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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [ ] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
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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)
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:
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BOSTONFED BANCORP, INC.
17 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS 01803
(781) 273-0300
March 30, 2001
Fellow Shareholders:
You are cordially invited to attend the annual meeting of shareholders
of BostonFed Bancorp, Inc., (the "Company") the holding company for Boston
Federal Savings Bank and Broadway National Bank, Burlington, Massachusetts, to
be held on April 30, 2001, 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 the Company, as well as a representative of KPMG LLP, the
Company's independent auditors, will be present to respond to any questions that
our shareholders may have regarding the business to be transacted.
The Board of Directors of the Company has determined that the matters
to be considered at the annual meeting are in the best interests of the Company
and its shareholders. It is important that your shares are represented whether
or not you attend the meeting and regardless of the number of shares of common
stock you own. To make sure that your shares are represented, we urge you to
complete and mail the enclosed proxy card. We appreciate your cooperation since
a majority of the common stock must be represented at the meeting 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 its subsidiaries, thank you for your continued interest and support.
Sincerely yours,
/s/ David F. Holland
David F. Holland
Chairman, President and
Chief Executive Officer
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BOSTONFED BANCORP, INC.
17 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS 01803
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 30, 2001
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NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
BostonFed Bancorp, Inc. will be held on April 30, 2001, 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. To elect two directors to three-year terms of office;
2. To ratify the appointment of KPMG LLP as independent auditors
of the Company for the fiscal year ending December 31, 2001;
and
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Stockholders of record at the close of business on March 7, 2001 are
entitled to receive notice of and to vote at the annual meeting and at any
adjournments of the meeting. In the event there are not sufficient shares for a
quorum or votes 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
/s/ John A. Simas
John A. Simas
Executive Vice President and
Corporate Secretary
Burlington, Massachusetts
March 30, 2001
THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER
SOLICITATIONS FOR PROXIES.
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PROXY STATEMENT
OF
BOSTONFED BANCORP, INC.
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This proxy statement is being furnished to shareholders of BostonFed
Bancorp, Inc. (the "Company"), the holding company of Boston Federal Savings
Bank ("Boston Federal") and Broadway National Bank ("Broadway National"), as
part of the solicitation of proxies by the Board of Directors to be used at the
annual meeting of the Company and at any adjournments thereof (the "annual
meeting"). The annual meeting will be held on April 30, 2001, at 2:00 p.m. at
the Renaissance Bedford Hotel, 44 Middlesex Turnpike, Bedford, Massachusetts.
This proxy statement and the enclosed proxy card, together with the Annual
Report to Shareholders, are first being mailed to record holders on or about
March 30, 2001.
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VOTING AND PROXY PROCEDURE
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WHO CAN VOTE AT THE MEETING
You are entitled to vote your Company common stock if the records of
the Company show that you held your shares as of the close of business on March
7, 2001. As of the close of business on that date, a total of 4,560,481 shares
of Company common stock were outstanding. Each share of common stock has one
vote. As provided in the Company's Certificate of Incorporation, recordholders
of the Company's common stock who beneficially own, either directly or
indirectly, in excess of 10% of the Company's outstanding shares, are not
entitled to any vote in respect of the shares held in excess of the 10% 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 10% 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 10% limit to supply information to the Company to enable
the Board of Directors to implement and apply the 10% limit.
ATTENDING THE MEETING
If you are a beneficial owner of Company common stock held by a broker,
bank or other nominee (i.e., in "street name"), you will need proof of ownership
as of March 7, 2001 to be admitted to the meeting. A recent brokerage statement
or letter from your bank or broker are examples of proof of ownership. If you
want to vote your shares of Company common stock held in street name in person
at the meeting, you will have to get a written proxy in your name from the
broker, bank or other nominee who holds your shares.
VOTE REQUIRED
The annual meeting will be held only if there is a quorum. A quorum
exists if a majority of the outstanding shares of common stock entitled to vote
(after subtracting any shares in excess of the 10% limit) is represented at the
meeting. If you return valid proxy instructions or attend the meeting in person,
your
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shares will be counted for purposes of determining whether there is a quorum,
even if you abstain from voting. Broker non-votes also will be counted for
purposes of determining the existence of a quorum. A broker non-vote occurs when
a broker, bank or other nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power with respect to that item and has not received voting instructions
from the beneficial owner.
As to the election of directors (Proposal 1), you may vote in favor of
both nominees, withhold votes as to both nominees or withhold votes as to a
specific nominee. There is no cumulative voting for the election of directors.
Directors are elected by a plurality of the votes cast. This means that the
nominees receiving the greatest number of votes will be elected. Votes that are
withheld and broker non-votes will have no effect on the outcome of the
election. As to the ratification of the appointment of KPMG LLP as independent
auditors (Proposal 2) and any other matters that may properly come before the
annual meeting, you may vote in favor of the proposal, vote against the proposal
or abstain from voting. This matter(s) will be decided by the affirmative vote
of a majority of the votes eligible to be cast on each matter. Broker non- votes
and abstentions will not be counted as votes cast and will have no effect on the
voting on these proposals.
VOTING BY PROXY
The Company's Board of Directors is sending you this proxy statement
for the purpose of requesting that you allow your shares of Company common stock
to be represented at the annual meeting by the persons named in the enclosed
proxy card. All shares of Company common stock represented at the annual meeting
by properly executed proxies will be voted according to the instructions
indicated on the proxy card. If you sign, date and return a proxy card without
giving voting instructions, your shares will be voted as recommended by the
Company's Board of Directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE NOMINEES AND "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS
THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR 2001.
If any matters not described in this proxy statement are properly
presented at the annual meeting, the proxy committee will use its own best
judgment to determine how to vote your shares. This includes a motion to adjourn
or postpone the meeting in order to solicit additional proxies. If the annual
meeting is postponed or adjourned, your Company common stock may be voted by the
proxy committee on the new meeting date as well, unless you have revoked your
proxy. Other than the matters listed on the attached Notice of Annual Meeting of
Shareholders, the Company does not know of any other matters that will be
presented for consideration at the meeting.
