SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.)
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14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Westborough Financial Services, Inc.
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(Name of Registrant as Specified in Its Charter)
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[X] No fee required
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[LETTERHEAD OF WESTBOROUGH FINANCIAL SERVICES, INC.]
December 26, 2000
Dear Shareholder:
You are cordially invited to attend the year 2001 Annual Meeting of
Shareholders of Westborough Financial Services, Inc., the holding company
for The Westborough Bank, which will be held on January 25, 2001 at 4:00
p.m., local time, at Wyndham Westborough Hotel located at 5400 Computer
Drive, Westborough, Massachusetts 01581 (the "Annual Meeting").
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business that we will transact at the Annual Meeting. In addition to
the formal items of business, management will report on the operations and
activities of Westborough Financial Services and Westborough Bank and you
will have an opportunity to ask questions.
The Board of Directors of Westborough Financial Services has
determined that an affirmative vote on each matter to be considered at the
Annual Meeting is in the best interests of Westborough Financial Services
and its shareholders and unanimously recommends a vote "FOR" each of these
matters.
Please complete, sign and return the enclosed proxy card promptly,
whether or not you plan to attend the Annual Meeting. Your vote is important
regardless of the number of shares you own. Voting by proxy will not prevent
you from voting in person at the Annual Meeting but will assure that your
vote is counted if you cannot attend.
On behalf of the Board of Directors and the employees of Westborough
Financial Services and Westborough Bank, we thank you for your continued
support and look forward to seeing you at the Annual Meeting.
Sincerely yours,
Joseph F. MacDonough
President and Chief Executive Officer
[LETTERHEAD OF WESTBOROUGH FINANCIAL SERVICES, INC.]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: Thursday, January 25, 2001
Time: 4:00 p.m., local time
Place: Wyndham Westborough Hotel
5400 Computer Drive
Westborough, Massachusetts 01581
At our 2001 Annual Meeting, we will ask you to:
1. Amend Article VI, Section 1 of Westborough Financial
Service's Articles of Organization to clarify that
directors are allowed to continue serving on the company's
board of directors until the annual meeting immediately
following his or her 75th birthday.
2. Elect five directors to serve for a three-year term to expire at
the 2004 annual meeting. The following five directors are the
Board of Director's nominees:
Nelson P. Ball Earl H. Hutt Joseph F. MacDonough
Robert G. Daniel Roger B. Leland
3. Ratify the appointment of Wolf & Company, P.C. as our
independent public accountants for the fiscal year ending
September 30, 2001;
4. Adopt the Westborough Financial Services, Inc. 2001 Stock Option
Plan;
5. Adopt the Westborough Financial Services, Inc. 2001 Recognition
and Retention Plan; and
6. Transact any other business as may properly come before the
Annual Meeting.
You may vote at the Annual Meeting if you were a shareholder of
Westborough Financial Services at the close of business on December 17,
2000, the record date.
By Order of the Board of Directors,
Nelson P. Ball
Clerk
Westborough, Massachusetts
December 26, 2000
============================================================================
You are cordially invited to attend the Annual Meeting. It is important that
your shares be represented regardless of the number of shares you own. The
Board of Directors urges you to sign, date and mark the enclosed proxy card
promptly and return it in the enclosed envelope. Returning the proxy card
will not prevent you from voting in person if you attend the Annual Meeting.
============================================================================
GENERAL INFORMATION
GENERAL
We have sent you this proxy statement and enclosed proxy card because
the Board of Directors is soliciting your proxy to vote at the Annual
Meeting. This proxy statement summarizes the information you will need to
know to cast an informed vote at the Annual Meeting. You do not need to
attend the Annual Meeting to vote your shares. You may simply complete, sign
and return the enclosed proxy card and your votes will be cast for you at
the Annual Meeting. This process is described below in the section entitled
"Voting Rights."
We began mailing this proxy statement, the Notice of Annual Meeting
and the enclosed proxy card on or about December 26, 2000 to all
shareholders entitled to vote. If you owned common stock of Westborough
Financial Services at the close of business on December 17, 2000, the record
date, you are entitled to vote at the Annual Meeting. On the record date,
there were __________ shares of common stock outstanding.
QUORUM
A quorum of shareholders is necessary to hold a valid meeting. If the
holders of at least a majority of the total number of the outstanding shares
of common stock entitled to vote are represented in person or by proxy at
the Annual Meeting, a quorum will exist. We will include proxies marked as
abstentions and broker non-votes to determine the number of shares present
at the Annual Meeting.
VOTING RIGHTS
You are entitled to one vote at the Annual Meeting for each share of
the common stock of Westborough Financial Services that you owned as of
record at the close of business on December 17, 2000. The number of shares
you own (and may vote) is listed at the top of the back of the proxy card.
You may vote your shares at the Annual Meeting in person or by proxy.
To vote in person, you must attend the Annual Meeting and obtain and submit
a ballot, which we will provide to you at the Annual Meeting. To vote by
proxy, you must complete, sign and return the enclosed proxy card. If you
properly complete your proxy card and send it to us in time to vote, your
"proxy" (one of the individuals named on your proxy card) will vote your
shares as you have directed. If you sign the proxy card but do not make
specific choices, your proxy will vote your shares FOR each of the proposals
identified in the Notice of the Annual Meeting.
If any other matter is presented, your proxy will vote the shares
represented by all properly executed proxies on such matters as a majority
of the Board of Directors determines. As of the date of this proxy
statement, we know of no other matters that may be presented at the Annual
Meeting, other than those listed in the Notice of the Annual Meeting.
VOTE BY WESTBOROUGH BANCORP, MHC
Westborough, MHC is the holding company of Westborough Financial
Services which was formed pursuant to the reorganization of Westborough Bank
to a mutual holding company structure on February 15, 2000. As indicated
under "Security Ownership of Certain Beneficial Owners and Management,"
Westborough, MHC owns 65%, or 1,027,893 shares, of the outstanding common
stock of Westborough Financial Services.
All shares of common stock owned by Westborough, MHC will be voted in
accordance with the instructions of the Board of Trustees of Westborough,
MHC. Westborough, MHC is expected to vote such shares "FOR" Proposals 1, 2
and 3. While Westborough, MHC also intends to vote "FOR" Proposals 4 and 5,
the adoption of these proposals requires the approval of a majority of the
total votes of the common stock issued and outstanding as of December 17,
2000, exclusive of the shares owned by Westborough, MHC.
VOTE REQUIRED
Proposals 1 and 3. In order to implement each of Proposals 1 and 3, we
must obtain the affirmative vote of the holders of a majority of the shares
of our common stock represented in person or by proxy at the Annual Meeting
and entitled to vote on each proposal. Under this voting standard, shares as
to which the "ABSTAIN" box has been selected on the proxy card will count as
shares represented and entitled to vote and will be treated as votes
"AGAINST" a proposal. Shares for which no vote is cast with respect to a
proposal will be treated as shares that are not represented and will have no
effect on the outcome of the vote for that proposal. A broker non-vote with
respect to either of these proposals will be treated as shares that are not
represented and will have no effect on the outcome of that proposal. Because
Westborough, MHC owns more than 50% of Westborough Financial Services's
outstanding shares, we expect that Westborough, MHC will control the outcome
of the votes on Proposals 1 and 3.
Proposal 2. For the election of directors under Proposal 2, the
nominees who receive the most votes will be elected. Under this voting
standard, a failure to vote or an indication of "WITHHOLD AUTHORITY" on your
proxy card with respect to any nominee will not count "FOR" or "AGAINST"
that nominee. A broker non-vote will have no effect on the outcome of this
proposal because only a plurality of votes cast is required to elect a
director. Because Westborough, MHC owns more than 50% of Westborough
Financial Services's outstanding shares, we expect that Westborough, MHC
will control the outcome of the vote on Proposal 2.
Proposals 4 and 5. In order to implement each of Proposals 4 and 5,
the majority of the outstanding shares of our common stock that are not held
by Westborough, MHC must be voted "FOR" each proposal. Under this voting
standard, we must treat an abstention or failure to vote the same as a vote
"AGAINST" a proposal. Shares for which no vote is cast or for which the
"ABSTAIN" box has been selected on the proxy card, will be treated the same
as a vote "AGAINST" each proposal. A broker non-vote with respect to either
of these proposals will be treated the same as a vote "AGAINST" that
proposal.
CONFIDENTIAL VOTING POLICY
Westborough Financial Services maintains a policy of keeping
shareholder votes confidential. We only let our Inspector of Election and
certain employees of our independent tabulating agent examine the voting
materials. We will not disclose your vote to management unless it is
necessary to meet legal requirements. We will, however, forward any written
comments that you may have to management.
REVOKING YOUR PROXY
You may revoke your proxy at any time before it is exercised by:
* Filing with the Clerk a letter revoking the proxy;
* Submitting another signed proxy with a later date; and
* Attending the Annual Meeting and voting in person, provided you file a
written revocation with the Secretary of the Annual Meeting prior to
the voting of such proxy.
If your shares are not registered in your own name, you will need
appropriate documentation from your shareholder of record to vote personally
at the Annual Meeting. Examples of such documentation include a broker's
statement, letter or other document that will confirm your ownership of
shares of Westborough Financial Services.
SOLICITATION OF PROXIES
Westborough Financial Services will pay the costs of soliciting
proxies from its shareholders. Directors, officers or employees of
Westborough Financial Services and Westborough Bank may solicit proxies by:
* mail;
* telephone; and
* other forms of communication.
We will also reimburse banks, brokers, nominees and other fiduciaries
for the expenses they incur in forwarding the proxy materials to you.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Our directors, officers and employees will be granted stock options
under the Westborough Financial Services, Inc. 2001 Stock Option Plan being
presented for shareholder approval in Proposal 4, if our shareholders
approve Proposal 4. Our directors, officers and employees will be awarded
restricted stock under the Westborough Financial Services, Inc. 2001
Recognition and Retention Plan being presented for shareholder approval in
Proposal 5, if our shareholders approve Proposal 5. As a result, our
directors, officers and employees have a personal interest in the outcome of
the vote on Proposals 4 and 5.
OBTAINING AN ANNUAL REPORT ON FORM 10-KSB
If you would like a copy of our Annual Report on Form 10-KSB and
audited financials for the year ended September 30, 2000, which will be
filed with the Securities and Exchange Commission ("SEC"), we will send you
one (without exhibits) free of charge. Please write to:
Nelson P. Ball, Clerk
Westborough Financial Services, Inc.
100 East Main Street
Westborough, Massachusetts 01581
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS OF WESTBOROUGH FINANCIAL SERVICES
The following table contains common stock ownership information for
persons known to Westborough Financial Services to "beneficially own" 5% or
more of Westborough Financial Services's common stock as of December 17,
2000. In general, beneficial ownership includes those shares that a person
has the power to vote, sell, or otherwise dispose. Beneficial ownership also
includes that number of shares which an individual has the right to acquire
within 60 days (such as stock options) of the date this table was prepared.
Two or more persons may be considered the beneficial owner of the same
shares. We obtained the information provided in the following table from
filings with the SEC and with Westborough Financial Services. In this proxy
statement, "voting power" is the power to vote or direct the voting of
shares, and "investment power" includes the power to dispose or direct the
disposition of shares.
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent
- -------------- ------------------- -------------------- -------
Common Stock Westborough, MHC 1,027,893 65.0%
$.01 par value 100 East Main Street
Westborough, Massachusetts 01581
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Westborough
Financial Services's common stock beneficially owned by each director, and
all directors and executive officers of Westborough Financial Services as a
group, as of December 17, 2000. Except as otherwise indicated, each person
and each group shown in the table has sole voting and investment power with
respect to the shares of common stock listed next to their name.
Position with Amount and Nature Percent of
Westborough of Beneficial Common Stock
Name Financial Services(1) Ownership(2) Outstanding(3)
- --------------------------- --------------------- ----------------- --------------
Nelson P. Ball Director 0(4)
Edward S. Bilzerian Director 3,000
David E. Carlstrom Director 2,500
John L. Casagrande Senior Vice President,
Treasurer and Director 1,451(5)
William W. Cotting, Jr. Director 1,000
Robert G. Daniel Director 7,500
Earl H. Hutt Director 3,500
Walter A. Kinell, Jr. Chairman of the Board 6,500
Robert A. Klugman Director 7,500(6)
Roger B. Leland Director 6,500(7)
Joseph F. MacDonough President, Chief Executive
Officer and Director 8,534(8)
Paul F. McGrath Director 5,000(9)
Charlotte C. Spinney Director 1,500(10)
Phyllis A. Stone Director 3,000(11)
James E. Tashjian Director 2,500(12)
Daniel G. Tear Director 1,451
All directors and executive
officers as a group
persons(13) 65,109 %
<FN>
- --------------------
* Less than one percent of the total outstanding shares of common stock.
<F1> Titles are for both Westborough Financial Services and Westborough
Bank.
