 Reflects service as a director of Leader Federal Savings and Loan
Association ("LFS"), which was merged with and into BFS on October 1, 1986.
Messrs. Holland, Dennis, Kent and Dr. Sizer began service on the LFS Board
in 1982, 1966, 1978 and 1978, respectively.
6 Includes 2,500 unvested shares that were awarded each to Messrs. DeFeudis
and Fahey and Dr. Flynn under the Incentive Plan upon their election to the
Board in February 2000. Such awards begin vesting at a rate of 20% per year
on October 15, 2000. 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. Mr. DeFeudis was elected as a
director by the Board of Directors pursuant to an agreement Mr. DeFeudis
had with the Company in connection with the sale of Diversified Ventures,
Inc. d/b/a Forward Financial Company and Ellsmere Insurance Agency, Inc.
7 Excludes 5,000; 5,000; and 5,000 shares subject to unexercisable options
granted Messrs. DeFeudis and Fahey and Dr. Flynn under the 1996 Incentive
Plan upon their election to the Board in February 2000. Options granted
under the Incentive Plan begin vesting at a rate of 20% per year commencing
on October 15, 2000, but will vest immediately upon death, disability,
retirement or a change in control.
8 Includes 26,000; 15,600; 10,400; 5,000; and 5,000 unvested shares of the
65,000; 39,000; 26,000; 12,500; and 12,500 shares that were awarded to
Messrs. Holland, Conley, Simas and Furey and Ms. Oates, respectively, under
the Incentive Plan. Such awards commenced vesting at a rate of 20% per year
beginning on April 30, 1997. The remaining 40% of the shares will vest 20%
on April 15, 2000, and 20% on April 15, 2001. 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.
9 Includes 128,000; 76,000; 52,000; 24,000; and 24,000 shares subject to
options granted to Messrs. Holland, Conley, Simas, Furey and Ms. Oates,
respectively, which are currently exercisable or will become exercisable
within 60 days and excludes 32,000;19,000;13,000; 6,000; and 6,000 shares
subject to unexercisable options granted to Messrs. Holland, Conley, Simas,
Furey and Ms. Oates, respectively, 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 for Messrs. Holland, Conley,
Simas, Furey and Ms. Oates. The options for the remaining 40% of the shares
will vest 20% on April 30, 2000, and 20% on April 30, 2001. All unvested
options will vest immediately upon death, disability, retirement or a
change in control.
10 Does not include 8,669 and 781 Common Stock share equivalents credited to
the Defined Contribution Restoration Plan, which is described elsewhere in
this document, accounts of Mr. Holland and Mr. Conley, respectively.
11 Includes a total of 105,060 shares awarded under the Incentive Plan as to
which voting may be directed. Includes a total of 475,000 shares underlying
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
requirements applicable to its officers, directors and greater than ten percent
beneficial owners were complied with.
6
<PAGE> 10
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 1999, the Board of Directors of the Company
held seven meetings. Except for Dr. Sizer, who due to illness attended 66% of
Board and committee meetings, all of the directors of the Company attended at
least 75% of the total number of the Company's Board meetings held and committee
meetings on which such directors served during fiscal 1999. 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 currently consists of directors Callahan, Dennis, Flynn, 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 fiscal 1999.
NOMINATING COMMITTEE. The Company's Nominating Committee for the 2000
Annual Meeting consists of Messrs. Conley, Holland 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 Corporate 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 Exchange Act and the Company's Bylaws. Article
II, Section 1 of the Bylaws govern eligibility to qualify as a director. The
information provided must establish the nominee's qualifications under these
Bylaw provisions. The Nominating Committee met on February 23, 2000.
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
met one time during fiscal 1999.
COMPENSATION COMMITTEE. The Compensation Committee of the Company and
the Personnel Committees of BFS and BNB (collectively, the "Compensation
Committee") currently consists of Messrs. DeFeudis, Dennis, Fahey, Kent and Dr.
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 1999.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. Members of the Board of Directors of the Company
currently receive an annual retainer of $4,000 and a fee of $500 for each Board
meeting attended and a fee of $250-$500 for each committee meeting attended.
Directors of BFS are currently paid an annual retainer of $4,000 and a fee of
$500 for each Board meeting attended. Directors are currently paid a fee of
$250-$500 for meetings of committees of the BFS Board on which they serve. BNB's
Directors are paid an annual retainer of $1,000 and a fee of $250 for each Board
or Committee Meeting attended. Members of management who are also directors do
not receive any director compensation.