You may revoke your proxy at any time before the vote is taken at the
annual meeting. To revoke your proxy you must either advise the Corporate
Secretary of the Company in writing before your common stock has been voted at
the annual meeting, deliver another proxy that bears a later date, or attend the
annual meeting and vote your shares in person. Your attendance at the annual
meeting will not automatically revoke your proxy.
If your Company common stock is held in "street name," you will receive
instructions from your broker, bank or other nominee that you must follow in
order to have your shares voted. Your broker or bank may allow you to deliver
your voting instructions via the telephone or the Internet. Please see the
instruction form that is provided by your broker, bank or other nominee and
which accompanies this proxy statement. If you wish to change your voting
instructions after you have returned your voting instruction form to your broker
or bank, you must contact your broker or bank.
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Proxies solicited should 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.
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STOCK OWNERSHIP
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The following table provides information as of March 7, 2001 with
respect to persons or entities known to the Company to be beneficial owners of
more than 5% of the Company's outstanding shares of common stock. A person may
be considered to beneficially own any shares of common stock over which he or
she has, directly or indirectly, sole or shared voting or investment power.
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
- --------------- -------------------------------------------- ------------- --------
Common Stock............................. Boston Federal Savings Bank 562,491(1) 12.3%
Employee Stock Ownership Plan ("ESOP")
17 New England Executive Park
Burlington, Massachusetts 01803
Common Stock............................. Thomson Horstmann & Bryant, Inc. 451,500(2) 9.9
Park 80 West/Plaza Two
Saddle Brook, New Jersey 07663
Common Stock............................. John Hancock Advisors, Inc. 436,700(3) 9.6
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
Common Stock............................. David F. Holland 257,391(4) 5.5
17 New England Executive Park
Burlington, Massachusetts 01803
Common Stock............................. Dimensional Fund Advisers 247,800(5) 5.4
1299 Ocean Avenue - 11th Floor
Santa Monica, California 90401
Common Stock............................. Jeffrey L. Gendell 239,100(6) 5.2
200 Park Avenue - Suite 3900
New York, New York 10166
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(1) Includes 427,482 shares that have been allocated to participants' accounts
and 135,009 shares that have not been allocated to participants' accounts.
The Investors Bank and Trust is the corporate trustee for the ESOP. Under
the terms of ESOP, the ESOP trustee will vote all shares allocated to
participants' accounts in the manner directed by the participants. Subject
to its fiduciary duty, the ESOP trustee will vote unallocated shares and
allocated shares for which no timely voting instructions are received in
the same proportion as shares for which they have received timely voting
instructions from participants.
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(2) Based upon information in a Schedule 13G amended on February 6, 2001.
Represents shares over which Thomson Horstmann & Bryant, Inc. has the
following: sole voting power with respect to 227,300 shares; sole
investment power with respect to 451,500 shares and shared voting power
with respect to 5,300 shares.
(3) Based upon information in a Schedule 13G amended on January 15, 1999.
Represents shares over which John Hancock Advisers, Inc. has sole voting
and investment power.
(4) Based up information in a Schedule 13D filed on March 1, 2001. Represents
shares over which Mr. Holland has the following: sole voting power with
respect to 13,000 shares; sole investment power with respect to 2,903
shares; shared voting power with respect to 83,883 shares and shared voting
power with respect to 93,980 shares. Also represents 160,000 shares that
may be acquired by Mr. Holland pursuant to stock options that are or will
become exercisable within 60 days.
(5) Based upon information in a Schedule 13G filed on February 2, 2001.
Represents shares over which Dimensional Fund Advisers has sole voting and
investment power.
(6) Based upon information in a Schedule 13F filed on February 13, 2001.
Represents shares over which Mr. Gendell has sole voting and investment
power.
The following table sets forth information as of March 7, 2001 about the
shares of the Company's common stock that may be considered to be beneficially
owned by each nominee for director of the Company, by each executive officer
named in the "Summary Compensation Table" and by all directors and executive
officers of the Company as a group. Unless otherwise indicated, each of the
named individuals has sole voting and investment power with respect to the
shares shown.
NUMBER OF SHARES
NUMBER OF THAT MAY BE
SHARES OWNED ACQUIRED WITHIN PERCENT OF
(EXCLUDING 60 DAYS BY COMMON STOCK
NAME OPTIONS)(1) EXERCISING OPTIONS OUTSTANDING (2)
- ------------------------------------------------ --------------------- --------------------- ------------------
Edward P. Callahan.............................. 18,673 20,000 *
David P. Conley................................. 60,153(3) 95,000 3.33%
Richard J. Dennis, Sr........................... 26,970 20,000 1.03%
Gene J. DeFeudis................................ 29,708(4) 1,000 *
Richard J. Fahey................................ 3,508(4) 1,000 *
Patricia M. Flynn, Ph.D......................... 4,508(4) 1,000 *
David F. Holland................................ 97,391(3) 160,000 5.45%
Charles R. Kent................................. 20,294 20,000 *
Shawn W. McGee.................................. 1,000 3,000 *
W. Robert Mill.................................. 24,967 9,500 *
John D. Mullen.................................. 1,000 3,000 *
John A. Simas................................... 48,644 65,000 2.46%
All Executive Officers and Directors
as a Group (19 persons)......................... 446,280(5) 584,500 20.03%
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* Represents less than 1% of shares outstanding
(1) Includes unvested shares of restricted common stock that were awarded under
the Amended and Restated BostonFed Bancorp, Inc. 1996 Stock-Based Incentive
Plan (the "Incentive Plan"), in the following amounts: Mr. Callahan, 2,000;
Mr. Conley, 7,800; Mr. Dennis, 2,000; Mr. Holland, 13,000; Mr. Kent, 2,000;
Mr. Mill, 2,000; and Mr. Simas, 5,200. Such awards will vest fully on April
15, 2001. Each participant presently has voting, but not investment, power
as to the unvested shares.
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(2) Based upon 4,560,481 shares of common stock outstanding as of March 7,
2001, plus the number of shares of common stock which such person has the
right to acquire within 60 days after March 7, 2001 by exercising options.