<F2> All shares are common stock of Westborough Financial Services, par
value $0.01.
<F3> Based on a total of _________ shares of Westborough Financial
Services's common stock outstanding as of December 17, 2000.
<F4> Excludes 3,500 shares held by his spouse for which Mr. Ball disclaims
beneficial ownership.
<F5> Reflects shares held in Westborough Bank's 401(k) plan.
<F6> Includes 6,000 shares held in Mr. Klugman's individual retirement
account.
<F7> Includes 2,000 shares held in his spouse's individual retirement
account.
<F8> Includes 1,753 shares held in Mr. MacDonough's individual retirement
account, 1,834 shares held in his spouse's individual retirement
account, 1,447 shares held in Westborough Bank's 401(k) plan, and
3,500 shares held jointly with his spouse.
<F9> Reflects shares held in Mr. McGrath's individual retirement account.
<F10> Reflects shares held in Ms. Spinney's individual retirement account.
<F11> Includes 50 shares held by Ms. Stone as custodian for an individual,
25 shares held by Ms. Stone as custodian under the Uniform Transfer to
Minors Act, and 1,500 shares held jointly with her spouse.
<F12> Reflects shares held jointly with his spouse.
<F13> The number of shares for all executive officers and directors as a
group includes 44,200 shares held by the Westborough Financial
Services, Inc. Employee Stock Ownership Plan ("ESOP") Trust, over
which certain directors and executive officers may be deemed to have
shared investment power. The shares have not yet been allocated to the
individual accounts as of December 17, 2000. The individual
participants in the ESOP have shared voting power with the ESOP
Trustee.
</FN>
DISCUSSION OF PROPOSALS RECOMMENDED BY BOARD
---------------------------------
PROPOSAL 1
AMENDMENT OF ARTICLES OF ORGANIZATION
TO REVISE AGE LIMITATION OF DIRECTORS
---------------------------------
The proposed amendment to Article VI, Section 6.2, Clause A of
Westborough Financial Service's Articles of Organization revises the age
limitation of directors who may serve on the Westborough Financial Services
Board of Directors. Currently, directors may not be elected to a term which
extends beyond his or her 75th birthday. The proposed amendment would allow
directors to continue serving on the Westborough Financial Services Board of
Directors until the annual meeting immediately following his or her 75th
birthday.
Attached as Exhibit A to this proxy statement is the proposed
amendment to Article VI, Section 6.2, Clause A of Westborough Financial
Services's Articles of Organization.
In addition, the Board of Directors has adopted a similar amendment to
Article II, Section 1 of Westborough Financial Services's Bylaws. Under
Article VIII, Section 1 of Westborough Financial Services's Bylaws, we must
notify each of our shareholders who was a shareholder on the record date for
the 2001 annual meeting of the amendment to the Bylaws. This notice must be
given to all shareholders on the record date no later than the date that the
Notice of the 2001 Annual Meeting is first given to shareholders. In
accordance with such requirements, this proxy statement constitutes notice
to shareholders of Westborough Financial Services of the amendment to
Article II, Section 1 of the Bylaws.
============================================================================
The Board of Directors unanimously recommends a vote "FOR" the proposed
amendment of the Articles of Organization revising the age limitation of
directors serving on the Board.
============================================================================
---------------------------------
PROPOSAL 2
ELECTION OF DIRECTORS
---------------------------------
GENERAL
The Board has nominated five persons for election as directors at the
Annual Meeting. The nominees are currently serving on Westborough Financial
Services's Board of Directors. If you elect the nominees, they will hold
office until the Annual Meeting in 2004, or until their successors have been
elected.
We know of no reason why any nominee may be unable to serve as a
director. If any nominee is unable to serve, your proxy may vote for another
nominee proposed by the Board. If for any reason these nominees prove unable
or unwilling to stand for election, the Board will nominate alternates or
reduce the size of the Board of Directors to eliminate the vacancy. The
Board has no reason to believe that its nominees would prove unable to serve
if elected.
NOMINEES AND CONTINUING DIRECTORS
Position(s)
Held with
Term Westborough Financial
Age(1) Expires Services Director Since(2)
------ ------- --------------------- -----------------
Nominees
- --------
Nelson P. Ball 69 2001 Director and Clerk 1980
Robert G. Daniel 71 2001 Director 1969
Earl H. Hutt 73 2001 Director 1988
Roger B. Leland 71 2001 Director 1974
Joseph F. MacDonough 54 2001 President, Chief Executive 1982
Officer and Director
Continuing Directors
- --------------------
Edward S. Bilzerian 67 2002 Director 1993
Paul F. McGrath 54 2002 Director 1993
Charlotte C. Spinney 64 2002 Director 1991
Phyllis A. Stone 57 2002 Director 1999
James E. Tashjian 59 2002 Director 1973
David E. Carlstrom 66 2003 Director 1976
John L. Casagrande 54 2003 Senior Vice President, 1994
Treasurer and Director
William W. Cotting, Jr. 54 2003 Director 1988
Walter A. Kinell, Jr. 71 2003 Chairman of the Board 1967
Robert A. Klugman 49 2003 Director 1991
Daniel G. Tear 74 2003 Director 1985
<FN>
- --------------------
<F1> As of September 30, 2000.
<F2> Includes service as a trustee of Westborough Bank prior to the
formation of Westborough Financial Services in 2000.
</FN>
The principal occupation and business experience of each nominee for
election as director and each continuing director are set forth below.
NOMINEES
Nelson P. Ball is the owner of Ball Financial Services, Co., located
in Westborough, Massachusetts. He has served as a financial services
consultant for over 35 years and is a member of the National Association of
Securities Dealers, Inc.
Robert G. Daniel was employed in various capacities, including
President and Treasurer, at Carlson Daniel Insurance Agency, Inc., located
in Westborough, Massachusetts from 1958 to 1994. Mr. Daniel sold insurance
from 1994 to 1996 for Allied American Agency following its acquisition of
Carlson Daniel Insurance. From 1996 to 1999, Mr. Daniel served as President
and Treasurer of Westborough Insurance Agency, Inc., a non-active
corporation used as a vehicle for payments from Allied American as
negotiated in connection with the acquisition of Carlson Daniel. Westborough
Insurance Agency Inc. dissolved in 1999.
Earl H. Hutt has served as an investment advisor and portfolio manager
for private industry for over 20 years.
Robert B. Leland has practiced estate, tax and real estate law at
Leland Law Associates for over 30 years. During that time, he also served
as an insurance broker, selling life and casualty insurance products,
through Leland Insurance Agency, Inc. Leland Law Associates and Leland
Insurance Agency are located in Northborough, Massachusetts.
Joseph F. MacDonough has served as President and Chief Executive
Officer of Westborough Bank since 1994 and of Westborough Financial Services
since its inception in 2000. He joined Westborough Bank in 1981 and served
as Vice President and Treasurer until his appointment as President. Mr.
MacDonough serves on the Board of Trustees of The Savings Bank Employees'
Retirement Association and is a certified public accountant.
CONTINUING DIRECTORS
Edward S. Blizerian is president of Bilzerian Consulting Group, Inc.,
a privately held company located in Worcester, Massachusetts, specializing
in small business turnarounds. He has been self-employed for over 14 years.
Paul F. McGrath is a certified public accountant and has served as
President of Mottle McGrath Braney & Flynn, P.C. for over five years. Mottle
McGrath is a certified public accounting firm, located in Worcester,
Massachusetts, that provides accounting, tax and business advisory services
throughout central New England.
Charlotte C. Spinney is a retired social studies teacher. She taught
at Westborough High School for 41 years and, during that time, she created
the curriculum for the community service component of the school's Sociology
course.
Phyllis A. Stone has served as Vice President and Treasurer of Comey
Oil Co., Inc., located in Westborough, Massachusetts, for the past 13 years.
Prior to her appointment as Vice President, she served in various other
capacities within Comey Oil for over 30 years. She is past Treasurer of the
Regatta Point Community Sailing Inc. of Worcester, Massachusetts.
James E. Tashjian is a partner in the law firm of Tashjian, Simsarian
& Wickstrom, located in Worcester, Massachusetts. He has engaged in the
general practice of law for over 30 years.
David E. Carlstrom has served as President of Carlstrom Pressed Metal
Co., Inc. for over 25 years. Carlstrom Pressed Metal is located in
Westborough, Massachusetts.
John L. Casagrande has served as the Senior Vice President and
Treasurer of Westborough Bank since 1993. He joined Westborough Bank after
having been employed as a senior bank officer and certified public
accountant for over 15 years at various times by several financial
institutions (including mutual and stock institutions) and the accounting
firm of Peat Marwick.
William W. Cotting, Jr. has been an attorney in private practice for
over 20 years. His practice is located in Northborough, Massachusetts.
Walter A. Kinell, Jr. has served as Chairman of the Board for
Westborough Bank since 1994 and for Westborough Financial Services since its
inception in 2000. Mr. Kinell joined Westborough Bank in 1949 as an
assistant treasurer, became President and Chief Executive Officer in 1969
and retired from this position in 1994.
Robert A. Klugman, M.D., F.A.C.P. has practiced general medicine in
Westborough, Massachusetts for over 20 years. Dr. Klugman is currently an
Associate Professor of Clinical Medicine at the University of Massachusetts
Medical School as well as Division Chief of Community Internal Medicine at
the UMASS/ Memorial.
Daniel G. Tear has served as a consultant to businesses in the area of
management psychology for the past 30 years.
============================================================================
The Board of Directors unanimously recommends a vote "FOR" all of the
nominees for election as directors.
============================================================================
INFORMATION ABOUT BOARD OF DIRECTORS AND MANAGEMENT
BOARD OF DIRECTORS
Westborough Financial Services's Board of Directors currently consists
of 16 members. Westborough Financial Services's Articles of Organization
provides that the Board shall be divided into three classes. The terms of
five directors expire at the Annual Meeting.
The Board of Directors oversees our business and monitors the
performance of our management. In accordance with our corporate governance
procedures, the Board of Directors does not involve itself in the day-to-day
operations of Westborough Financial Services. Westborough Financial
Services's executive officers and management oversee the day-to-day
operations of Westborough Financial Services. Our directors fulfill their
duties and responsibilities by attending regular meetings of the Board which
are held on a monthly basis. Our directors also discuss business and other
matters with the Chairman, other key executives, and our principal external
advisers (legal counsel, auditors, financial advisors and other
consultants).
The Board of Directors held four regular meetings and three special
meetings during the fiscal year ended September 30, 2000. Each incumbent
director attended at least 75% of the meetings of the Board of Directors,
plus meetings of committees on which that particular director served during
this period.
COMMITTEES OF THE BOARD
The Board of Directors of Westborough Financial Services has
established the following committees:
EXECUTIVE The Executive Committee exercises the powers of the Board
COMMITTEE of Directors in between Board meetings.
Directors Carlstrom, Daniel, Klugman, Leland, MacDonough,
and Tashjian currently serve as members of the committee.
Mr. MacDonough is the Chairman of the Committee. The
Executive Committee met 45 times in the 2000 fiscal year.
COMPENSATION The Compensation Committee provides advice and
COMMITTEE recommendation to the Board of Directors in the areas of
employee salaries and benefit programs.
Directors Carlstrom, Daniel and Leland currently serve on
the committee. Mr. Daniel is the Chairman of the Committee.
The Compensation Committee met nine times in the 2000
fiscal year.
LONG RANGE The Long Range Planning Committee sets long range goals and
PLANNING objectives and develops plans for their achievement.
COMMITTEE
Directors Carlstrom, Daniel, Kinell, Klugman, Leland,
MacDonough, Tashjian and Tear currently serve on the
committee. Mr. Leland is the Chairman of the Committee. The
Long Range Planning Committee met 10 times in the 2000
fiscal year.
NOMINATING The Nominating Committee recommends nominees for election
COMMITTEE as directors and reviews if any shareholder nominations
comply with the notice procedures set forth in Westborough
Financial Service's Bylaws.
Westborough Financial Service's Bylaws set forth a
procedure for shareholders to nominate directors by
notifying the Clerk of Westborough Financial Services in
writing and meeting other requirements set forth in the
Bylaws.
Directors Carlstrom, McGrath and Tear currently serve on
the committee. Mr. McGrath is the Chairman of the
Committee. The Nominating Committee met in October, 2000 to
select the nominees for election as directors at the Annual
Meeting.
AUDIT The Audit Committee reviews the annual audit prepared by
COMMITTEE the independent accountants and recommends the appointment
of accountants. The board of directors of Westborough
Financial Services has adopted a written charter for the
Audit Committee, which is attached to this proxy statement
as Exhibit B.
Directors Bilzerian, Hutt and McGrath currently serve as
members of the committee. Mr. Hutt is the Chairman of the
Committee. All members of the Audit Committee are
independent directors.
The Audit Committee met five times in the 2000 fiscal year.