7
<PAGE> 11
CONSULTING AGREEMENT. On December 7, 1999, and in connection with the
Company's acquisition of Diversified Ventures, Inc. d/b/a Forward Financial
Company and Ellsmere Insurance Agency (collectively, "Forward Financial"), the
Company entered into a consulting agreement with Mr. DeFeudis. For a description
of such acquisition, see "Transactions with Certain Related Persons." The
agreement, which is for a two-year term, commenced on December 7, 1999 and
provides that Mr. DeFeudis be paid a quarterly fee in an amount of $125,000 for
consulting services to the Company.
INCENTIVE PLANS. The Company maintains two plans, the Amended and
Restated BostonFed Bancorp, Inc. 1996 Stock-Based Incentive Plan (the "Incentive
Plan") and the BostonFed Bancorp, Inc. 1997 Stock Option Plan, approved by
shareholders, 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. Under the Incentive Plan, each outside director at that time was
granted on April 30, 1996, 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 Incentive Plan is $12.44 per share, which was the fair
market value of the shares on the date of grant. Shares subject to options
granted commenced vesting at a rate of 20% per year beginning on April 30, 1997.
The Directors' Awards became exercisable in five equal annual installments of
20% commencing on April 30, 1997. The remaining awards will vest on April 15,
2000, and April 15, 2001. 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 BostonFed Bancorp, Inc. 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 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 Compensation Committee has
prepared the following report for inclusion in this proxy statement.
The Banks' and the Company's Executive Compensation Policies ensure
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. Short Term Incentive Plans
("STIPs") were adopted by BFS (not including Forward Financial) in 1997, and BNB
in 1998, which measure specific objective financial performance results upon
which to base payouts to executives and other employees. Payouts under these
plans are reflected in the Bonus column of the Summary Compensation Table.
8
<PAGE> 12
Executive salary levels of BFS and BNB were reviewed in December 1999
and certain increases approved in accordance with the General Policy detailed
below. The primary quantitative measurements utilized in the December 1999
compensation review were the improvement in such measurements as earnings per
share and return on equity, as well as the performance of the Company's stock
relative to comparable financial institutions.
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.
The Banks participate in salary surveys each year to obtain
contemporaneous compensation data. The Company and the Banks engaged William M.
Mercer 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 1999 William M. Mercer
Compensation and Benefits Survey.
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 that permits 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 Chief Executive
Officer of BNB 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 of the Banks. Upon review, the Boards of the Banks 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, defined
benefits restoration plan, defined contribution restoration plan, 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
9
<PAGE> 13
guidelines provided for in such plans. Benefits under the ESOP and 401(k) plan
are also subject to limitations imposed by ERISA. The defined benefits and
contribution restoration plans, described later in this document, restore to
participants, those benefits limited by tax regulation under the ESOP, 401(k)
and retirement plans. Short-term cash incentives are determined primarily by the
objective criteria in the STIP.
Chief Executive Officer. The salary of the Chief Executive Officer was
reviewed in December 1999 and set at $360,000 effective January 2000. In
determining the Chief Executive Officer's salary level, the Compensation
Committee reviewed an independent survey by William M. Mercer.
The survey material indicated that the new salary of the Chief
Executive Officer was below the average paid at comparable financial
institutions. The Chief Executive Officer earned a STIP bonus in 1999 which was
paid in February 2000. Total cash compensation of the Chief Executive Officer
was below the average paid at comparable financial institutions as indicated by
the data in the compensation survey reviewed by the Committee.
When reviewing the 1999 performance of the Chief Executive Officer, the
Committee considered the financial performance of the Company during 1999
focusing on the significant improvement in earnings, earnings per share and
return on equity. The Committee also considered the successful acquisition of
Forward Financial and Ellsmere Insurance Agency, Inc. and the performance of the
Company's stock compared to other over the last twelve months, which is detailed
in the Stock Performance Graph contained in this proxy statement.
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
10
<PAGE> 14
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 Custom Peer Group
Index for the period beginning on October 24, 1995, the day the Company's Common
Stock began trading, through December 31, 1999. 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.