(3) Does not include 10,797 and 1,156 common stock share equivalents credited
to the accounts of Messrs. Holland and Conley, respectively, under the
Defined Contribution Restoration Plan, which is described elsewhere in this
proxy statement.
(4) Includes 500 vested and 2,500 unvested shares that were awarded under the
Incentive Plan upon their election to the Board in February 2000. Such
awards vest at a rate of 20% per year and began vesting on October 15,
2000. Each participant presently has voting, but not investment, power as
to the unvested shares.
(5) Includes a total of 52,780 shares awarded under the Incentive Plan as to
which voting may be directed.
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PROPOSAL 1. ELECTION OF DIRECTORS
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The Board of Directors of the Company currently consists of nine
directors, who also serve as directors of the Boston Federal and Broadway
National. The Board is divided into three classes, with approximately one-third
of the directors elected each year.
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 his successor is
elected and qualified. As such, Edward P. Callahan, Richard J. Dennis, Sr. and
Charles R. Kent, who are members of the Class of 2003, are not eligible to
continue serving the rest of their terms as directors of the Company and will
retire from office as Directors of the Company at the 2001 annual meeting.
The two nominees proposed for election at this Annual Meeting to serve
for a three-year term or until their respective successors have been elected and
qualified, are Gene J. DeFeudis and David F. Holland. 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. If any nominee is unable
to serve or declines to serve for any reason, the proxy committee will vote your
shares to approve the election of any substitute proposed by the Board of
Directors. Alternatively, the Board of Directors may adopt a resolution to
reduce the size of the Board. At this time, the Board of Directors knows of no
reason why any nominee might be unwilling or unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF BOTH
NOMINEES.
Information regarding the nominees and the directors continuing in
office is provided below. Unless otherwise stated, each individual held his or
her current occupation for the last five years. The age indicated in each
nominees biography is as of March 7, 2001. There are no family relationships
among the directors and/or executive officers.
NOMINEES FOR ELECTION OF DIRECTORS:
The following persons have been nominated for terms to expire in 2004 or until
their respective successors are elected and qualified:
Gene J. DeFeudis owns and manages Ellsmere Investment Company and the Birchwood
Development Companies. Mr. DeFeudis owned Diversified Ventures, Inc. d/b/a
Forward Financial Company ("Forward Financial"), now a subsidiary of Boston
Federal and Ellsmere Insurance Agency ("Ellsmere"), now a subsidiary of Broadway
National, before both were acquired by the Company in 1999. Mr. DeFeudis joined
the Company's Board in 2000 and is Vice President of Ellsmere. Age 59.
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David F. Holland is the Chairman of the Board, President and Chief Executive
Officer of the Company and Chief Executive Officer of Boston Federal and
Chairman of Broadway National. Mr. Holland has served on Boston Federal's Board
since 1986. Age 59.
DIRECTORS CONTINUING IN OFFICE:
The following directors have terms ending in 2002:
David P. Conley is Executive Vice President, Assistant Secretary and Assistant
Treasurer of the Company and President of Boston Federal and President and Chief
Executive Officer of Broadway National. Mr. Conley has served on Boston
Federal's Board since 1992. Age 57.
Richard J. Fahey is a Principal of Trammel Crow Company, Inc., a diversified
commercial real estate services company. Mr. Fahey has served on the Company's
Board since 2000. Age 47.
W. Robert Mill is a consultant to Middleton and Co., Inc., an investment
advisory firm. Mr. Mill has served on Boston Federal's Board since 1977. Age 71.
The following directors have terms ending in 2003:
Patricia M. Flynn, Ph.D., is the Dean of the McCallum Graduate School of
Business and Professor of Economics at Bentley College, Waltham, Massachusetts.
Dr. Flynn has served on the Company's Board since 2000. Age 50.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company conducts its business through
regular and special meetings and its committees. The Board of Directors of the
Company meets quarterly and has additional meetings as needed. During fiscal
2000, the Board of Directors of the Company held nine 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 2000. 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 Dr. Flynn and Messrs. Callahan, Dennis and
Mill, who are all 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 2000.
NOMINATING COMMITTEE. The Company's Nominating Committee for the 2001
Annual Meeting consists of Dr. Flynn and Messrs. Conley and Fahey. 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 written notice
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 Securities Exchange Act of 1934, as amended, 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 in
2001.
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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 meetings during fiscal 2000.
COMPENSATION COMMITTEE. The Compensation Committee of the Company and
the Personnel Committees of Boston Federal and Broadway National (collectively,
the "Compensation Committee") currently consist of Messrs. DeFeudis, Dennis,
Fahey and Kent. 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 five times in fiscal 2000.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. Members of the Board of Directors of the Company
receive an annual retainer of $4,000 and a fee of $500 for each Board meeting
attended and a fee ranging between $250-$500 for each committee meeting
attended. Directors of Boston Federal are currently paid an annual retainer of
$4,000 and a fee of $500 for each Board meeting attended, as well as a fee
ranging between $250-$500 for meetings of committees on which they serve.
Broadway National's Directors are paid an annual retainer of $1,000 and a fee of
$250 for each Board or committee meeting they attended. Members of management
who are also directors do not receive any director compensation.
CONSULTING AGREEMENT. During 2000, the Company paid $500,000 to Mr.
DeFeudis pursuant to a consulting agreement that it entered into as part of its
acquisition of Forward Financial and Ellsmere. The agreement provides that for
two years, the Company will pay Mr. DeFeudis a quarterly fee of $125,000 as an
independent contractor for consulting services. The Company's obligations under
the agreement commenced in 2000 and will cease on December 7, 2001.