AUDIT COMMITTEE REPORT
WESTBOROUGH FINANCIAL SERVICES, INC. AUDIT COMMITTEE REPORT
The following Audit Committee Report is provided in accordance with
the rules and regulations of the Securities and Exchange Commission (the
"SEC"). Pursuant to such rules and regulations, this report shall not be
deemed "soliciting materials," filed with the SEC, subject to Regulation 14A
or 14C of the SEC or subject to the liabilities of section 18 of the
Securities Exchange Act of 1934, as amended.
The Audit Committee has reviewed and discussed the audited financial
statements with management. The committee has also reviewed and discussed
with Wolf & Company, P.C., their independent auditors the matters required
to be discussed by SAS 61, as may be modified or supplemented.
The Audit Committee also has received the written disclosures and the
letter from the independent accountants required by Independence Standards
Board Standard No. 1 (Independence Standards Board Standard No.1,
Independence Discussions with Audit Committee), as may be modified or
supplemented, and has discussed with Wolf & Company its independence.
Based on the foregoing discussions, the Audit Committee recommended to
the Board of Directors of Westborough Financial Services that the audited
financial statements be included in the Westborough Financial Services's
Annual Report on Form 10-KSB for the year ended September 30, 2000.
Audit Committee of Westborough
Financial Services, Inc.
Earl H. Hutt (Chairman)
Edward S. Bilzerian
Paul M. McGrath
DIRECTORS' COMPENSATION
Meeting Fees. Currently, each non-employee director of Westborough
Bank receives the following fees:
* fee of $250 per Board of Directors meeting attended; and
* fee of $250 per committee meeting attended, with the Chairman of
each committee receiving a fee of $275.
In addition, Directors Carlstrom, Daniel, Klugman, Leland, and
Tashjian receive an annual retainer of $5,000 as members of the Executive
Committee, while Director Kinell receives an annual retainer of $5,000 as
Chairman of the Board. Directors Bilzerian, Hutt and McGrath receive an
annual retainer equal to $3,500 as members of the Audit Committee. Directors
Ball, Cotting, Spinney, Stone and Tear receive an annual retainer of $2,500.
Total directors' meeting and committee fees for fiscal 2000 were
$89,350. We do not compensate our employee-directors for service as
directors. Directors are also entitled to the protection of certain
indemnification provisions in our Articles of Organization.
Recognition and Retention Plan and Stock Option Plan. Our directors
are eligible to participate in the Westborough Financial Services, Inc. 2001
Stock Option Plan and Westborough Financial Services, Inc. 2001 Recognition
and Retention Plan. These stock benefit plans are discussed under "-Benefit
Plans," "Stock Option Plan" and "Recognition and Retention Plan."
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following individuals are executive officers of Westborough
Financial Services and Westborough Bank and hold the offices set forth below
opposite their names.
Biographical information and the business experience of each non-
director executive officer of Westborough Financial Services and Westborough
Bank is set forth below.
In addition to Messrs. Casagrande and MacDonough, Westborough
Financial Services and Westborough Bank have the following executive
officers:
Vickie A. Bouvier, age 43, has worked for Westborough Bank since 1976
in various capacities and has been the Vice President, Operations Officer
since 1994.
Margaret I. Duquette, age 48, has worked for Westborough Bank as its
Director of Human Resources since 1997. Prior to 1997, she held the position
of Director of Human Resources at Bay State Savings Bank in Worcester,
Massachusetts where she worked for 19 years.
Robert K. McCann, age 43, is currently the Vice President of
Commercial Lending, a position he has held since October 2000. Mr. McCann is
responsible for supervising the operation of the commercial loan department
and developing new commercial relationships. Mr. McCann joined Westborough
Bank in 1999 as Assistant Vice President. Prior to joining Westborough Bank,
he worked at Citizens-Union Savings Bank, located in River, Massachusetts.
Mr. McCann has over 19 years of finance and banking experience.
Alexander P. Tautkas, age 56, is currently the Vice President and
Senior Loan Officer of Westborough Bank, an office which he has held since
1997. He is responsible in this capacity for Westborough Bank's loan
portfolio. He has been employed by Westborough Bank in various positions
since 1977.
Sharyn L. Tomasso, age 36, is Vice President of Marketing and Retail
Sales, a position she has held since 1999. Prior to joining Westborough Bank
in 1999, she served as Executive Vice President of Market Development for
Cookson & Company, Marketing Communications.
EXECUTIVE COMPENSATION
The following table sets forth compensation paid during the fiscal
years ended September 30, 2000 and 1999 to the Chief Executive Officer of
Westborough Financial Services and Westborough Bank and to the other most
highly compensated executive officer of Westborough Financial Services and
Westborough Bank whose salary and bonus for 2000 was at least $100,000.
Summary Compensation Table
Annual Compensation
-------------------------------------------------------------
Other
Annual All Other
Name and Principal Compensation Compensation
Positions Year Salary($) Bonus($) ($)(1) ($)(2)
- ------------------ ---- --------- -------- ------------ ------------
Joseph F. MacDonough 2000 $178,644 - - 37,328
President and Chief 1999 $156,437 $29,371 - 38,405
Executive Officer
John L. Casagrande 2000 $ 99,012 - - 17,531
Senior Vice President 1999 $ 87,331 $19,931 - 18,092
and Treasurer
<FN>
- --------------------
<F1> Westborough Bank provides Mr. MacDonough with certain non-cash
benefits and perquisites, such as the use of an automobile, club
membership dues and certain other personal benefits, the aggregate
value of which did not exceed the lesser of $50,000 or 10% of the
total annual salary and annual bonus reported for him in the Summary
Compensation Table.
<F2> Includes the dollar value of the benefit to Mr. MacDonough and Mr.
Casagrande of the premiums paid by Westborough Bank under their split
dollar life insurance arrangements and contributions on behalf of
Westborough Bank's 401(K) plan. The full amount of the premiums paid
by Westborough Bank under the split dollar life insurance arrangement
will be refunded to it from the proceeds of the split dollar life
insurance policy.
</FN>
Westborough Financial Services had entered into separate employment
agreements with Messrs. MacDonough and Casagrande to secure their services
as President and Chief Executive Officer, and Senior Vice President and
Treasurer, respectively. The employment agreements provide for an initial
term of three years in the case of Mr. MacDonough, and two years in the case
of Mr. Casagrande. Commencing on the first anniversary of the effective date
of each agreement, and continuing on each anniversary date thereafter, the
employment agreements may be extended, after review by the Compensation
Committee of the Board of the executive's performance, for an additional
one-year period, so that the remaining term will be three years in the case
of Mr. MacDonough, and two years in the case of Mr. Casagrande.
The employment agreements provide for each executive's base salary to
be reviewed annually by the Board. Each executive's base salary may be
adjusted based on his job performance and the overall performance of
Westborough Financial Services and Westborough Bank. In addition to base
salary, each employment agreement provides for participation in stock,
retirement, and welfare benefit plans and eligibility for fringe benefits
applicable to executive personnel. Mr. MacDonough's agreement provides for
the reimbursement of his ordinary and necessary business expenses, which
specifically include travel and entertainment expenses, expenses related to
the use of an automobile, and fees for membership in clubs and organizations
that he and Westborough Financial Services agree are for business purposes.
Mr. Casagrande's agreement provides for the reimbursement of his ordinary
and necessary business expenses, which specifically include certain travel
and entertainment expenses.
Westborough Financial Services may terminate each executive's
employment at any time with or without cause, and each executive may resign
at any time provided he provides 30 days prior written notice and fully
cooperates in the transition of his duties. In the event an executive's
employment is terminated without cause during the term of the employment
agreement, the executive will be entitled to severance benefits. These
severance benefits include a lump sum payment equal to the present value of
the base salary and bonus payments that would have been made to the
executive for the remaining term of his employment agreement, assuming the
executive would have been awarded a bonus for each year remaining in the
agreement term equal to the highest annual bonus paid to him in the
preceding three year period and paid his base salary during the remaining
agreement term at the annual rate in effect as of the termination. In
addition, the executive would be entitled to continue his participation in
the group life, health, dental, accidental death and long-term disability
plans sponsored by Westborough Bank for the remaining term of his employment
agreement. The same severance benefits would be payable if the executive
resigns during the term of the employment agreement following: failure of
the Board to reappoint the executive to the position provided for in his
employment agreement; failure of Westborough Financial Services to vest in
the executive the duties set forth in the agreement, if not cured; and
Westborough Financial Services's material breach of the agreement. The
employment agreements also provide certain uninsured benefits in the event
the executive's employment terminates because of death or disability.
Under his employment agreement, Mr. MacDonough agrees that for the
three year period following his termination of employment, he will not take
a position with any competitor that would require him to work within a 50
mile radius of the headquarters of Westborough Financial Services or
Westborough Bank. Mr. Casagrande agrees under his employment agreement that
for a period of two years following his termination of employment he will
not take a position with any competitor that would require him to work
within a 30 mile radius of the headquarters of Westborough Financial
Services or Westborough Bank.
Change in Control Provisions. In the event Mr. MacDonough or Mr.
Casagrande resigns for any reason or is terminated without cause following a
change in control of Westborough Financial Services or Westborough Bank, he
will be entitled to certain severance benefits. These severance benefits
include a lump sum payment equal to the present value of the base salary and
bonus payments that would have been made to the executive for the remaining
term of his employment agreement, assuming the executive would have been
awarded a bonus for each year remaining in the agreement term equal to the
highest annual bonus paid to him in the preceding three year period and paid
his base salary during the remaining agreement term at the annual rate in
effect as of the termination. However, in no event will the amount of this
lump sum payment be less than 2.99 multiplied by the executive's average
annual compensation for the preceding five years. In addition, the executive
will be entitled to continue his participation in the group life, health,
dental, accidental death and long-term disability plans sponsored by
Westborough Bank for the remaining term of his employment agreement. A
second-step conversion will not trigger additional benefits or accelerate
benefits under the employment agreements or under any other arrangement.
If Westborough Financial Services or Westborough Bank experiences a
change in ownership, a change in effective ownership or control or a change
in the ownership of a substantial portion of their assets as contemplated by
section 280G of the Internal Revenue Code, a portion of any severance
payments under the employment agreements might constitute an "excess
parachute payment" under current federal tax laws. Any excess parachute
payment would be subject to a 20% federal excise tax payable by the
executive. Neither Westborough Bank nor Westborough Financial Services could
claim a federal income tax deduction for an excess parachute payment. The
employment agreements require Westborough Financial Services to indemnify
each executive against the financial effects of the excise tax.
BENEFIT PLANS
Pension Plans. Westborough Bank maintains a tax-qualified pension plan
that covers substantially all employees who have attained age 21 and have at
least one year of service. The following table shows the estimated aggregate
benefits payable under the pension plan upon retirement at age 65 with
various years of service and average compensation combinations.
Years of Service
Average --------------------------------------------------------------
Compensation 10 15 20 25 30 35
- ------------ ------- ------- ------- ------- ------- -------
$100,000 $16,394 $24,590 $32,787 $40,984 $40,984 $40,984
$125,000 $21,019 $31,528 $42,037 $52,547 $52,547 $52,547
$150,000 $25,644 $38,465 $51,287 $64,109 $64,109 $64,109
$160,000 $27,494 $41,240 $54,987 $68,734 $68,734 $68,734
$175,000 $29,344 $44,015 $58,687 $73,359 $73,359 $73,359
$200,000 $29,344 $44,015 $58,687 $73,359 $73,359 $73,359
$300,000 $29,344 $44,015 $58,687 $73,359 $73,359 $73,359
$400,000 $29,344 $44,015 $58,687 $73,359 $73,359 $73,359
The benefits shown in the preceding table are annual benefits payable
in the form of a single life annuity and are not subject to any deduction
for Social Security benefits or other offset amounts. At September 30, 2000,
Mr. MacDonough's and Mr. Casagrande's average compensation and estimated
years of service were $158,162 and 22.9 years of service and $99,150 and
6.75 years of service, respectively.
Mr. MacDonough and Mr. Casagrande are entitled to supplemental
retirement benefits under an Executive Supplemental Compensation Agreement
each has entered into with Westborough Bank. Under each agreement, the
executive is entitled to an annual retirement benefit, payable at age 65 in
the form of a single life annuity, equal to 70% of his benefit computation
base in the case of Mr. MacDonough and 50.4% of his benefit computation base
in the case of Mr. Casagrande, but reduced by the sum of: 2% multiplied by
the executive's annual primary Social Security benefit multiplied by his
years of service, plus his annual retirement benefit under any tax-qualified
pension plan, plus the annual annuity payable to the executive under his
Split Dollar Agreement. Under the agreements, the executive's benefit
computation base is his average annual compensation during the 12
consecutive calendar quarters in which his compensation is the highest.
401(k) Plan. Westborough Bank maintains a tax-qualified 401(k) defined
contribution plan for employees who have attained age 21 and have at least
one year of service. Eligible employees may take pre-tax contributions to
the plan through salary reduction elections from 1% to 15% of annual
compensation, subject to limitations of the Internal Revenue Code.