COMPARISON OF TOTAL RETURNS OF
BOSTONFED BANCORP, INC., AMEX MARKET INDEX
AND MG INDEX FOR SAVINGS INSTITUTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUMMARY
10/24/95 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BostonFed Bancorp, Inc.............. 100 97.92 124.37 187.21 153.32 141.78
AMEX Market Index................... 100 103.63 105.28 131.66 141.32 180.59
MG Index for Savings Institutions... 100 101.02 119.45 202.21 142.48 138.46
</TABLE>
NOTES:
A. The lines represent annual 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 monthly 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 October 24, 1995.
- --------------------------------------------------------------------------------
11
<PAGE> 15
SUMMARY COMPENSATION TABLE. The following table shows, for the years ended
1999, 1998 and 1997 cash compensation paid by BFS, as well as certain other
compensation paid or accrued for those years, to the Chief Executive Officer of
the Company and the other four highest paid executive officers of the Company
and the Banks who earned and/or received salary and bonus in excess of $100,000
in fiscal year 1999 ("Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
------------------------------- ------------------------- ---------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND FISCAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) SATION(2) AWARDS($)3 SARS(#)(4) PAYOUTS(5) SATION(6)
- ---------------------------- ------ --------- -------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David F. Holland................. 1999 $318,564 $87,120 -- $-- -- -- $181,648
Chairman, President & CEO of 1998 311,638 50,625 -- -- -- -- 39,142
Company, Chairman and CEO of 1997 291,616 33,810 -- -- -- -- 51,951
BFS, Chairman of BNB
David P. Conley.................. 1999 193,050 51,519 -- -- -- -- 52,185
Director and Executive VP of 1998 186,602 28,114 -- -- -- -- 38,815
Company, Director and President 1997 173,629 18,371 -- -- -- -- 52,097
of BFS, Director, President and
CEO of BNB
John A. Simas.................... 1999 144,752 34,849 -- -- -- -- 35,812
Executive VP, Chief Financial 1998 138,573 26,347 -- -- -- -- 34,598
Officer, Secretary of Company 1997 130,924 21,540 -- -- -- -- 43,409
and BFS and Executive EVP, CFO
and Director of BNB.
Dennis J. Furey.................. 1999 108,853 21,680 -- -- -- -- 24,819
Senior VP of BFS. 1998 108,708 15,109 -- -- -- -- 25,675
1997 102,007 10,510 -- -- -- -- 32,821
Marylea R. Oates................. 1999 106,550 22,202 -- -- -- -- 25,148
Senior VP of BFS. 1998 105,052 11,513 -- -- -- -- 25,675
1997 94,584 10,633 -- -- -- -- 31,793
</TABLE>
- ------------------------
1 Salaries reported under Annual Compensation include director's fees (1997 and
1998 only) 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
6% of their compensation, up to the maximum limits under the Internal Revenue
Code of 1986, as amended (the "Code"). Bonuses reported under Annual
Compensation are reported in the year earned regardless of when paid. Bonuses
to Messrs. Holland, Conley, Simas, Furey and Ms. Oates were paid pursuant to
the BFS STIP as described later in this document.
2 For 1999 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, Furey and Ms.
Oates were awarded 65,000, 39,000, 26,000, 12,500 and 12,500 shares of Common
Stock in fiscal 1996. Such awards have been vesting in equal installments at
a rate of 20% per year commencing on April 30, 1997 and the remaining 40%
will vest 20% on April 15, 2000 and 20% on April 15, 2001. All awards vest
immediately on termination due to death, disability, retirement, or change in
control. As of December 31, 1999, Messrs. Holland, Conley, Simas, Furey and
Ms. Oates had 26,000, 15,600, 10,400, 5,000 and 5,000 unvested stock awards,
respectively, which were valued at $323,440, $194,064, $129,376, $62,000 and
$62,000, respectively.
4 See discussion and table under "Stock-Based Incentive Plans" elsewhere in
this proxy statement. On December 12, 1999, Shaun W. McGee and John D. Mullen
were each granted 15,000 stock options. Mr. McGee is President and Mr. Mullen
is Senior Vice President of Forward Financial, which the Company acquired on
December 7, 1999. Messrs. McGee and Mullen were designated as Executive
Officers in January 2000. The options are exercisable at $14.57 per share and
vest at 20% per year beginning October 15, 2000.