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 Company common stock or shares
of common stock. In 1996, each outside director was granted non-statutory
options to purchase 20,000 shares of Common Stock (with dividend equivalent
rights ("DERs"), as discussed below) and stock awards for 10,000 shares of
common stock under the Incentive Plan. The DERs provide a separate cash benefit
equal to 100% of the amount of any extraordinary dividend declared by the
Company on shares of common stock subject to an option. The exercise price for
the stock option awards is $12.44 per share, which was the fair market value of
the shares on the date of grant. The Directors' stock options began vesting at
20% per year in 1997 and the final installment will vest on April 30, 2001. The
Directors' stock awards began vesting at 20% per year in 1997 and the final
investment will vest on April 15, 2001. In 2000, Dr. Flynn and Messrs. DeFeudis
and Fahey were also awarded non-statutory options to purchase 5,000 shares and
stock awards for 2,500 shares of common stock. The exercise price for these
stock option awards is $13.82 per share. Their stock awards and stock options
began vesting at 20% per year on October 15, 2000. All stock option and stock
awards granted under the Incentive Plan will vest immediately upon termination
due to death, disability, retirement or a change in control. Each participant
presently has voting power as to the unvested stock award shares. No Company
Directors have received awards under the BostonFed Bancorp, Inc. 1997 Stock
Option Plan.
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EXECUTIVE COMPENSATION
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SUMMARY COMPENSATION TABLE. The following information is furnished for
the chief executive officer and the other four highest paid executive officers
of the Company, Boston Federal and Broadway National who received a salary and
bonus of $100,000 or more during the year ended December 31, 2000.
LONG-TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
------------------------------ ----------------------- ----------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL
NAME AND FISCAL COMPEN- AWARDS OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) SATION(2) ($)(3) SARS(#)(4) PAYOUTS(5) SATIONS(6)
- ------------------------- ----- --------- --------- ---------- ---------- ----------- ---------- --------------
David F. Holland......... 2000 $360,000 $ 81,000 -- -- -- -- $ 87,600(6)
Company Chairman, 1999 320,000 87,120 -- -- -- -- 181,648
President & CEO; 1998 313,000 50,625 -- -- -- -- 39,142
Boston Federal Chairman
& CEO; Broadway
National Chairman.
David P. Conley.......... 2000 210,000 54,469 -- -- -- -- 48,120(6)
Company Executive VP; 1999 193,500 51,519 -- -- -- -- 52,185
Boston Federal Director & 1998 187,000 28,114 -- -- -- -- 38,815
President; Broadway
National Director,
President & CEO.
John A. Simas............ 2000 165,000 50,257 -- -- -- -- 37,601(6)
Company and Boston 1999 146,500 34,849 -- -- -- -- 35,812
Federal CFO, Executive 1998 140,500 26,347 -- -- -- -- 34,598
VP & Secretary; Broadway
National CFO, Executive
VP & Director.
Shaun W. McGee........... 2000 165,000 121,000 -- -- -- -- 12,690(6)
Company VP & -- -- -- -- -- -- -- --
President of Forward -- -- -- -- -- -- -- --
Financial.
John D. Mullen........... 2000 155,000 30,000 -- -- -- -- 95,842(6)
Company VP & -- -- -- -- -- -- -- --
Senior VP of Forward -- -- -- -- -- -- -- --
Financial.
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(1) Salaries reported under Annual Compensation include director's fees (1998
only) and amounts deferred by the executive officer pursuant to the Boston
Federal 401(k) Plan or the Forward Financial 401(k) Plan. Bonuses reported
under "Annual Compensation" are reported in the year earned, regardless of
when paid. Bonuses to Messrs. Holland, Conley and Simas were paid pursuant
to the Boston Federal STIP as described later in this document. Bonuses
paid to Messrs. McGee and Mullen were paid pursuant to individualized
incentive plans, based primarily on the profitability of Forward Financial
and the Company. Messrs. McGee and Mullen joined the Company in 2000 and
therefore, their salaries and bonuses for 1999 and 1998 are not reportable.
(2) For 2000 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 and Simas were
awarded 65,000, 39,000 and 26,000 shares of common stock in 1996. Such
awards have been vesting at a rate of 20% per year and the remaining 20%
will vest on April 15, 2001. When awards become vested and are distributed,
the recipients also receive an amount equal to accumulated cash and stock
dividends (if any) paid with respect thereto, plus earnings thereon. At
December 31, 2000, the market value of unvested shares held by Messrs.
Holland, Conley and Simas was $271,375, $162,825 and $108,550,
respectively.
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(4) See discussion and table under "Stock-Based Incentive Plans" elsewhere in
this proxy statement.
(5) For 2000, 1999, and 1998, there were no payouts under any long-term
incentive plan.
(6) For 2000, such amounts (a) include $3,046; $2,746; and $3,300 contributed
by the respective banks' 401(k) plans to Messrs. Holland, Conley and Simas
respectively and $12,690 and $13,442 contributed by Forward Financial's
401(k) Plan to Messrs. McGee and Mullen; (b) $29,721, $29,721 and $28,847
representing the value of shares allocated under the Boston Federal ESOP
including forfeitures, for the benefit of Messrs. Holland, Conley and Simas
respectively; (c) $41,185 and $7,472 for Mr. Holland and Mr. Conley,
respectively, representing the value of benefits accrued in 2000 for each
in the Defined Contribution Restoration Plan, and (d) includes $13,648,
$8,181, and $5,454 in dividends on unvested stock awards credited to
Messrs. Holland, Conley and Simas, respectively, during fiscal 2000. Mr.
Mullen received a payout of $82,400 during 2000 upon termination of a
Forward Financial Deferred Compensation Plan in which he was the only
participant.
EMPLOYMENT AGREEMENTS. The Company and Boston Federal maintain
employment agreements with Messrs. Holland, Conley, Simas, McGee and Mullen
(individually, the "Executive") to ensure that the Company and Boston Federal
will be able to maintain a stable and competent management team. The continued
success of the Company and Boston Federal depends to a significant degree on the
skills and competence of Messrs. Holland, Conley, Simas, McGee and Mullen.
The Company's employment agreements with Messrs. Holland, Conley and
Simas provide for a three-year term of employment. The agreements of Messrs.
McGee and Mullen are for two-year term of employment. The agreements extend 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 for Messrs. Holland, Conley and Simas and becomes a fixed two-year term for
Messrs. McGee and Mullen. Under the employment agreements, the base salary of
the Executive is set by the Compensation Committee and reviewed annually by the
Board of Directors. As of January 1, 2001, the base salaries for Messrs.