Westborough Bank makes a matching contribution to the plan equal to 25% of
the first four percent of annual compensation contributed to the plan on a
pre-tax basis by the eligible employee.
Employee Stock Ownership Plan. This plan is a tax-qualified plan that
covers substantially all employees of Westborough Bank and Westborough
Financial Services who have at least one year of service and have attained
age 21.
Although contributions to this plan are discretionary, Westborough
Bank intends to continue contributing enough money each year to make the
required principal and interest payments on the loan from Westborough
Financial Services. This loan is for a term of 10 years and calls for level
annual payments of principal and interest. The plan has pledged the shares
as collateral for the loan and holds them in a suspense account.
The plan will release a portion of the pledged shares annually,
allocating the shares released each year among the accountants of
participants in proportion to their salary for the year. For example, if a
participant's base salary for a year represents 1% of the total base
salaries of all participants for the year, the plan would allocate to that
participant 1% of the shares released for the year. Participants direct the
voting of shares allocated to their accounts. Shares in the suspense account
will usually be voted in a way that mirrors the votes which participants
cast for shares in their individual accounts.
This plan may purchase additional shares in the future, and may do so
using borrowed funds, cash dividends, periodic employer contributions or
other cash flow.
Benefit Restoration Plan. Westborough Financial Services has also
adopted a benefit restoration plan for Mr. MacDonough. This plan is designed
to provide Mr. MacDonough with the benefits that would otherwise be earned
by him as a participant in the 401(k) plan and the employee stock ownership
plan if such benefits were not limited by certain provisions of the Internal
Revenue Code. The benefit restoration plan provides for a benefit equal in
value to the allocations under the employee stock ownership plan and the
401(k) that would have been made on Mr. MacDonough's behalf but for these
IRS limits, including employer matching contributions that would have been
made under the 401(k) plan if Mr. MacDonough had elected to make pre-tax
contributions to the 401(k) plan up to the maximum percentage of salary
permitted under the terms of the plan and the annual IRS limit on pre-tax
contributions did not apply.
Under the benefit restoration plan, a bookkeeping account has been
established for Mr. MacDonough which will be credited with a number of
"stock units" equal to the number of shares that could not be allocated on
his behalf under the employee stock ownership plan each year because of the
IRS limits. The value of this supplemental employee stock ownership plan
bookkeeping account at any time is equal to the number of stock units
credited to the account multiplied by the current fair market value per
share. A bookkeeping account also has been established for Mr. MacDonough
which will be credited each year with an amount equal to the employer
matching contributions that could not be allocated to his account under the
401(k) plan because of the IRS limits. Each year, this supplemental employer
matching contribution bookkeeping account will be credited with hypothetical
investment earnings as if the amount credited to the account were invested
either in 30-year Treasury securities or in other investment funds selected
by the Compensation Committee.
Unless a different time or form of distribution is elected by Mr.
MacDonough within the 30 day period following the effective date of the
plan, the value of his supplemental employee stock ownership plan and
employer matching contribution bookkeeping accounts will be paid to him in
one lump sum cash payment as soon as possible following the end of the
calendar year in which his employment terminates. The benefit restoration
plan is an unfunded plan, and benefits payable thereunder will be paid from
the general assets of Westborough Financial Services.
Stock Option Plan. The Board of Directors of Westborough Financial
Services has adopted the Westborough Financial Services, Inc. 2001 Stock
Option Plan. This plan is subject to the approval of the shareholders other
than Westborough, MHC at the Annual Meeting. See "Proposal 4 - Stock Option
Plan."
Recognition and Retention Plan. The Board of Directors of Westborough
Financial Services has adopted the Westborough Financial Services, Inc. 2001
Recognition and Retention Plan. This plan is subject to the approval of the
shareholders other than Westborough, MHC at the Annual Meeting. See
"Proposal 5 - Recognition and Retention Plan."
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Westborough Bank does not make loans to its executive officers or
employees. However, Westborough Bank does make loans to its non-employee
directors. These loans bear interest at the same rate as loans offered to
non-director borrowers and have the same underwriting terms that apply to
non-director borrowers. The outstanding principal balance of such loans to
directors totaled $266,451 or 1.1%, of Westborough Financial Services's
total equity at September 30, 2000.
Westborough Financial Services retains the law firm of Tashjian,
Simsarian & Wickstrom. Mr. James Tashjian, a director of Westborough
Financial Services and Westborough Bank, and a trustee of Westborough, MHC,
has been a partner of Tashjian, Simsarian & Wickstrom since 1995. The legal
fees received by the law firm for professional services rendered to
Westborough Bank during the year ended September 30, 2000 did not exceed 5%
of the firm's gross revenues. For 2000, the firm received approximately
$48,400 from borrowers of Westborough Bank to review loan documentation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Westborough Financial Service's directors and executive officers,
and persons who own more than 10% of Westborough Financial Service's common
stock, to report to the SEC their initial ownership of Westborough Financial
Services's common stock and any subsequent changes in that ownership.
Specific due dates for these reports have been established by the SEC and
Westborough Financial Services is required to disclose in this proxy
statement any late filings or failures to file.
To Westborough Financial Service's knowledge, based solely on its
review of the copies of such reports furnished to Westborough Financial
Services and written representations that no other reports were required
during the fiscal year ended September 30, 2000, all Section 16(a) filing
requirements applicable to Westborough Financial Service's executive
officers and directors during fiscal 2000 were met.
---------------------------------
PROPOSAL 3
RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
---------------------------------
The Board of Directors has appointed Wolf & Company, P.C. to act as
the independent public accountants for Westborough Financial Services for
the fiscal year ending September 30, 2001, and we are asking shareholders to
ratify the appointment. Representatives of Wolf & Company, P.C. are expected
to attend the Annual Meeting.
============================================================================
The Board of Directors unanimously recommends a vote "FOR" the ratification
of the appointment of Wolf & Company, P.C. as independent public accountants
for Westborough Financial Services.
============================================================================
---------------------------------
PROPOSAL 4
ADOPTION OF THE WESTBOROUGH FINANCIAL SERVICES, INC.
2001 STOCK OPTION PLAN
---------------------------------
GENERAL
The Board of Directors has adopted the Westborough Financial Services,
Inc. 2001 Stock Option Plan, subject to approval by the holders of a
majority of Westborough Financial Services's outstanding shares of common
stock that are not owned by Westborough, MHC. Provided below is a summary of
our reasons for adopting this plan and seeking the approval of our
shareholders. The following summary is qualified in its entirety by the full
text of the plan document. The plan document is included at the end of this
proxy statement as Exhibit C and is incorporated by reference into this
proposal.
WHY WE ARE ASKING FOR SHAREHOLDER APPROVAL
We are asking our shareholders to approve the Westborough Financial
Services, Inc. 2001 Stock Option Plan so that we will be able to grant stock
options to our directors and officers. Most of the companies with which we
compete for directors and management-level employees are public companies
that offer stock options as part of their director and officer compensation
packages. By approving this plan, our shareholders will enable us to offer a
more competitive compensation package in attracting and retaining highly
qualified directors and officers. In addition, the value of the stock
options that we would grant under this plan relates directly to the market
price of our common stock. Adding stock options to our compensation package
would link the financial interests of our directors and officers with the
financial interest of our shareholders.
IF WE DO NOT RECEIVE SHAREHOLDER APPROVAL, WE WILL NOT IMPLEMENT THE PLAN
Applicable Massachusetts banking regulations did not permit us to
implement a stock option plan during the first six months after the
completion of Westborough Bank' stock conversion and our initial public
offering. These regulations permit us to implement a stock option plan after
six months and before the first anniversary of these events only if we
obtain the approval of the holders of a majority of our shares of common
stock that are not owned by Westborough, MHC. If we do not receive this
approval, it will not be possible for us to grant stock options. In this
event, we expect that the Board will consider substituting other forms of
compensation to assure that our compensation packages for officers and
directors are competitive with those of other publicly traded financial
services companies in our market area.
PURPOSE OF THE OPTION PLAN
The purpose of the option plan is to promote growth and profitability
to Westborough Financial Services and its shareholders, to provide certain
key officers, employees and directors of Westborough Financial Services and
its affiliates with an incentive to achieve corporate objectives, to attract
and retain individuals of outstanding competence and to provide such
individuals with an equity interest in Westborough Financial Services.
DESCRIPTION OF THE OPTION PLAN
Administration. The plan will be administered by the members of the
Compensation Committee of Westborough Financial Services who are
"disinterested directors" under the federal tax and securities laws. In
general, disinterested directors are directors who (1) are not, and never
were, officers or employees of Westborough Financial Services or Westborough
Bank; and (2) do not receive material compensation from Westborough
Financial Services or Westborough Bank except for service as a director. The
administrative committee must have at least two members and has broad
discretionary powers.
Stock Subject to the Option Plan. Westborough Financial Services has
reserved 55,348 shares of its common stock for issuance upon the exercise of
options under the plan. Such shares may be authorized and unissued shares or
shares previously issued that Westborough Financial Services has reacquired.
Any shares subject to grants under the option plan which expire or are
terminated, forfeited or canceled without having been exercised or vested in
full, shall be available for new option grants. As of December 11, 2000, the
aggregate fair market value of the shares reserved for issuance under the
plan was $________, based on the latest closing sales price per share of
Westborough Financial Services common stock of $______ on the OTC Bulletin
Board on December 11, 2000.
Eligibility. The compensation committee for the plan selects the
people who receive stock option grants. Any employee, officer or employee of
Westborough Financial Services, Westborough Bank or any affiliate approved
by the compensation committee may be selected to receive option grants. As
of December 17, 2000, the compensation committee had not selected the
employees and directors who will be eligible to receive option grants.
Terms and Conditions of Options. The administrative committee sets the
terms and conditions of the stock options that it grants. In setting terms
and conditions, it must observe the following restrictions:
* It may not grant options to purchase more than 13,837 shares to
any one employee. In addition, it may not grant options to
purchase more than 2,767 shares of our common stock to any one
non-employee director or options to purchase more than 16,604
shares of our common stock to all outside directors in the
aggregate.
* It may not grant a stock option with a purchase price that is
less than the fair market value of a share of our common stock
on the date it grants the stock option.
* It may not grant a stock option with a term that is longer than
10 years.
* It may not grant options that become exercisable more rapidly
than at the rate of 20% per year measured from the date we
receive shareholder approval for the plan, with acceleration
permitted only in the case of death or disability.
* It may not grant options with an effective date that is before
the date that we receive shareholder approval for the plan.
The committee may grant incentive stock options that qualify for
special federal income tax treatment or non-qualified stock options that do
not qualify for special federal income tax treatment. Incentive stock
options are subject to certain additional restrictions under the Internal
Revenue Code and the plan.
Upon the exercise of an option, the exercise price of the option must
be paid in full. Payment may be made in cash, common stock of Westborough
Financial Services already owned by the option holder, shares to be acquired
by the option holder upon exercise of the option, or in such other
consideration as the administrative committee authorizes. Options may be
transferred prior to exercise only to certain family members, certain non-
profit organizations, and on death of the option holder.
Mergers and Reorganizations; Adjustments for Extraordinary Dividends.
The number of shares available under the plan, the maximum limits on option
grants to individual officers and directors and to non-employee directors in
the aggregate, and the number of shares subject to outstanding options will
be adjusted to reflect any merger, consolidation or business reorganization
in which Westborough Financial Services is the surviving entity, and to
reflect any stock split, stock dividend or other event generally affecting
the number of shares. If a merger, consolidation or other business
reorganization occurs and Westborough Financial Services is not the
surviving entity, outstanding options may be canceled upon written notice to
the option holder so long as the option holder receives payment determined
by the Board to be of a value equivalent to the value of the canceled
options.
TERMINATION OR AMENDMENT OF THE OPTION PLAN
This plan will be in effect for a ten-year period that will begin on
the date of shareholder approval and will end on the tenth anniversary of
the date of shareholder approval. The Board of Directors may suspend or
terminate the plan before then. It may also amend this plan at any time and
in any respect. Any amendment that would change the class of eligible
employees, increase the number of stock options that may be granted to any
person or in total, or reduce the minimum option price must first be
approved by our shareholders.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended to be a summary and is not a
comprehensive description of the federal tax laws, regulations and policies
affecting Westborough Financial Services and recipients of stock option
grants under the plan. Any descriptions of the provisions of any law,
regulation or policy are qualified in their entirety by reference to the
particular law, regulation or policy. Any change in applicable law or
regulation or in the policies of various taxing authorities may have a
significant effect on this summary. The plan is not a qualified plan under
section 401(a) of the Internal Revenue Code.