(Footnotes continue on following page)
12
<PAGE> 16
5 For 1999, 1998, and 1997, there were no payouts under any long-term incentive
plan.
6 For 1999, such amounts (a) include $1,969; $2,233; $2,930; $2,110; and $2,140
contributed by the respective banks' 401(k) Plans to Messrs. Holland, Conley,
Simas, Furey and Ms. Oates; (b) $31,492, $31,492, $28,832, $20,765 and
$21,064 representing the value of shares allocated under the BFS ESOP
including forfeitures, for the benefit of Messrs. Holland, Conley, Simas,
Furey and Ms. Oates; (c) $138,089 and $12,395 for Mr. Holland and Mr. Conley,
respectively, representing the value of benefits accrued for each in the
Defined Contribution Restoration Plan, for the years 1996 through 1999; and
(d) includes $10,098, $6,066, $4,050, $1,944 and $1,944 in dividends on stock
awards credited to Messrs. Holland, Conley, Simas, Furey and Ms. Oates,
respectively, during fiscal 1999.
EMPLOYMENT AGREEMENTS. The Company and BFS have entered into employment
agreements with Messrs. Holland, Conley and Simas (individually, the
"Executive") to ensure that the Company and BFS will be able to maintain a
stable and competent management team. The continued success of the Company and
BFS depends to a significant degree on the skills and competence of Messrs.
Holland, Conley and Simas.
Each of the Company employment agreements provide for a three-year term
of employment that extends on a daily basis until either the Executive or the
Company provides written notice of non-renewal, at which time the term of the
agreement becomes a fixed three-year term. Each of the BFS employment agreements
provide for a three-year term of employment that BFS may extend on an annual
basis following a performance evaluation of the Executive. Under the employment
agreements, the base salary of the Executive is reviewed annually by the board
of directors or a committee of the board of directors. As of January 1, 2000,
the base salaries for Messrs. Holland, Conley and Simas are $360,000, $210,000,
and $165,000, respectively. In addition to the base salary, the agreements
provide for, among other things, participation in stock benefits plans and other
certain employee fringe benefit programs applicable to executive personnel.
Each of the agreements provide that the Company or BFS, as applicable,
may terminate the Executive's employment for cause, as described in the
respective agreements, at any time. In the event that either the Company or BFS
terminates the Executive's employment for reasons other than for cause, or in
the event the Executive terminates employment with the Company or BFS upon any:
(a) notice to the Executive of non-renewal of the term of the agreement, (b)
failure to re-elect the Executive to the Executive's current or higher offices;
(c) a demotive change in the Executive's functions, duties or responsibilities;
(d) a relocation of the Executive's principal place of employment by more than
25 miles; (e) a reduction in compensation benefits or perquisites being provided
to the Executive under the agreement; (f) liquidation or dissolution of the
Company or BFS; or (g) breach of the agreement by the Company or BFS, then the
Executive or, in the event of death, Executive's beneficiary will receive an
amount equal to the remaining compensation and STIP payments and benefits that
would have been made on the Executive's behalf to any employee benefit plans of
the Company or BFS during 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, following a change in control of the Company
or BFS, the Executive's employment involuntarily terminates, the Executive
voluntarily terminates employment at any time during the term of the agreement
as a result of any demotion, loss of title, office or significant authority,
reduction in compensation or benefits or relocation of Executive's principal
place of employment by more than 25 miles, or the Executive voluntarily
terminates employment for any reason within the 30-day period following the date
that is one year from the change in control, then the Executive or, in the event
of the Executive's death, Executive's beneficiary would receive a severance
payment equal to three (3) times the greater of: (i) the Executive's average
annual compensation, including STIP and compensation attributable to the
exercise of stock options, for the five most recent taxable years of the
Executive, or (ii) the highest annual compensation, excluding compensation
attributable to the exercise of stock options, for any of the five most recent
taxable years of the Executive. The Company or BFS would also continue the
Executive's life,
13
<PAGE> 17
pension, medical, dental, 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 not receive duplicative
payments or benefit coverage under the agreements.