Holland, Conley, Simas, McGee and Mullen are $388,500, $225,000, $177,000,
$175,000 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 Boston Federal, 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
Boston Federal terminates the Executive's employment for reasons other than for
cause, or in the event the Executive terminates employment with the Company or
Boston Federal 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 Boston Federal; or (g) breach of the agreement
by the Company or Boston Federal, 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, Boston Federal
or Forward Financial 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 Boston Federal, 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 for Messrs. Holland,
Conley and Simas and two (2) times for Messrs. McGee and Mullen 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,
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excluding compensation attributable to the exercise of stock options, for any of
the five most recent taxable years of the Executive. The Company or Boston
Federal would also continue Messrs. Holland, Conley and Simas life, pension,
medical, dental, and disability coverage for thirty-six months and the Company,
Boston Federal or Forward Financial would also continue Messrs. McGee and
Mullen's similar benefit coverage for twenty-four months.
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 Boston Federal 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 Boston Federal employment agreement
are guaranteed by the Company if the payments are not made by Boston Federal.
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 Boston Federal 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 Boston Federal shall indemnify the
Executive to the fullest extent allowable under Delaware and federal law,
respectively.
STOCK-BASED INCENTIVE PLANS. The Company maintains the 1996 Stock-Based
Incentive Plan and the 1997 Stock Option Plan which provide discretionary
stock-based awards to officers and key employees, as determined by a committee
of at least two non-employee directors.
SHORT TERM INCENTIVE PLAN (STIP). Boston Federal and Broadway National
maintain STIPs. The purpose of these 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 2000 were certain performance ratios of the Company, specifically
Earnings per Share (EPS), Return on Equity (ROE), Efficiency Ratio, Customer
Service 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. Forward Financial has individualized plans for
senior management focused on profitability and the attainment of measurable
business goals. Awards under these plans are included in the "Bonus" column of
the "Summary Compensation Table."
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The following table provides certain information with respect to the
number of shares of common stock represented by outstanding options held by the
executive officers named in the "Summary Compensation Table" as of December 31,
2000. 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
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARs AT OPTION/SARs AT
FISCAL YEAR END(#) FISCAL YEAR END($)(1)
---------------------------- ------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------ ---------------------------- ------------------------------
David F. Holland............................ 128,000(2) 32,000(2) $1,079,680 $269,920
David P. Conley............................. 76,000(2) 19,000(2) 641,060 160,265
John A. Simas............................... 52,000(2) 13,000(2) 438,620 109,655
Shaun W. McGee.............................. 3,000(3) 12,000(3) 18,915 75,660
John D. Mullen.............................. 3,000(3) 12,000(3) 18,915 75,660
- -----------------------------
(1) Based on market value of the underlying stock at the fiscal year end, minus
the exercise price. As of December 31, 2000, the market price of the
Company's common stock was $20.875.
(2) These options have an exercise price of $12.44 and became exercisable at a
rate of 20% per year beginning April 30, 1997. The options will expire ten
(10) years from the date of grant.
(3) These options have an exercise price of $14.57 and became exercisable at an
annual rate of 20% commencing October 15, 2000. The options will expire ten
(10) years from date of grant.
PENSION PLAN. Boston Federal and Broadway National 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 to a participant who retires at age 65 and
elects 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, the benefit is reduced by 3% at the time the benefit is
distributed for each full year the participant retires before reaching age 65.
The benefits listed in the retirement benefit table are based upon salary only
and are not subject to any social security adjustment.
YEARS OF CREDITED SERVICE(1)
--------------------------------------------------------------------------------------
FINAL AVERAGE
EARNINGS 15 20 25 30 35
- ------------------ ----------- ----------- ---------- ----------- -----------
$ 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
170,000 51,000 68,000 85,000 102,000 119,000
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
- -------------------------------------
(1) The maximum allowable salary for 2000 is $170,000. As of December 31, 2000,
Messrs. Holland, Conley and Simas had 26 years, 31 years and 22 years
respectively, of credited service (i.e., benefit service).
(2) Messrs. Holland, Conley, and Simas participate in the Defined Benefit
Restoration Plan, which is described below. The table reflects the combined
benefits of the Defined Benefit Plan and the Defined Benefit Restoration
Plan for incomes in excess of $170,000 in 2000.
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DEFINED CONTRIBUTION AND BENEFIT RESTORATION PLANS. Boston Federal
maintains a Defined Contribution Restoration Plan ("DCRP") and a Defined Benefit
Restoration Plan ("DBRP") for its key executive employees. The purpose of these
plans is to restore benefits that would have been received under Boston
Federal's defined benefit and defined contribution plans but for limitations
imposed by federal tax limitations. Messrs. Holland, Conley and Simas
participate in these plans. Payments under these plans are guaranteed by the
Company.
The DCRP is an excess benefit plan which provides benefits that would
have been received under Boston Federal's 401(k) plan and ESOP but for qualified
plan benefit and contribution limitations. The DCRP provides participants with
the incremental amount to match the participant's 401(k) contributions and the
incremental benefits that would have been credited to the participant's ESOP
account that could not be made by reason of federal limitations on qualified
plans. The dollar amount of benefits received under the DCRP is converted to
Company common stock equivalent shares based upon the average of high and low
price on December 31 of each year. These common stock equivalent shares are then
credited to the participant's DCRP account. The annual income reflecting the
credits made under the DCRP is reflected under the "All Other Compensation"
column of the "Summary Compensation Table."
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.
Boston Federal 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 any reduction in benefits
caused by an early retirement after age 55, as described under the Pension Plan.
COMMITTEE REPORTS
The reports of the Compensation Committee and Audit and Compliance
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, or the
Securities Exchange Act of 1934, as amended, except as to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
REPORT OF THE COMPENSATION COMMITTEE
Under rules established by the Securities and Exchange Commission, 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.
Boston Federal's, Broadway National's and the Company's Executive
Compensation Policies ensure competitive compensation levels to retain and
attract able management. The Compensation Policies were adopted by the Company
and Boston Federal and Broadway National for use in determining compensation
levels in subsequent years. Short Term Incentive Plans ("STIPs") were adopted by
Boston Federal (not including Forward Financial) in 1997, and Broadway National
in 1998, which measure specific objective
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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."