Federal Tax Consequences for Option Recipients. Incentive stock
options will not create federal income tax consequences when they are
granted. If they are exercised during employment or within three months
after termination of employment, the exercise will not create federal income
tax consequences either. When the shares acquired on exercise of an
incentive stock option are sold, the seller must pay federal income taxes on
the amount by which the sales price exceeds the purchase price. This amount
will be taxed at capital gains rates if the sale occurs at least two years
after the option was granted and at least one year after the option was
exercised. Otherwise, it is taxed as ordinary income.
Incentive stock options that are exercised more than one year after
termination of employment due to death or disability or three months after
termination of employment for other reasons are treated as non-qualified
stock options. Non-qualified stock options will not create federal income
tax consequences when they are granted. When they are exercised, federal
income taxes at ordinary income tax rates must be paid on the amount by
which the fair market value of the shares acquired by exercising the option
exceeds the exercise price. When an option holder sells shares acquired by
exercising non-qualified stock option, he or she must pay federal income
taxes on the amount by which the sales price exceeds the purchase price plus
the amount included in ordinary income at option exercise. This amount will
be taxed at capital gains rates, which will vary depending upon the time
that has elapsed since the exercise of the option. A cash payment under the
plan's change of control provisions is taxed as if it were the exercise of a
non-qualified stock option followed immediately by a resale of the stock
acquired by exercising the option.
Federal Tax Consequences for Westborough Financial Services. When a
non-qualified stock option is exercised, Westborough Financial Services may
be allowed a federal income tax deduction for the same amount that the
option holder includes in his or her ordinary income. When an incentive
stock option is exercised, there is no tax deduction unless the shares
acquired are resold sooner than two years after the option was granted or
one year after the option was exercised. A cash payment under the plan's
change of control provisions is deductible as if it were the exercise of a
non-qualified stock option. The Internal Revenue Code places an annual limit
of $1.0 million each on the tax deduction which we may claim in any fiscal
year for the compensation of our chief executive officer and for the
compensation of our four next most highly compensated executive officers
whose salary and bonus for the fiscal year in question equals or exceeds
$100,000. There is an exception to this limit for so-called "qualified
performance-based compensation". We have designed this plan with the
intention that the stock options that we grant will constitute qualified
performance-based compensation. As a result, we do not believe that this
limit will impair our ability to claim federal income tax deductions that
are otherwise available when an option holder exercises a non-qualified
stock option.
The preceding statements summarize the general principles of current
federal income tax law applicable to options that may be granted under the
plan. State and local tax consequences may also be significant.
============================================================================
The Board of Directors unanimously recommends a vote "FOR" the adoption of
the Westborough Financial Services, Inc. 2001 Stock Option Plan.
============================================================================
---------------------------------
PROPOSAL 5
ADOPTION OF WESTBOROUGH FINANCIAL SERVICES, INC.
2001 RECOGNITION AND RETENTION PLAN
---------------------------------
The Board of Directors has adopted the Westborough Financial Services,
Inc. 2001 Recognition and Retention Plan, subject to approval by the holders
of a majority of Westborough Financial Services's outstanding shares of
common stock that are not owned by Westborough, MHC. Provided below is a
summary of our reasons for adopting this plan and seeking the approval of
our shareholders. The following summary is qualified in its entirety by the
full text of the plan document. The plan document is included at the end of
this Proxy Statement as Exhibit D and is incorporated by reference into this
proposal.
WHY WE ARE ASKING FOR SHAREHOLDER APPROVAL
We are asking our shareholders to approve the Westborough Financial
Services, Inc. 2001 Recognition and Retention plan so that we will be able
to grant stock awards to our directors and officers. Most of the companies
with which we compete for directors and management-level employees are
public companies that offer stock awards as part of their director and
officer compensation packages. By approving this plan, our shareholders will
enable us to offer a more competitive compensation package in attracting and
retaining highly qualified directors and officers. In addition, the value of
the stock awards that we would grant under this plan relates directly to the
market price of our common stock. Adding stock awards to our compensation
package would link the financial interests of our directors and officers
with the financial interest of our shareholders.
IF WE DO NOT RECEIVE SHAREHOLDER APPROVAL, WE WILL NOT IMPLEMENT THE PLAN
Applicable Massachusetts banking regulations did not permit us to
implement this plan during the first six months after the completion of
Westborough Bank' stock conversion and our initial public offering. These
regulations permit us to implement this plan after six months and before the
first anniversary of these events only if we obtain the approval of the
holders of a majority of our shares of common stock that are not owned by
Westborough, MHC. If we do not receive this approval, it will not be
possible for us to grant stock awards. In this event, we expect that the
Board will consider substituting other forms of compensation to assure that
our compensation packages for officers and directors are competitive with
those of other publicly traded financial services companies in our market
area.
PURPOSE OF THE RECOGNITION AND RETENTION PLAN
The purpose of the plan is to promote the growth and profitability of
Westborough Financial Services and its shareholders, to provide certain key
officers, employees and directors of Westborough Financial Services and its
affiliates with an incentive to achieve corporate objectives, to attract and
retain individuals of outstanding competence and to provide such individuals
with an equity interest in Westborough Financial Services.
DESCRIPTION OF THE RECOGNITION AND RETENTION PLAN
Administration. The plan will be administered by the members of the
Compensation Committee of Westborough Financial Services who are
"disinterested directors" under the federal tax and securities laws. In
general, disinterested directors are directors who (1) are not, and never
were, officers or employees of Westborough Financial Services or Westborough
Bank; and (2) do not receive material compensation from Westborough
Financial Services or Westborough Bank except for service as a director. The
administrative committee must have at least two members and has broad
discretionary powers.
Stock Subject to the RRP. Westborough Financial Services will
establish a trust and will contribute certain amounts of money or property
to be determined by the Board, in its discretion. No contributions by
participants will be permitted. The trustee will invest the assets of the
trust primarily in the shares of our common stock that will be used to make
restricted stock awards. It is currently anticipated that the trust will
purchase common stock on the open market, or in private transactions. The
trust is not expected to purchase previously authorized but unissued shares
from Westborough Financial Services. The trust is not authorized to purchase
more than 22,139 shares of common stock of Westborough Financial Services
and cannot purchase more than this number. As of December 11, 2000, the
aggregate fair market value of the shares of common stock to be purchased
under this plan was $________, based on the closing sales price per share of
Westborough Financial Services common stock of on the OTC Bulletin Board on
December 11, 2000.
Eligibility. The administrative committee for the plan selects the
people who receive restricted stock awards under the plan. Any employee of
Westborough Financial Services, Westborough Bank or any affiliate approved
by the administrative committee may be selected to receive stock awards. As
of December 17, 2000, the administrative committee had not yet selected the
employees and directors who will receive stock awards.
Terms and Conditions of Awards. The administrative committee may, in
its discretion, grant awards of restricted stock to eligible individuals, up
to a maximum of 22,139 shares. The administrative committee will determine
at the time of the grant the number of shares of common stock subject to an
award, the vesting schedule applicable to the award and may, in its
discretion, establish other terms and conditions applicable to the award. In
setting terms and conditions, it must observe the following restrictions:
* It may not grant restricted stock awards for more than 5,534
shares of our common stock to any one officer or employee, more
than 1,106 shares of our common stock to any one non-employee
director, or more than 6,641 shares to all non-employee
directors in the aggregate.
* It may not grant restricted stock awards that become exercisable
more rapidly than at the rate of 20% per year measured from the
date we receive shareholder approval for the plan, with
acceleration permitted only in cases of death or disability.
* It may not grant restricted stock awards with an effective date
that is before the date that we receive shareholder approval for
the plan.
As a general rule, shares of our common stock that are subject to a
restricted stock award are held in trust for the benefit of the award
recipient until vested and, when vested, are transferred from the trust to
the award recipient. While the shares are held in the trust, the award
recipient receives dividends and exercises voting rights. In the
alternative, the administrative committee may authorize the immediate
distribution of the restricted shares to the award recipient in the form of
a stock certificate bearing a legend containing the applicable vesting
restrictions.
Mergers and Reorganizations. The number of shares available under the
plan, the maximum limits on restricted stock awards to individual officers
and directors and to non-employee directors in the aggregate, and any
outstanding awards will be adjusted to reflect any merger, consolidation or
business reorganization in which Westborough Financial Services is the
surviving entity, and to reflect any stock split, stock dividend or other
event generally affecting the number of shares. If a merger, consolidation
or other business reorganization occurs and Westborough Financial Services
is not the surviving entity, the trustee will hold any money, stock,
securities or other property received in the trust fund, and adjust any
award by allocating such money, stock, securities or other property to the
individual eligible for the award.
TERMINATION OR AMENDMENT
The Board has the authority to suspend or terminate the plan in whole
or in part at any time by giving written notice to the administrative
committee, but the plan may not be terminated while there are outstanding
awards that will vest in the future. Upon the termination of the plan, the
trustee will make distributions from the trust as directed by the
administrative committee and will return any remaining assets of the trust
to Westborough Financial Services.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended to be a summary and is not a
comprehensive description of the federal tax laws, regulations and policies
affecting Westborough Financial Services and recipients of awards that may
be granted under the plan. Any descriptions of the provisions of any law,
regulation or policy are qualified in their entirety by reference to the
particular law, regulation or policy. Any change in applicable law or
regulation or in the policies of various taxing authorities may have a
significant effect on this summary. The plan is not a qualified plan under
Section 401(a) of the Internal Revenue Code.
The stock awards under the plan do not result in federal income tax
consequences to either Westborough Financial Services or the award
recipient. As a general rule, once the award is vested and the shares
subject to the award are distributed, the award recipient will generally be
required to include in ordinary income, for the taxable year in which the
vesting date occurs, an amount equal to the fair market value of the shares
on the vesting date. Westborough Financial Services will generally be
allowed to claim a deduction, for compensation expense, in a like amount. If
dividends are paid on unvested shares held under the plan, such dividend
amounts will also be included in the ordinary income of the recipient.
Westborough Financial Services will be allowed to claim a deduction for
compensation expense for this amount as well.
Section 162(m) of the Internal Revenue Code limits Westborough
Financial Services's deductions for compensation in excess of $1.0 million
per year for the chief executive officer and the four other most highly paid
executives named in its proxy statement. Compensation amounts resulting from
restricted stock awards will be subject to this deduction limitation if this
amount of the restricted stock awards plus other compensation of the
executive that is subject to the limit exceeds $1.0 million. We expect that
the administrative committee will take these deduction limits into account
in setting the size and the terms and conditions of restricted stock awards.
However, the administrative committee may decide to grant restricted stock
awards all or a portion of which will exceed the deduction limit.
The preceding statements are intended to summarize the general
principles of current federal income tax law applicable to awards that may
be granted under the plan. State and local tax consequences may also be
significant.
============================================================================
The Board of Directors unanimously recommends a vote "FOR" the adoption of
the Westborough Financial Services, Inc. 2001 Recognition and Retention
Plan.
============================================================================
ADDITIONAL INFORMATION
INFORMATION ABOUT SHAREHOLDER PROPOSALS
If you wish to submit proposals to be included in our next proxy
statement for the 2002 Annual Meeting of Shareholders, we must receive them
by August 29, 2001, pursuant to the proxy solicitation regulations of the
SEC. SEC rules contain requirements as to which shareholder proposals must
be in the proxy statement. Any such proposal will be subject to 17 C.F.R.
[SECTION]240.14a-8 of the rules and regulations promulgated by the SEC.
In addition, under Westborough Financial Services's Bylaws, if you
wish to nominate a director or bring other business before an annual
meeting:
* You must be a shareholder of record entitled to vote and have
given timely notice in writing to the Clerk of Westborough
Financial Services.
* Your notice must contain the specific information required in
our Bylaws.
By Order of the Board of Directors,
Nelson P. Ball
Clerk
Westborough, Massachusetts
December 26, 2000
============================================================================
To assure that your shares are represented at the Annual Meeting, please
complete, sign, date and promptly return the accompanying proxy card in the
postage-paid envelope provided.
============================================================================
Exhibit A
---------
Proposed Amendment to Article VI, Section 6.2, Clause A of
Westborough Financial Services, Inc.'s Articles of Organization
Italicized text reflects the proposed amendment referred to in
Proposal 1 of the Proxy Statement.
6.2 Directors
A. The number of Directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board. The Directors shall be divided into three
classes, with the term of office of the first class to expire at the first
annual meeting of stockholders, the term of office of the second class to
expire at the annual meeting of stockholders one year thereafter and the
term of office of the third class to expire at the annual meeting of
stockholders two years thereafter. At each annual meeting of stockholders
following such initial classification and election, Directors elected to
succeed those Directors whose terms expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders
after their election; provided that no person shall continue to serve as a
director beyond the Annual Meeting of Stockholders immediately following his
or her 75th birthday.
Exhibit B
Audit Committee of the Board of Directors of
Westborough Financial Services, Inc.