Section 280G of the Internal Revenue Code (the "Code") provides that
severance payments that equal or exceed three times the individual's base amount
are deemed to be "excess parachute payments" if they are contingent upon a
change in control. Individuals receiving excess parachute payments are subject
to a 20% excise tax on the amount of such excess payments, and the Company would
not be entitled to deduct the amount of such excess payments. Payments under the
Company agreements in the event of a change in control may constitute some
portion of an excess parachute payment under Section 280G of the Code, resulting
in the imposition of an excise tax on the recipient and denial of the deduction
for such excess amounts to the Company. Should such excise tax be assessed, the
Company will provide the Executive with a full tax gross-up so that on an
after-tax basis, the result to the Executive will be the same as if the excise
tax had not been imposed. The BFS agreements limit payments under the agreements
in connection with a change in control to $1 less than the Executive's parachute
limitation under Section 280G of the Code.
Payments to the Executive under the BFS employment agreement are
guaranteed by the Company if the payments are not made by BFS. All reasonable
costs and legal fees paid or incurred by the Executive pursuant to any dispute
or question of interpretation relating to the agreements will be paid by the
Company or BFS if the Executive is successful on the merits pursuant to a legal
judgment, arbitration or settlement. The employment agreements also provide that
the Company and BFS shall indemnify the Executive to the fullest extent
allowable under Delaware and federal law, respectively.
CHANGE IN CONTROL AGREEMENTS. For similar reasons as with the
employment agreements, the Company and BFS have each entered into change in
control agreements with Mr. Furey and Ms. Oates (the "Executive"). The Company
agreements provide for a thirty-month term that extends on a daily basis until
either the Executive or the Company provides written notice of non-renewal at
which time the term of the agreement becomes a fixed thirty-month term. Each of
the BFS agreements provide for a thirty-month term that BFS may extend on an
annual basis following a performance evaluation of the Executive. Under the
agreements if, following a change in control of the Company or BFS, the
Executive's employment involuntarily terminates or the Executive voluntarily
terminates employment as a result of any demotion, loss of title, office or
significant authority, reduction in annual compensation or benefits, or
relocation of employment by more than 25 miles, or the Executive voluntarily
terminates employment for any reason within the 30-day period following the date
that is one year from the change in control, then the Executive, or in the event
of the Executive's death, Executive's beneficiary or beneficiaries or estate, as
the case may be, would receive a sum equal to two and one-half (2 1/2) times the
greater of (i) Executive's average annual compensation, including STIP and
compensation attributable to the exercise of stock options, for the five most
recent taxable years of the Executive, or (ii) the highest annual compensation,
excluding compensation attributable to the exercise of stock options, for any of
the five most recent taxable years of the Executive. The Company or BFS would
also continue the Executive's life, pension, medical, dental and disability
coverage for thirty full calendar months from the date of termination.
Notwithstanding that both agreements provide for a severance payment in the
event of a change in control, the Executive would not receive duplicative
payments under the agreements.
Payments to the Executive under the BFS change in control agreement
will be guaranteed by the Company if the payments or benefits are not paid by
BFS. Notwithstanding that both agreements provide for a severance payment in the
event of a change in control, the Executive would not receive duplicative
payments under the agreements.
14
<PAGE> 18
Section 280G of the Code provides that severance payments that equal or
exceed three times the individual's base amount are deemed to be "excess
parachute payments" if they are contingent upon a change in control. Individuals
receiving excess parachute payments are subject to a 20% excise tax on the
amount of such excess payments, and the Company would not be entitled to deduct
the amount of such excess payments. Payments under the Company agreements in the
event of a change in control may constitute some portion of an excess parachute
payment under Section 280G of the Code, resulting in the imposition of an excise
tax on the recipient and denial of the deduction for such excess amounts to the
Company. Should such an excise tax be assessed, the Company will provide the
Executive with a full tax gross-up so that on an after-tax basis, the result to
the Executive will be the same as if the excise tax had not been imposed. The
BFS agreements limit payments under the agreements in connection with a change
in control to $1 less than the Executive's parachute limitation under Section
280G of the Code.
STOCK-BASED INCENTIVE PLANS. The Company maintains the Incentive Plan
and the 1997 Stock Option Plan (referred to herein, collectively, as "Incentive
Plans") which provide discretionary stock-based awards to officers and key
employees as determined by a committee of non-employee directors.