Executive salary levels of Boston Federal, Broadway National and
Forward Financial were reviewed in December 2000 and certain increases approved
in accordance with the General Policy detailed below. The primary quantitative
measurements utilized in the December 2000 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.
Boston Federal and Broadway National participate in salary surveys each
year to obtain contemporaneous compensation data. The Company, Boston Federal
and Broadway National engaged William M. Mercer Compensation and Benefits
Consultants to review the salary structure of the executive officers of the
Company and its banks in relation to peer institutions operating within the
northeast region of the United States. In addition, the Compensation Committee
utilized the 2000 William M. Mercer Northeast Banking Industry Survey and the
2000 W.M. Sheehan & Company Banking Compensation Report.
In preparation of comparative compensation data, factors most similar
to the Company are evaluated. Corporate considerations include asset size, 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 Boston Federal evaluates the performance
of all Boston Federal executive officers reporting to him and the President of
Boston Federal evaluates the performance of all executive officers reporting to
him. The Chief Executive Officer of Broadway National evaluates the performance
of all Broadway National 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 Boston Federal and Broadway National. Upon review, the
Boards of Boston Federal and Broadway National 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 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 elsewhere
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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 2000 and set at $388,500 effective January 2001. 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 2000 which was paid in February 2001. Total cash
compensation of the Chief Executive Officer was below the average paid at
comparable financial institutions as indicated by the data in the William M.
Mercer compensation survey reviewed by the Committee.
When reviewing the 2000 performance of the Chief Executive Officer, the
Committee considered the financial performance of the Company during 2000
focusing on the significant improvement in earnings, earnings per share and
return on equity. The Committee also considered the performance of the Company's
stock compared to others over the last twelve months. A detailed Stock
Performance Graph is 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
Gene J. DeFeudis
Richard J. Dennis, Sr.
Richard J. Fahey
Charles R. Kent
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. DeFeudis, Dennis, Fahey
and Kent. During 2000, Mr. DeFeudis received $500,000 in fees from the Company
pursuant to a consulting agreement under which Mr. DeFeudis provides consulting
services. He also serves as Vice President of Ellsmere Insurance Agency, Inc.
The consulting agreement was made in connection with the Company's acquisition
of Forward Financial and Ellsmere. See "Directors Compensation--Consulting
Agreement."
Except as set forth above, none of the members of the Compensation
Committee is currently or has been at any time since the beginning of the last
fiscal year, an officer or employee of the Company. No member of the
Compensation Committee or executive officer of the Company, Boston Federal or
Broadway National serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's, Boston Federal's or Broadway National's Board of
Directors or Compensation Committee.
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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 as of the close of business on December 29, 1995
through December 31, 2000. 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 Center for Research in Security
Prices, Graduate School of Business, University of Chicago. Total return assumes
the reinvestment of all dividends.
[LINE GRAPH APPEARS HERE]
PERIOD ENDED
---------------------------------------------------------------------
12/1995 12/1996 12/1997 12/1998 12/1999 12/2000
---------- --------- --------- --------- --------- --------
BostonFed Bancorp, Inc.................... $100.00 $127.00 $191.20 $156.60 $144.80 $196.90
AMEX Stock Market (US Companies).......... 100.00 101.50 127.30 136.60 179.40 168.50
AMEX Stocks (Savings Institutions)........ 100.00 118.20 200.20 141.00 137.20 159.60
NOTES:
A. The lines represent monthly 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 December 29, 1995.
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AUDIT AND COMPLIANCE COMMITTEE REPORT
The Audit and Compliance Committee of the Board of Directors is
responsible for assisting the Board of Directors in fulfilling its
responsibility to the stockholders relating to corporate accounting, reporting
practices and the quality and integrity of the financial reports of the Company.
Additionally, the Audit and Compliance Committee selects the auditors and
reviews their independence and their annual audit. The Audit and Compliance
Committee is comprised of four directors, each of whom is independent under the
American Stock Exchange's listing standards. The Audit and Compliance Committee
acts under a written charter adopted by the Board of Directors, a copy of which
is attached to this proxy statement as Appendix A.
The Audit and Compliance Committee reviewed and discussed the annual
financial statements with management and the independent accountants. As part of
this process, management represented to the Audit and Compliance Committee that
the financial statements were prepared in accordance with generally accepted
accounting principles. The Audit and Compliance Committee also received and
reviewed written disclosures and a letter from the accountants concerning their
independence as required by Independence Standard No. 1. The Audit and
Compliance Committee discussed with the accountants the contents of such
materials, the accountant's independence and the additional matters required
under Statement on Auditing Standards No. 61. Based on such review and
discussions, the Audit and Compliance Committee recommended that the Board of
Directors include the audited consolidated financial statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000 for filing with
the Securities and Exchange Commission.
THE AUDIT AND COMPLIANCE COMMITTEE
Edward P. Callahan
Richard J. Dennis, Sr.
Patricia M. Flynn, Ph.D.
W. Robert Mill
- --------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
- --------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who own
more than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Executive officers, directors and greater than 10% shareholders are
required by regulation to furnish the Company with copies of all Section 16(a)
reports they file. Based solely on a review of copies of such reports of
ownership furnished to the Company and written representations provided to it
from individuals required to file the reports, the Company believes that during
the past fiscal year, each of its executive officers and directors has complied
with all applicable reporting requirements, except for Shaun W. McGee and John
D. Mullen for whom a Form 4 was filed late due to an administrative error.
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TRANSACTIONS WITH MANAGEMENT
- --------------------------------------------------------------------------------
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 connection with its acquisition of Diversified Ventures, Inc. d/b/a
Forward Financial, the Company agreed to compensate Mr. DeFeudis, the sole owner
of Forward Financial, for consulting services for a period of two years. See
"Directors Compensation--Consulting Agreement." The purchase price and
consulting agreement were determined in the context of an arm's-length
transaction through negotiations between the Company and Mr. DeFeudis, each of
whom were 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, 2000 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, 2001, 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.