Audit Committee Charter
I. Statement of Policy
The primary function of the Audit Committee of the Board of Directors of
Westborough Financial Services, Inc. ("Company") is to provide assistance to
the Company's Board of Directors in fulfilling its responsibilities to the
Company's shareholders and the investment community relating to the
Company's accounting and reporting practices and the quality and integrity
of the Company's financial reports. In so doing, it is the responsibility of
the Audit Committee to maintain free and open means of communication among
the Company's Board of Directors, outside auditors, internal auditors
(whether contracted or employed by the Company) and senior management.
II. Composition of the Audit Committee
The Audit Committee shall consist of at least three "independent" directors
of the Company, and shall serve at the pleasure of the Board of Directors.
An "independent" Director is defined as an individual who (a) is not an
officer or salaried employee of the Company, (b) is not an attorney who
receives any fee or compensation from the Company, (c) does not have any
relationship that, in the opinion of the Board of Directors, would interfere
with his or her exercise of independent judgment as an Audit Committee
member and (d) meets the Nasdaq Stock Market's definition of independent
director. Additionally, Audit Committee members should have few or no ties
to the Company other than through their duties as Board members. In
selecting the members of the Audit Committee, the Board of Directors will
take into account the requirements imposed by, and the interpretations of,
the applicable federal and state banking regulators.
At least one member of the Audit Committee shall have accounting or related
financial management expertise. Each Audit Committee member must be able to
read and understand financial statements, including a balance sheet, income
statement, and cash flow statement, or become so able within a reasonable
period after joining the Audit Committee. The Audit Committee, with the
assistance of the independent public auditors, shall develop and implement a
skill enhancement plan and assess member contribution and performance.
The members of the Audit Committee shall be designated by the full Board of
Directors at each annual meeting of the Board. The Board shall designate one
member of the Audit Committee to serve as chairman of the committee.
III. Meetings
The Audit Committee shall meet at least 4 times a year or more frequently as
circumstances require. The Audit Committee shall maintain minutes of each
meeting of the Audit Committee and shall report the actions of the Audit
Committee to the Board of Directors, with such recommendations as the Audit
Committee deems appropriate. The Audit Committee should also meet
periodically with the internal auditor, the outside auditors and the
Company's financial management in separate executive sessions to discuss any
matters that the Audit Committee or these groups believe should be discussed
privately with the Audit Committee. In addition, the Audit Committee, or at
least its chairman, should meet with the outside auditors and financial
management quarterly to review the Company's quarterly report on Form 10-QSB
before it is filed with the Securities and Exchange Commission and, if
possible, before any public announcement of the Company's financial results.
IV. Responsibilities and Duties of the Audit Committee
The primary duties and responsibilities of the Audit Committee are to
oversee and monitor the Company's financial reporting process and internal
control system and review and evaluate the performance of the Company's
outside auditors and internal auditing staff. In fulfilling these duties and
responsibilities, the Audit Committee shall take the following actions, in
addition to performing such functions as may be assigned by law, the
Company's charter or bylaws or the Board of Directors:
1. The Audit Committee shall nominate, select, evaluate and, when
appropriate, recommend the replacement of the outside auditors,
subject to the approval of the Board of Directors. As part of the
audit process, the Audit Committee shall meet with the outside
auditors to discuss and decide the audit's scope. The Audit Committee
shall determine that the outside audit team engaged to perform the
external audit consists of competent, experienced, financial
institution auditing professionals. The Audit Committee shall also
review and approve the compensation to be paid to the outside
auditors.
2. The Audit Committee shall require the outside auditors to submit, on
an annual basis, a formal written statement setting forth all
relationships between the outside auditors and the Company that may
affect the objectivity and independence of the outside auditors, and
the Audit Committee shall actively engage in a dialogue with the
outside auditors with respect to any disclosed relationships or
services that may impact the objectivity and independence of the
outside auditor. The Audit Committee shall take, or recommend that the
full Board take, appropriate action to ensure the independence of the
outside auditors.
3. The Audit Committee shall require the outside auditors to advise the
Company of any fact or circumstance that might adversely affect the
outside auditors' independence or judgment with respect to the Company
under applicable auditing standards.
4. The Audit Committee shall require the outside auditors to advise the
Company if it becomes aware that any officer or employee of the
Company, or its direct or indirect subsidiaries or affiliates, is
related to a partner, employee or other representative of the outside
auditors, to the extent that such relationship might adversely affect
the Company under applicable auditing standards.
5. The Audit Committee shall meet with the outside auditors, with no
management in attendance, to openly discuss the quality of the
Company's accounting principles as applied in its financial reporting,
including issues such as (a) the appropriateness, not just the
acceptability, of the accounting principles and financial disclosure
practices used or proposed to be used by the Company, (b) the clarity
of the Company's financial disclosures and (c) the degree of
aggressiveness or conservatism that exists in the Company's accounting
principles and underlying estimates and other significant decisions
made by the Company's management in preparing the financial disclosure
and reviews by the outside auditors. The Audit Committee shall then
meet among themselves, without operating management or the outside
auditors being present, to discuss the information presented to them.
6. The Audit Committee shall require the outside auditors, in reviewing
the Company's financial reporting and in advising the Audit Committee,
to take into account the requirements imposed by, and the
interpretations of, the applicable federal and state banking
regulators.
7. The Audit Committee shall meet with the outside auditors and
management to review the Company's annual report on Form 10-K and
discuss any significant adjustments, management judgments and
accounting estimates and any significant new accounting policies
before such form is filed with the Securities and Exchange Commission.
8. Upon the completion of the annual audit, the Audit Committee shall
review the audit findings, including any comments or recommendations
of the outside auditors, with the entire Board of Directors.
9. The Audit Committee shall meet at least annually with the Company's
internal auditor to assure itself that the Company has a strong
internal auditing function by reviewing the internal audit program and
assessing (grading) risk areas along with a proper control environment
that promotes accuracy and efficiency in the Company's operations.
10. The Audit Committee must assure itself that the internal auditor is
free from operational duties, and that the internal auditor reports
directly to the Board of Directors or the Audit Committee regarding
any audit concerns or problems.
11. The Audit Committee shall receive from the Company's internal auditor
periodic reports, which should include a summary of findings from
completed internal audits and a progress report on planned and actual
hours spent in each audit area, together with explanations for any
deviations from the original plan.
12. The Audit Committee shall review the internal audit function of the
Company, including the independence and authority of its reporting
obligations, the proposed audit plans for the coming year and the
coordination of such plans with the independent auditors.
13. The Audit Committee shall review and concur in the appointment,
replacement, reassignment or dismissal of the Company's internal
auditor.
14. The Audit Committee shall consider and review with management and the
internal auditor: (a) significant findings during the year and
management's responses thereto, including the status of previous audit
recommendations, (b) any difficulties encountered in the course of
their audits, including any restrictions on the scope of activities or
access to required information, (c) any changes required in the
planned scope of the internal audit plan and (d) the internal auditing
department budget and staffing.
15. The Audit Committee shall consider and approve, if appropriate,
changes to the Company's auditing and accounting principles and
practices, as suggested by the outside auditors, the internal auditor
or management, and the Audit Committee shall review with the outside
auditors, the internal auditor and management the extent to which such
changes have been implemented (to be done at an appropriate amount of
time subsequent to the implementation of such changes, as decided by
the Audit Committee).
16. The Audit Committee shall investigate or consider such other matters
within the scope of its responsibilities and duties as the Audit
Committee may, in its discretion, determine to be advisable, and the
Audit Committee shall retain outside counsel, accountants or others
for this purpose if, in its judgment, that is appropriate.
17. The Audit Committee shall prepare a report for inclusion in the
Company's proxy statement describing the discharge of the Audit
Committee's responsibilities, as applicable.
Exhibit C
WESTBOROUGH FINANCIAL SERVICES, INC.
2001 STOCK OPTION PLAN
______________________________
Adopted on October 26, 2000
TABLE OF CONTENTS
Page
Article I
Purpose
Section 1.1 General Purpose of the Plan 1
Article II
Definitions
Section 2.1 Bank 1
Section 2.2 Board 1
Section 2.3 Change in Control 1
Section 2.4 Code 3
Section 2.5 Committee 3
Section 2.6 Company 3
Section 2.7 Disability 3
Section 2.8 Disinterested Board Member 3
Section 2.9 Effective Date 3
Section 2.10 Eligible Director 3
Section 2.11 Eligible Employee 3
Section 2.12 Employer 3
Section 2.13 Exchange Act 4
Section 2.14 Exercise Price 4
Section 2.15 Fair Market Value 4
Section 2.16 Family Member 4
Section 2.17 FDIC Regulations 4
Section 2.18 Incentive Stock Option 4
Section 2.19 Non-Profit Organization 4
Section 2.20 Non-Qualified Stock Option 4
Section 2.21 Option 4
Section 2.22 Option Period 4
Section 2.23 Person 5
Section 2.24 Plan 5
Section 2.25 Retirement 5
Section 2.26 Share 5
Section 2.27 Termination for Cause 5
Article III
Available Shares
Section 3.1 Available Shares 5
Article IV
Administration
Section 4.1 Committee 6
Section 4.2 Committee Action 6
Section 4.3 Committee Responsibilities 7
Article V
Stock Option Grants
Section 5.1 Grant of Options 7
Section 5.2 Size of Option 8
Section 5.3 Exercise Price 8
Section 5.4 Option Period 8
Section 5.5 Required Regulatory Provisions 9
Section 5.6 Additional Restrictions on Incentive Stock Options 10
Article VI
Options - In General
Section 6.1 Method of Exercise 11
Section 6.2 Limitations on Options 12
Article VII
Amendment and Termination
Section 7.1 Termination 13
Section 7.2 Amendment 13
Section 7.3 Adjustments in the Event of a Business Reorganization 13
Article VIII
Miscellaneous
Section 8.1 Status as an Employee Benefit Plan 14
Section 8.2 No Right to Continued Employment 14
Section 8.3 Construction of Language 14
Section 8.4 Governing Law 14
Section 8.5 Headings 15
Section 8.6 Non-Alienation of Benefits 15
Section 8.7 Taxes 15
Section 8.8 Notices 15
Section 8.9 Required Regulatory Provisions 15
Section 8.10 Approval of Shareholders 16
Article IX
Additional Provisions Subject to Further Shareholder Approval
Section 9.1 Accelerated Vesting Upon Retirement or Change in Control 16
Section 9.2 Discretion to Establish Vesting Schedules. 16
Section 9.3 No Effect Prior to Shareholder Approval. 16
Westborough Financial Services, Inc. 2001 Stock Option Plan
Article I
Purpose
Section 1.1 General Purpose of the Plan.
The purpose of the Plan is to promote the growth and profitability of
Westborough Financial Services, Inc., to provide eligible directors, certain
key officers and employees of Westborough Financial Services, Inc. and its
affiliates with an incentive to achieve corporate objectives, to attract and
retain individuals of outstanding competence and to provide such individuals
with an equity interest in Westborough Financial Services, Inc.
Article II
Definitions
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
Section 2.1 Bank means The Westborough Bank, a Massachusetts stock
savings bank, and any successor thereto.
Section 2.2 Board means the board of directors of the Company.
Section 2.3 Change in Control means any of the following events:
(a) the consummation of a reorganization, merger or
consolidation of the Company with one or more other persons, other
than a transaction following which:
(i) at least 51% of the equity ownership interests of
the entity resulting from such transaction are beneficially
owned (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act")) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) at least 51% of the outstanding equity ownership interests
in the Company; and
(ii) at least 51% of the securities entitled to vote
generally in the election of directors of the entity resulting
from such transaction are beneficially owned (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) at least 51% of the securities entitled to vote generally
in the election of directors of the Company;
(b) the acquisition of all or substantially all of the assets
of the Company or beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 25% or more of the
outstanding securities of the Company entitled to vote generally in
the election of directors by any person or by any persons acting in
concert;
(c) a complete liquidation or dissolution of the Company;
(d) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board of Directors of
Westborough Financial Services, Inc. do not belong to any of the
following groups:
(i) individuals who were members of the Board of
Directors of Westborough Financial Services, Inc. on the
Effective Date; or
(ii) individuals who first became members of the Board of
Directors of Westborough Financial Services, Inc. after the
Effective Date either:
(A) upon election to serve as a member of the
Board of Directors of Westborough Financial Services, Inc.
by affirmative vote of three-quarters of the members of
such board, or of a nominating committee thereof, in
office at the time of such first election; or
(B) upon election by the shareholders of the
Company to serve as a member of such board, but only if
nominated for election by affirmative vote of three-
quarters of the members of the Board of Directors of
Westborough Financial Services, Inc., or of a nominating
committee thereof, in office at the time of such first
nomination;
provided, however, that such individual's election or nomination
did not result from an actual or threatened election contest
(within the meaning of Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents (within the meaning of Rule
14a-11 of Regulation 14A promulgated under the Exchange Act)
other than by or on behalf of the Board of Directors of
Westborough Financial Services, Inc.; or
(e) approval by the stockholders of the Company of any
agreement, plan or arrangement for the consummation of a transaction
which, if consummated, would result in the occurrence of an event
described in section 2.3(a), (b), (c) or (d); or
(f) any event which would be described in section 2.3(a), (b),
(c), (d) or (e) if the term "Bank" were substituted for the terms
"Company" or "Westborough Financial Services, Inc." therein.