SHORT TERM INCENTIVE PLAN (STIP). BFS and BNB maintain STIPs. The
purpose of the plans is to provide cash incentive bonuses upon the achievement
of objective performance goals to reward achievement and further align
management's interests with that of stockholders. The criteria used for 1999
were certain performance ratios of the Company, specifically Earnings per Share
(EPS), Return on Equity (ROE), Return on Average Assets (ROA), Efficiency Ratio
and various personal business or departmental goals. Targeted goals were set for
each criteria and percentage payouts established for reaching or exceeding the
specified goals. Awards under this plan are included in the Bonus column of the
Summary Compensation Table.
The following table provides certain information with respect to the
number of shares of Common Stock represented by outstanding options held by the
Named Executive Officers as of December 31, 1999. Also reported are the values
for "in-the-money" options which represent the positive spread between the
exercise price of any such existing stock options and the year end price of the
Common Stock.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTION/SARS
AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
----------------------------- ----------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
- ---- ----------------------------- ----------------------------
<S> <C> <C> <C> <C>
David F. Holland(1) ................ 96,000 64,000 $329,760 $219,840
David P. Conley(1) ................. 57,000 38,000 195,795 130,530
John A. Simas(1) ................... 39,000 26,000 133,965 89,310
Dennis J. Furey(1) ................. 18,000 12,000 61,830 41,220
Marylea R. Oates(1) ................ 18,000 12,000 61,830 41,220
</TABLE>
- -----------------------------
1 The options have an exercise price of $12.44 and became 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. On December 31, 1999, the market price of the Company's
Common Stock was $15.875.
15
<PAGE> 19
PENSION PLAN. BFS and BNB participate in the Financial Institutions
Retirement Plan, administered by the Pentegra Group, which is a defined benefit
pension plan for their 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.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE(1)
-----------------------------------------------------------------------------
FINAL AVERAGE EARNINGS 15 20 25 30 35
- ---------------------- ------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C>
$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
200,000(2) 60,000 80,000 100,000 120,000 140,000
300,000(2) 90,000 120,000 150,000 180,000 210,000
350,000(2) 105,000 140,000 175,000 210,000 245,000
400,000(2) 120,000 160,000 200,000 240,000 280,000
</TABLE>
- ------------------------
1 The maximum allowable salary for 1999 is $160,000. As of December 31, 1999,
Messrs. Holland, Conley, Simas, Furey and Ms. Oates had 25 years, 30 years,
21 years, 21 years and 29 years, respectively, of credited service (i.e.,
benefit service).
2 Messrs. Holland, Conley, and Simas participate in the Defined Benefit
Restoration Plan ("DBRP"), which is described elsewhere in this Proxy
Statement. The table reflects the combined benefits of the Defined Benefit
Plan and the DBRP for incomes in excess of $160,000 in 1999.
DEFINED CONTRIBUTION AND BENEFIT RESTORATION PLANS. BFS adopted a
Defined Benefit Restoration Plan ("DBRP") and a Defined Contribution Restoration
Plan ("DCRP") in 1999. The purpose of these plans is to equalize for all
employees the benefits derived from both defined benefit and defined
contribution plans. The DBRP and DCRP function by restoring benefits lost due to
tax-qualified plan contributions and income limitations. Mr.
Holland, Mr. Conley, and Mr. Simas are participants in the DBRP and DCRP plans.
The DCRP is an excess benefit type plan which is operated in
conjunction with the BFS 401(k) and ESOP qualified plans, which provides
benefits that would have been provided under the qualified plans but for
qualified plan benefit and contribution limitations. The DCRP provides
participants with an incremental 401(k) bank match on the participant's 401(k)
contributions resulting in the total BFS match that would have been made without
qualified plan limitations. The DCRP also provides participants with an
incremental benefit resulting in what the participant would have received as an
ESOP contribution without qualified plan limitations. The amount of annual
dollar benefit resultant from the incremental 401(k) and ESOP benefits is
converted to Company Common Stock equivalent shares at the average of high and
low price on December 31 of each year. These equivalent shares are then credited
to the participant's DCRP account. The annual income resultant from the DCRP
crediting is reflected in the All Other Compensation column of the Summary
Compensation Table. The details of the crediting are stated in footnote number
ten of the Stock Ownership Table and footnote number six of the Summary
Compensation Table contained earlier in this proxy statement.