If the ratification of the appointment of auditors is not approved by a
majority of votes cast by shareholders at the annual meeting, other independent
public auditors will be considered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS.
AUDIT FEES
The aggregate fees the Company paid to KPMG LLP for the annual audit and
for the review of the Company's Forms 10-Q for the fiscal year 2000 totaled
$187,500.
ALL OTHER FEES
The aggregate fees the Company paid to KPMG LLP for all other non-audit
services, including fees for tax-related services, during fiscal year 2000
totaled $191,085, which included $100,000 for the review of the prospectus for
the BFD Preferred Capital Trust II and other fees for tax-related, employee
benefits and other accounting related services. The Audit and Compliance
Committee believes that the non-audit fees paid to KPMG LLP are compatible with
maintaining KPMG LLP's independence.
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MISCELLANEOUS
- --------------------------------------------------------------------------------
The Company will pay the cost of this proxy solicitation. In addition to
soliciting proxies by mail, proxies may be solicited personally or by telephone
by directors, officers and other employees of the Company or its subsidiaries,
who will not be specially compensated for such activities. 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 instructions from such beneficial owners, and will
reimburse them for their reasonable expenses in doing so. Corporate Investor
Communications, Inc., a proxy solicitation firm, will be paid a fee of $4,000,
plus out-of-pocket expenses to assist the Company.
A COPY OF THE FORM 10-K (WITHOUT EXHIBITS) FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2000, 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.
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STOCKHOLDERS PROPOSALS AND NOMINATIONS
- --------------------------------------------------------------------------------
To be considered for inclusion in the Company's proxy statement and form
of proxy relating to the 2002 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 30, 2001. Any such proposal will be subject to 17 C.F.R. ss. 240.14a-8
of the Rules and Regulations under the Securities Exchange Act of 1934, as
amended.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The Company's Bylaws 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
a county in which the Company or its Banks maintain a banking office or a county
contiguous to any such county or have significant business ties to such
counties; 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
19
22
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 Securities and Exchange Commission
in effect at the time such proposal is received. For example, assuming that the
2002 Annual Meeting of Shareholders will be held on April 30, 2002 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 30, 2002.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ John A. Simas
John A. Simas
Executive Vice President and
Corporate Secretary
Burlington, Massachusetts
March 30, 2001
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.
20
23
APPENDIX A
AUDIT AND COMPLIANCE
COMMITTEE CHARTER
BOSTONFED BANCORP, INC.
BOSTON FEDERAL SAVINGS BANK
BROADWAY NATIONAL BANK
17 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MA 01803
JANUARY 2001
I. STATEMENT OF PURPOSE
The Audit and Compliance Committee is appointed by the Board of Directors
to assist the Board in fulfilling its oversight responsibilities. The primary
responsibility for the Company's financial reporting, internal operations,
establishment of policies and internal controls is vested in senior management.
The Audit and Compliance Committee's primary duties and responsibilities are to:
A. Monitor the integrity of the Company's financial reporting process
and systems of internal controls regarding finance, accounting, and
legal compliance.
B. Monitor the independence and performance of the Company's independent
auditors and the Internal Audit and Compliance departments.
C. Provide an avenue of communication among the independent auditors,
management, the Internal Audit and Compliance departments, compliance
officer, and the Board of Directors.
II. ORGANIZATION
A. MEMBERS: Committee members will be chosen by a majority vote of the
Board of Directors. If a chairperson is not appointed by the Board of Directors,
the Committee shall select a chairperson by majority vote. The Committee will be
composed of at least three independent outside directors, each of whom should
have a basic understanding of finance and accounting and be able to read and
understand fundamental financial statements, and at least one member of the
Committee shall have accounting or related management expertise. They will be
free of any relationships that, in the opinion of the Board of Directors, would
compromise their independence. Committee member's independence and
qualifications shall be determined by application of the appropriate Exchange
requirements.
B. MEETINGS: The Committee will meet at least four times per year,
including the planning meeting with the independent public accountants. Special
meetings may be called as deemed necessary by the Committee chairperson, a
majority of the Committee, and Chairman or Secretary of the Board of Directors.
All meetings will require at least a 48 hour notice unless waived by each
Committee member. Meetings may be held telephonically or by other electronic
means. A planning meeting will be held with the independent public accountants
annually, on a timely basis, to discuss their responsibilities, independence and
the scope of the upcoming audit. A post-audit meeting will be held with the
Committee and/or the full Board of Directors to review with management and the
independent public accountant the results of the annual audit.
C. MINUTES: Minutes will be prepared for all meetings. They will be
distributed to all members of the Committee to ensure their accuracy and will be
approved at the next Committee meeting. Minutes will also be distributed to the
Board of Directors.
24
III. RESPONSIBILITIES
The Committee, as part of its oversight, has the following
responsibilities:
A. CORPORATE GOVERNANCE, GENERAL OVERSIGHT, AND REPORTING:
1. In consultation with the management, the independent auditors,
and the internal auditors, consider the integrity of the
Company's financial reporting processes and controls. Discuss
significant financial risk exposures and the steps management
has taken to monitor, control, and report such exposures.
Review significant findings prepared by the independent
auditors and the Internal Audit and Compliance departments
together with management's responses.
2. Review the results of Safety & Soundness and Compliance
examinations performed by the Federal Reserve Bank, the Office
of Thrift Supervision (OTS), Office of the Comptroller of the
Currency (OCC) and any other applicable agency.
3. On at least an annual basis, review any legal or income tax
matters that could have a significant impact on the Company's
financial statements, the Company's compliance with applicable
laws and regulations, and inquiries received from regulators
or governmental agencies.
4. Conduct any investigation appropriate to fulfilling its
responsibilities. The Committee has direct access to the
independent auditors and unrestricted access to Company
personnel and documents and will be provided the reasonable
resources necessary to discharge its responsibilities. The
Committee has the ability to retain, at the Company's expense,
special legal, accounting, or other consultants or experts it
deems necessary in the performance of its duties.
5. Review the Audit and Compliance Committee Charter annually and
recommend modifications to the Charter to the Board of
Directors as needed. Provide that the Charter be included in
the Company's Proxy at least every three (3) years as required
by the Securities and Exchange Commission.