In no event, however, shall a Change of Control be deemed to have occurred
as a result of any acquisition of securities or assets of the Company, the
Bank, or a subsidiary of either of them, by the Company, the Bank, or any
subsidiary of either of them, or by any employee benefit plan maintained by
any of them. For purposes of this section 2.3, the term "person" shall have
the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the
Exchange Act.
Section 2.4 Code means the Internal Revenue Code of 1986 (including
the corresponding provisions of any succeeding law).
Section 2.5 Committee means the Committee described in section 4.1.
Section 2.6 Company means Westborough Financial Services, Inc., a
corporation organized and existing under the laws of the Commonwealth of
Massachusetts, and any successor thereto.
Section 2.7 Disability means a condition of total incapacity, mental
or physical, for further performance of duty with the Company which the
Committee shall have determined, on the basis of competent medical evidence,
is likely to be permanent.
Section 2.8 Disinterested Board Member means a member of the Board
who (a) is not a current employee of the Company or a subsidiary, (b) is not
a former employee of the Company who receives compensation for prior
services (other than benefits under a tax-qualified retirement plan) during
the taxable year, (c) has not been an officer of the Company, (d) does not
receive remuneration from the Company or a subsidiary, either directly or
indirectly, in any capacity other than as a director except in an amount for
which disclosure would not be required pursuant to Item 404(a) of the proxy
solicitation rules of the Securities and Exchange Commission and (e) does
not possess an interest in any other transaction, and is not engaged in a
business relationship, for which disclosure would be required pursuant to
Item 404(a) or (b) of the proxy solicitation rules of the Securities and
Exchange Commission. The term Disinterested Board Member shall be
interpreted in such manner as shall be necessary to conform to the
requirements of section 162(m) of the Code and Rule 16b-3 promulgated under
the Exchange Act.
Section 2.9 Effective Date means January 25, 2001.
Section 2.10 Eligible Director means a member of the board of
directors of an Employer who is not also an employee or an officer of any
Employer.
Section 2.11 Eligible Employee means any employee whom the Committee
may determine to be a key officer or employee of an Employer and select to
receive a grant of an Option pursuant to the Plan.
Section 2.12 Employer means the Company, the Bank and any successor
thereto and, with the prior approval of the Board, and subject to such terms
and conditions as may be imposed by the Board, any other savings bank,
savings and loan association, bank, corporation, financial institution or
other business organization or institution. With respect to any Eligible
Employer or Eligible Director, the Employer shall mean the entity which
employs such person or upon whose board of directors such person serves.
Section 2.13 Exchange Act means the Securities Exchange Act of 1934,
as amended.
Section 2.14 Exercise Price means the price per Share at which Shares
subject to an Option may be purchased upon exercise of the Option,
determined in accordance with section 5.3.
Section 2.15 Fair Market Value means, with respect to a Share on a
specified date:
(a) the final reported sales price on the date in question (or
if there is no reported sale on such date, on the last preceding date
on which any reported sale occurred) as reported in the principal
consolidated reporting system with respect to securities listed or
admitted to trading on the principal United States securities exchange
on which the Shares are listed or admitted to trading; or
(b) if the Shares are not listed or admitted to trading on any
such exchange, the closing bid quotation with respect to a Share on
such date on the National Association of Securities Dealers Automated
Quotations System, or, if no such quotation is provided, on another
similar system, selected by the Committee, then in use; or
(c) if sections 2.15(a) and (b) are not applicable, the fair
market value of a Share as the Committee may determine.
Section 2.16 Family Member means the spouse, parent, child or sibling
of an Eligible Director or Eligible Employee.
Section 2.17 FDIC Regulations means the rules and regulations of the
Federal Deposit Insurance Corporation.
Section 2.18 Incentive Stock Option means a right to purchase Shares
that is granted to Eligible Employees pursuant to section 5.1, that is
designated by the Committee to be an Incentive Stock Option and that is
intended to satisfy the requirements of section 422 of the Code.
Section 2.19 Non-Profit Organization means any organization which is
exempt from federal income tax under section 501(c)(3), (4), (5), (6), (7),
(8) or (10) of the Internal Revenue Code.
Section 2.20 Non-Qualified Stock Option means a right to purchase
Shares that is either (a) granted to an Eligible Director or (b) granted to
an Eligible Employee and either (i) is not designated by the Committee to
be an Incentive Stock Option, or (ii) does not satisfy the requirements of
section 422 of the Code.
Section 2.21 Option means either an Incentive Stock Option or a Non-
Qualified Stock Option.
Section 2.22 Option Period means the period during which an Option
may be exercised, determined in accordance with section 5.4.
Section 2.23 Person means an individual, a corporation, a bank, a
savings bank, a savings and loan association, a financial institution, a
partnership, an association, a joint-stock company, a trust, an estate, an
unincorporated organization and any other business organization or
institution.
Section 2.24 Plan means the Westborough Financial Services, Inc. 2001
Stock Option Plan, as amended from time to time.
Section 2.25 Retirement means with respect to an Eligible Employee,
termination of all service for all Employers as an employee, at or after the
normal or early retirement date set forth in any tax-qualified retirement
plan of the Bank, whether or not the individual in question actually
participates in any such tax-qualified plan of the Bank, and in the case of
an Eligible Director, termination of all service for all Employers as a
voting member of the Employer's board of directors after the attainment of
the latest age at which the Eligible Director is eligible for election or
appointment as a voting member of the Employer's board of directors under
the Employer's charter.
Section 2.26 Share means a share of Common Stock, par value $.01 per
share, of Westborough Financial Services, Inc.
Section 2.27 Termination for Cause means termination of service or
removal from office with the Employer upon the occurrence of any of the
following: (a) the individual intentionally engages in dishonest conduct in
connection with his performance of services for the Employer resulting in
his conviction of a felony; (b) the individual is convicted of, or pleads
guilty or nolo contendere to, a felony or any crime involving moral
turpitude; (c) the individual breaches his fiduciary duties to the Employer
for personal profit; or (d) the individual willfully breaches or violates
any law, rule or regulation (other than traffic violations or similar
offenses), or final cease and desist order in connection with his
performance of services for the Employer.
Article III
Available Shares
Section 3.1 Available Shares.
(a) The maximum aggregate number of Shares with respect to
which Options may be granted at any time shall be equal to the excess
of:
(i) 55,348 Shares; over
(ii) the sum of:
(A) the number of Shares with respect to which
previously granted Options may then or may in the future
be exercised; plus
(B) the number of Shares with respect to which
previously granted Options have been exercised;
subject to adjustment pursuant to section 7.3.
(b) Options to purchase an aggregate maximum of 16,604 Shares
(subject to adjustment pursuant to section 7.3) may be granted to
Eligible Directors, and Options to purchase a maximum of 2,767 Shares
(subject to adjustment pursuant to section 7.3) may be granted to any
one Eligible Director.
(c) Options to purchase an aggregate maximum of 55,348 Shares
(subject to adjustment pursuant to section 7.3) may be granted to
Eligible Employees, and Options to purchase a maximum of 13,837 Shares
(subject to adjustment pursuant to section 7.3) may be granted to any
one Eligible Employee.
(d) For purposes of this section 3.1, an Option shall not be
considered as having been exercised to the extent that such Option
terminates by reason other than the purchase of related Shares;
provided, however, that for purposes of meeting the requirements of
section 162(m) of the Code, no Eligible Employee who is a covered
employee (within the meaning of section 162(m) of the Code) shall
receive grants of Options for an aggregate number of Shares that is in
excess of the amount specified for him under this section 3.1,
computed as if any Option which is canceled or forfeited reduced the
maximum number of Shares.
Article IV
Administration
Section 4.1 Committee.
The Plan shall be administered by the members of the Compensation
Committee of Westborough Financial Services, Inc. who are Disinterested
Board Members. If the Committee consists of fewer than two Disinterested
Board Members, then the Board shall appoint to the Committee such additional
Disinterested Board Members as shall be necessary to provide for a Committee
consisting of at least two Disinterested Board Members.
Section 4.2 Committee Action.
The Committee shall hold such meetings, and may make such
administrative rules and regulations, as it may deem proper. A majority of
the members of the Committee shall constitute a quorum, and the action of a
majority of the members of the Committee present at a meeting at which a
quorum is present, as well as actions taken pursuant to the unanimous
written consent of all of the members of the Committee without holding a
meeting, shall be deemed to be actions of the Committee. All actions of the
Committee shall be final and conclusive and shall be binding upon the
Company and all other interested parties. Any Person dealing with the
Committee shall be fully protected in relying upon any written notice,
instruction, direction or other communication signed by the Secretary of the
Committee and one member of the Committee, by two members of the Committee
or by a representative of the Committee authorized to sign the same in its
behalf.
Section 4.3 Committee Responsibilities.
Subject to the terms and conditions of the Plan and such limitations
as may be imposed by the Board, the Committee shall be responsible for the
overall management and administration of the Plan and shall have such
authority as shall be necessary or appropriate in order to carry out its
responsibilities, including, without limitation, the authority:
(a) to interpret and construe the Plan, and to determine all
questions that may arise under the Plan as to eligibility for
participation in the Plan, the number of Shares subject to the
Options, if any, to be granted, and the terms and conditions thereof;
(b) to adopt rules and regulations and to prescribe forms for
the operation and administration of the Plan; and
(c) to take any other action not inconsistent with the
provisions of the Plan that it may deem necessary or appropriate.
Article V
Stock Option Grants
Section 5.1 Grant of Options.
(a) Subject to the limitations of the Plan, the Committee may,
in its discretion, grant to an Eligible Employee or an Eligible
Director an Option to purchase Shares. An Option for Eligible
Employees must be designated as either an Incentive Stock Option or a
Non-Qualified Stock Option and, if not designated as either, shall be
a Non-Qualified Stock Option. An Option for an Eligible Director
shall be a Non-Qualified Stock Option.
(b) Any Option granted under this section 5.1 shall be
evidenced by a written agreement which shall:
(i) specify the number of Shares covered by the Option
determined in accordance with section 5.2;
(ii) specify the Exercise Price, determined in accordance
with section 5.3, for the Shares subject to the Option;
(iii) specify the Option Period determined in accordance
with section 5.4;
(iv) set forth specifically or incorporate by reference
the applicable provisions of the Plan; and
(v) contain such other terms and conditions not
inconsistent with the Plan as the Committee may, in its
discretion, prescribe with respect to an Option granted to an
Eligible Employee or an Eligible Director.
Section 5.2 Size of Option.
Subject to section 3.1 and such limitations as the Board may from time
to time impose, the number of Shares as to which an Eligible Employee or
Eligible Director may be granted Options shall be determined by the
Committee, in its discretion.
Section 5.3 Exercise Price.
The price per Share at which an Option granted to an Eligible Employee
or Eligible Director shall be determined by the Committee, in its
discretion; provided, however, that the Exercise Price shall not be less
than the Fair Market Value of a Share on the date on which the Option is
granted.
Section 5.4 Option Period.
Subject to section 5.5, the Option Period during which an Option
granted to an Eligible Employee may be exercised shall commence on the date
specified by the Committee in the Option agreement and shall expire on the
date specified in the Option agreement or, if no date is specified, on the
earliest of:
(a) in the case of an Option granted to an Eligible Employee:
(i) the close of business on the last day of the three-
month period commencing on the date of the Eligible Employee's
termination of employment with the Employer, other than on
account of death or Disability, Retirement or a Termination for
Cause;
(ii) the close of business on the last day of the one-
year period commencing on the date of the Eligible Employee's
termination of employment due to death, Disability or
Retirement;
(iii) the date and time when the Eligible Employee ceases
to be an employee of the Employer due to a Termination for
Cause; and
(iv) the last day of the ten-year period commencing on
the date on which the Option was granted; and
(b) in the case of an Option granted to an Eligible Director:
(i) removal for cause in accordance with the Employer's
bylaws, or Termination for Cause; or
(ii) the last day of the ten-year period commencing on
the date on which the Option was granted.
Section 5.5 Required Regulatory Provisions.