16
<PAGE> 20
The DBRP functions in a similar manner. It restores to participants the
value of benefit service that would have been credited under the defined benefit
pension plan, but for qualified plan limitations. Participants thus earn pension
benefits determined by the pension plan formulas without regard to defined
benefit income limitations. The amount of combined total pension benefits from
both the pension plan and the DBRP is reflected in the pension plan table. BFS
is contractually obligated by the DBRP to pay to each participant upon
retirement the difference between the actual benefit paid by the pension plan
and the benefit that would have been paid without qualified plan limitations.
The DBRP also functions to remove the defined benefit plan limitations on the
death benefit payout to the pension plan. The death benefit is thus restored to
the pension plan formula benefit without regard to qualified plan limitations.
The DBRP also serves to mitigate the benefit reduction resultant from an early
retirement after age 55 as detailed in the pension plan section of this proxy
statement.
The Company guarantees payment under the DBRP and DCRP.
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.
In late 1999, the Company acquired Forward Financial for $38.3 million
in cash. In connection with such transaction, Gene J. DeFeudis, the sole owner
of Diversified, entered into a contract with the Company to provide consulting
services. See "Directors Compensation--Consulting Agreement." Subsequent to the
transaction, Mr. DeFeudis was appointed as a director of the Company by the
Board of Directors for a term which expires in 2001. The purchase price and
consulting agreement were determined in the context of an arms-length
transaction through negotiations between the Company and Mr. DeFeudis with both
parties being advised by investment banking firms.
PROPOSAL 2. RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended December
31, 1999 were KPMG LLP. The Company's Board of Directors has reappointed KPMG
LLP to continue as independent auditors for the Banks and the Company for the
year ending December 31, 2000, subject to ratification of such appointment by
the shareholders.
Representatives of KPMG 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 LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
17
<PAGE> 21
ADDITIONAL INFORMATION
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy statement and
form of proxy relating to the 2000 Annual Meeting of Shareholders, a shareholder
proposal must be received by the Corporate Secretary of the Company at the
address set forth on the first page of this proxy statement not later than
November 28, 2000. Any such proposal will be subject to 17 C.F.R. ss. 240.14a-8
of the Rules and Regulations under the Exchange Act.
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 and to nominate
persons for election to the Board of Directors. 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. Additionally, in the case of
nominations to the Board of Directors, certain information regarding the nominee
must be provided, including information establishing that a nominee satisfies
the eligibility requirements contained in the Bylaws. Such qualifications
generally consist of requirements that any Board member or nominee: 1) reside in
or have significant business ties to the communities served by the Company; 2)
not be affiliated with a competing financial institution; and 3) not have been
the subject of any past criminal or regulatory sanctions. Additionally, agents
of or persons acting in concert with any non-qualified person also would be
ineligible for nomination. 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. For example, assuming that the 2001 Annual Meeting of Shareholders
will be held on April 25, 2001 and that notice was given by the Company at least
100 days in advance of this meeting, then to properly bring business before such
meeting, a shareholder must give written advance notice to the Corporate
Secretary of the Company no later than January 25, 2001.
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.
18
<PAGE> 22
A COPY OF THE FORM 10-K (WITHOUT EXHIBITS) FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999, 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 28, 2000
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.
19
<PAGE> 23
DETACH HERE
PROXY
BOSTONFED BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
April 26, 2000
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 at 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 at the Annual Meeting of Shareholders, to be held on April 26, 2000, at
2:00 p.m. Eastern Daylight Saving Time, at the Renaissance Bedford Hotel, 44
Middlesex Turnpike, Bedford, 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 the 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.
- ------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------- -------------
<PAGE> 24
DETACH HERE
Please mark
[X] votes as in
this example
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS
<S> <C> <C>
1. The election as directors of 2. The ratification of the appointment FOR AGAINST ABSTAIN
all nominees listed (except of KPMG LLP as independent [ ] [ [ [ ]
as marked to the contrary auditors of BostonFed Bancorp, Inc.
below). for the fiscal year ending December 31, 2000.
NOMINEES: (01) Edward P. Callahan,
(02) Richard J. Dennis, Sr.,
(03) Patricia M. Flynn,
(04) Charles R. Kent
FOR ALL [ ] [ ] VOTE WITHHELD
FROM ALL
[ ]
-------------------------------------- MARK HERE FOR ADDRESS CHANGE AND NOTE CHANGES
For all nominees except as noted above 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 28, 2000 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:
----------------------------- ----------- ----------------------------- -----------
</TABLE>