6. Periodically perform self-assessment of Audit and Compliance
Committee performance by comparing the Committee's
accomplishments against the attached Meeting Agenda Matrix
(Appendix I), reviewing each member's qualifications and
independence against the applicable Exchange criteria and
soliciting views of the independent auditors.
7. Report to the Board of Directors annually outlining the
Committee's activities during the prior year.
8. Provide for the proxy statement a report from the Committee
disclosing whether the Committee has: reviewed and discussed
with management the audited financial statements, discussed
with the independent public accounting firm all matters
required by Statement on Auditing Standards No. 61, No. 89 and
No. 90 "Communications with Audit Committees", and received
and reviewed written disclosures and letter from the
independent public accounting firm required by Independence
Standards Board Standard No. 1 and has discussed with the
independent public accounting firm the independence of such
firm. Based on the reviews and discussions referred to above,
the Committee would recommend to the Board of Directors that
the financial statements be included in the Company's Form
10-K.
9. Certify to the appropriate Exchange that the Audit and
Compliance Committee has met and will continue to meet the
membership requirements as stated by the Exchange Rules, and
has adopted a formal written Charter, as well as reviewed and
reassessed the adequacy of the Charter on an annual basis.
A-2
25
B. INDEPENDENT PUBLIC ACCOUNTANTS:
1. Review and evaluate on an annual basis and recommend to the
Board of Directors engagement of an independent public
accounting firm, including a review of the engagement letter
and fee. The independent public accounting firm chosen will be
ultimately accountable to the Board of Directors and the Audit
and Compliance Committee as representatives of the
shareholders.
2. Review and approve the independent public accounting firm's
responsibilities and audit plan, including scope, staffing,
reliance on management and the internal auditor and review the
annual audit performed by the independent public accounting
firm.
3. Prior to the Company's release of year-end earnings, review
the results of the audit performed by the independent public
accounting firm. As part of this review, the independent
public accounting firm should discuss with the Committee the
auditor's judgments about the quality, not just the
acceptability of the financial reporting. Review significant
findings of the independent public accounting firm and
recommendations for improvement along with management's
responses.
4. Prior to the Company's release of quarterly earnings, make
every effort to meet with management, the internal auditor,
and the independent public accountant to review the financial
statements, discuss any appropriate issues such as significant
changes in accounting policies, judgement on significant
accounting estimates or any other appropriate issues and the
press release. In occasional instances when it is not possible
to have a meeting, the Chairperson or if necessary a Committee
member in lieu of the Chairperson should have such discussions
with management and the independent public accountant and
report on such discussions to the full Committee or Board at
the next meeting. However, if as a result of their quarterly
review, the independent public accountants discover any
material issues, the Committee must meet with the independent
public accountants prior to the release of quarterly earnings,
in accordance with Statement on Auditing Standards No. 71
"Interim Financial Information".
5. Ensure that the independent public accounting firm submits a
formal written statement regarding relationships and services
that may affect objectivity and independence and obtain a
statement from the independent public accounting firm that is
does not have any relationships nor has it performed or is
expected to perform any services which would compromise its
objectivity and independence. Discuss any such relationships
with the independent accounting firm as applicable.
6. Ensure that the independent public accounting firm is
performing an interim review under Statement on Auditing
Standards No. 71 "Interim Financial Information" before the
Company files its Form 10-Q. If significant events,
transactions and changes in accounting estimates have affected
the quality of the Company's financial reporting, and these
were considered by the independent public accounting firm in
performing the quarterly review, the independent public
accountants must attempt to discuss that effect with the Audit
and Compliance Committee or at least its Chairperson before
the Company files its Form 10-Q.
7. Obtain in writing from the independent public accounting firm,
all communications required by current professional standards,
and confirm the receipt of these communications.
8. Review with management and the independent public accounting
firm all material changes in accounting issues that require
disclosure in the financial statements, any Financial
Accounting Standards Board or regulatory pronouncements that
have a material impact on the Company, and any legal, tax or
other material issues as deemed necessary.
9. Meet in executive session with the independent public
accounting firm at least annually.
A-3
26
C. INTERNAL AUDIT:
1. Review and approve management's appointment of Internal
Auditor and participate in Internal Auditor's annual
performance review.
2. Review the internal audit function including proposed audit
plans, budget, and organizational structure as well as
coordination with the independent public accountants. The
Audit and Compliance Committee should ensure that the Company
has an adequately staffed, professional internal auditing
function.
3. Receive a summary of completed audits, follow up of prior
audits, and a progress report on the audit plan at each
meeting.
4. Provide an opportunity for the internal auditors to meet with
the Committee in executive session without members of
management present.
5. Review management's evaluation of the adequacy of the internal
control structure and the extent to which recommendations made
by the independent public accountants and internal auditors
have been implemented.
D. REVIEW COMPLIANCE AND QUALITY CONTROL FUNCTION:
1. Review and approve management's appointment of Compliance
Officer and participate in Compliance Officer's annual
performance review.
2. Review scope of compliance and quality control function and
ensure that the Company has an adequate staff which is
properly trained.
3. Review a summary of the completed compliance and quality
control reports and the follow-up there-on.
4. Ascertain that the Compliance Officer reports directly to the
Committee without influence from management.
5. Provide an opportunity for the Compliance Officer to meet with
the Committee in executive session without members of
management present.
A-4
27
DETACH HERE
PROXY
BOSTONFED BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
APRIL 30, 2001
2:00 PM 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 at the Annual Meeting of Shareholders, to be held on April 30, 2001, 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 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.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
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: (01) Gene J. DeFeudis, (02) David F. Holland.
FOR ALL [ ] [ ] VOTE
WITHHELD
FROM ALL
FOR ALL
EXCEPT
[ ] _____________________________________________
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided above.)
2. The ratification of the appointment of KPMG LLP as independent auditors of
BostonFed Bancorp, Inc. for the fiscal year ending December 31, 2001.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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 30, 2001 and of the Annual Report to Shareholders.
Please sign exactly as your name appears on this card. When signing as attorney,
executor, adminstrator, 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:_______