Notwithstanding anything contained herein to the contrary:
(a) no Option shall be granted to an Eligible Employee or
Eligible Director under the Plan prior to shareholder approval in
accordance with section 8.10;
(b) subject to section 9.2, each Option granted to an Eligible
Employee or Eligible Director shall become exercisable no more rapidly
than as follows:
(i) prior to the first anniversary of the Effective
Date, an Option shall not be exercisable;
(ii) on and after the first anniversary, but prior to the
second anniversary, of the Effective Date, an Option may be
exercised as to a maximum of twenty percent (20%) of the Shares
subject to the Option when granted;
(iii) on and after the second anniversary, but prior to
the third anniversary, of the Effective Date, an Option may be
exercised as to a maximum of forty percent (40%) of the Shares
subject to the Option when granted, including in such forty
percent (40%) any optioned Shares purchased prior to such second
anniversary;
(iv) on and after the third anniversary, but prior to the
fourth anniversary, of the Effective Date, an Option may be
exercised as to a maximum of sixty percent (60%) of the Shares
subject to the Option when granted, including in such sixty
percent (60%) any optioned Shares purchased prior to such third
anniversary;
(v) on and after the fourth anniversary, but prior to
the fifth anniversary, of the Effective Date, an Option may be
exercised as to a maximum of eighty percent (80%) of the Shares
subject to the Option when granted, including in such eighty
percent (80%) any optioned Shares purchased prior to such fourth
anniversary; and
(vi) on and after the fifth anniversary of the Effective
Date and for the remainder of the Option Period, an Option may
be exercised as to the entire number of optioned Shares not
theretofore purchased;
provided, however, that such an Option shall become fully exercisable,
and all optioned Shares not previously purchased shall become
available for purchase, on the date of the Option holder's death or
Disability while in the service of an Employer.
(c) The Option Period of any Option granted hereunder, whether
or not previously vested, shall be suspended as of the time and date
at which the Option holder has received notice from the Board that his
or her employment is subject to a possible Termination for Cause, or
in the case of an Eligible Director, removal for cause in accordance
with the Employer's by-laws. Such suspension shall remain in effect
until the Option holder receives official notice from the Board that
he or she has been cleared of any possible Termination for Cause, or
in the case of an Eligible Director, removal for cause, at which time,
the original Exercise Period shall be reinstated without any
adjustment for the intervening suspended period. In the event that
the Option Period under section 5.4 expires during such suspension,
the Company shall pay to the Eligible Employee, within 30 days after
his reinstatement as an employee of the Company, damages equal to the
value of the expired Options (based on the Fair Market Value of a
Share as of the expiration of the Option Period less the Exercise
Price of such Options).
(d) No Option granted to an Eligible Employee or Eligible
Director hereunder, whether or not previously vested, shall be
exercised after the time and date at which the Option holder's
services with the Employer are terminated in a Termination for Cause,
or, in the case of an Eligible Director, removal for cause in
accordance with the Employer's by-laws.
Section 5.6 Additional Restrictions on Incentive Stock Options.
An Option granted to an Eligible Employee designated by the Committee
to be an Incentive Stock Option shall be subject to the following
limitations:
(a) If, for any calendar year, the sum of (i) plus (ii)
exceeds $100,000, where (i) equals the Fair Market Value (determined
as of the date of the grant) of Shares subject to an Option intended
to be an Incentive Stock Option which first become available for
purchase during such calendar year, and (ii) equals the Fair Market
Value (determined as of the date of grant) of Shares subject to any
other options intended to be Incentive Stock Options and previously
granted to the same Eligible Employee which first become exercisable
in such calendar year, then that number of Shares optioned which
causes the sum of (i) and (ii) to exceed $100,000 shall be deemed to
be Shares optioned pursuant to a Non-Qualified Stock Option or Non-
Qualified Stock Options, with the same terms as the Option or Options
intended to be an Incentive Stock Option;
(b) The Exercise Price of an Incentive Stock Option granted to
an Eligible Employee who, at the time the Option is granted, owns
Shares comprising more than 10% of the total combined voting power of
all classes of stock of the Company shall not be less than 110% of the
Fair Market Value of a Share, and if an Option designated as an
Incentive Stock Option shall be granted at an Exercise Price that does
not satisfy this requirement, the designated Exercise Price shall be
observed and the Option shall be treated as a Non-Qualified Stock
Option;
(c) The Option Period of an Incentive Stock Option granted to
an Eligible Employee who, at the time the Option is granted, owns
Shares comprising more than 10% of the total combined voting power of
all classes of stock of the Company, shall expire no later than the
fifth anniversary of the date on which the Option was granted, and if
an Option designated as an Incentive Stock Option shall be granted for
an Option Period that does not satisfy this requirement, the
designated Option Period shall be observed and the Option shall be
treated as a Non-Qualified Stock Option;
(d) An Incentive Stock Option that is exercised during its
designated Option Period but more than:
(i) three (3) months after the termination of employment
with the Company, a parent or a subsidiary (other than on
account of disability within the meaning of section 22(e)(3) of
the Code or death) of the Eligible Employee to whom it was
granted; and
(ii) one (1) year after such individual's termination of
employment with the Company, a parent or a subsidiary due to
disability (within the meaning of section 22(e)(3) of the Code)
or death;
may be exercised in accordance with the terms but shall at the time of
exercise be treated as a Non-Qualified Stock Option; and
(e) Except with the prior written approval of the Committee,
no individual shall dispose of Shares acquired pursuant to the
exercise of an Incentive Stock Option until after the later of (i) the
second anniversary of the date on which the Incentive Stock Option was
granted, or (ii) the first anniversary of the date on which the Shares
were acquired.
Article VI
Options - In General
Section 6.1 Method of Exercise.
(a) Subject to the limitations of the Plan and the Option
agreement, an Option holder may, at any time during the Option Period,
exercise his or her right to purchase all or any part of the Shares to
which the Option relates; provided, however, that the minimum number
of Shares which may be purchased at any time shall be 100, or, if
less, the total number of Shares relating to the Option which remain
unpurchased. An Option holder shall exercise an Option to purchase
Shares by:
(i) giving written notice to the Committee, in such form
and manner as the Committee may prescribe, of his intent to
exercise the Option;
(ii) delivering to the Committee full payment, consistent
with section 6.1(b), for the Shares as to which the Option is to
be exercised; and
(iii) satisfying such other conditions as may be
prescribed in the Option agreement.
(b) The Exercise Price of Shares to be purchased upon exercise
of any Option shall be paid in full in cash (by certified or bank
check or such other instrument as the Company may accept) or, if and
to the extent permitted by the Committee, by one or more of the
following: (i) in the form of Shares already owned by the Option
holder having an aggregate Fair Market Value on the date the Option is
exercised equal to the aggregate Exercise Price to be paid; (ii) by
requesting the Company to cancel without payment Options outstanding
to such Person for that number of Shares whose aggregate Fair Market
Value on the date of exercise, when reduced by their aggregate
Exercise Price, equals the aggregate Exercise Price of the Options
being exercised; or (iii) by a combination thereof. Payment for any
Shares to be purchased upon exercise of an Option may also be made by
delivering a properly executed exercise notice to the Company,
together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds to
pay the purchase price. To facilitate the foregoing, the Company may
enter into agreements for coordinated procedures with one or more
brokerage firms.
(c) When the requirements of section 6.1(a) and (b) have been
satisfied, the Committee shall take such action as is necessary to
cause the issuance of a stock certificate evidencing the Option
holder's ownership of such Shares. The Person exercising the Option
shall have no right to vote or to receive dividends, nor have any
other rights with respect to the Shares, prior to the date as of which
such Shares are transferred to such Person on the stock transfer
records of the Company, and no adjustments shall be made for any
dividends or other rights for which the record date is prior to the
date as of which such transfer is effected, except as may be required
under section 7.3.
Section 6.2 Limitations on Options.
(a) An Option by its terms shall not be transferable by the
Option holder other than to Family Members or Non-profit Organizations
or by will or by the laws of descent and distribution and shall be
exercisable, during the lifetime of the Option holder, only by the
Option holder, a Family Member or a Non-profit Organization. Any such
transfer shall be effected by written notice to the Company given in
such form and manner as the Committee may prescribe and shall be
recognized only if such notice is received by the Company prior to the
death of the person giving it. Thereafter, the transferee shall have,
with respect to such Option, all of the rights, privileges and
obligations which would attach thereunder to the transferor if the
Option were issued to such transferor. If a privilege of the Option
depends on the life, employment or other status of the transferor,
such privilege of the Option for the transferee shall continue to
depend on the life, employment or other status of the transferor.
The Committee shall have full and exclusive authority to interpret and
apply the provisions of this Plan to transferees to the extent not
specifically described herein. Notwithstanding the foregoing, an
Incentive Stock Option is not transferable by an Eligible Employee
other than by will or the laws of descent and distribution, and is
exercisable, during his lifetime, solely by him.
(b) The Company's obligation to deliver Shares with respect to
an Option shall, if the Committee so requests, be conditioned upon the
receipt of a representation as to the investment intention of the
Option holder to whom such Shares are to be delivered, in such form as
the Committee shall determine to be necessary or advisable to comply
with the provisions of applicable federal, state or local law. It may
be provided that any such representation shall become inoperative upon
a registration of the Shares or upon the occurrence of any other event
eliminating the necessity of such representation. The Company shall
not be required to deliver any Shares under the Plan prior to (i) the
admission of such Shares to listing on any stock exchange on which
Shares may then be listed, or (ii) the completion of such registration
or other qualification under any state or federal law, rule or
regulation as the Committee shall determine to be necessary or
advisable.
Article VII
Amendment and Termination
Section 7.1 Termination.
The Board may suspend or terminate the Plan in whole or in part at any
time prior to the tenth anniversary of the Effective Date by giving written
notice of such suspension or termination to the Committee. Unless sooner
terminated, the Plan shall terminate automatically on the day preceding the
tenth anniversary of the Effective Date. In the event of any suspension or
termination of the Plan, all Options theretofore granted under the Plan that
are outstanding on the date of such suspension or termination of the Plan
shall remain outstanding and exercisable for the period and on the terms and
conditions set forth in the Option agreements evidencing such Options.
Section 7.2 Amendment.
The Board may amend or revise the Plan in whole or in part at any
time; provided, however, that, to the extent required to comply with section
162(m) of the Code, no such amendment or revision shall be effective if it
amends a material term of the Plan unless approved by the holders of a
majority of the votes cast on a proposal to approve such amendment or
revision.
Section 7.3 Adjustments in the Event of a Business Reorganization.
(a) In the event of any merger, consolidation, or other
business reorganization in which the Company is the surviving entity,
and in the event of any stock split, stock dividend or other event
generally affecting the number of Shares held by each Person who is
then a holder of record of Shares, the number of Shares covered by
each outstanding Option and the number of Shares available to any
individual or group of individuals pursuant to section 3.1 shall be
adjusted to account for such event. Such adjustment shall be effected
by multiplying such number of Shares by an amount equal to the number
of Shares that would be owned after such event by a Person who,
immediately prior to such event, was the holder of record of one
Share, and the Exercise Price of the Options shall be adjusted by
dividing the Exercise Price by such number of Shares; provided,
however, that the Committee may, in its discretion, establish another
appropriate method of adjustment.
(b) In the event of any merger, consolidation, or other
business reorganization in which the Company is not the surviving
entity, any Options granted under the Plan which remain outstanding
shall be converted into options to purchase voting common equity
securities of the business entity which survives such merger,
consolidation or other business reorganization having substantially
the same terms and conditions as the outstanding Options under this
Plan and reflecting the same economic benefit (as measured by the
difference between the aggregate exercise price and the value
exchanged for outstanding Shares in such merger, consolidation or
other business reorganization), all as determined by the Committee
prior to the consummation of such merger; provided, however, that the
Committee may, at any time prior to the consummation of such merger,
consolidation or other business reorganization, direct that all, but
not less than all, outstanding Options be canceled as of the effective
date of such merger, consolidation or other business reorganization in
exchange for a cash payment per optioned Share equal to the excess (if
any) of the value exchanged for an outstanding Share in such merger,
consolidation or other business reorganization over the Exercise Price
of the Option being canceled.
Article VIII
Miscellaneous
Section 8.1 Status as an Employee Benefit Plan.
This Plan is not intended to satisfy the requirements for
qualification under section 401(a) of the Code or to satisfy the
definitional requirements for an "employee benefit plan" under section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended. It is
intended to be a non-qualified incentive compensation program that is exempt
from the regulatory requirements of the Employee Retirement Income Security
Act of 1974, as amended. The Plan shall be construed and administered so as
to effectuate this intent.
Section 8.2 No Right to Continued Employment.
Neither the establishment of the Plan nor any provisions of the Plan
nor any action of the Board or the Committee with respect to the Plan shall
be held or construed to confer upon any Eligible Director or Eligible
Employee any right to a continuation of his or her position as a director or
employee of the Company. The Employers reserve the right to remove any
Eligible Director or dismiss any Eligible Employee or otherwise deal with
any Eligible Director or Eligible Employee to the same extent as though the
Plan had not been adopted.
Section 8.3 Construction of Language.
Whenever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular,
and words importing the masculine gender may be read as referring equally to
the feminine or the neuter. Any reference to an Article or section number
shall refer to an Article or section of this Plan unless otherwise
indicated.
Section 8.4 Governing Law.
The Plan shall be construed, administered and enforced according to
the laws of the Commonwealth of Massachusetts without giving effect to the
conflict of laws principles thereof, except to the extent that such laws are
preempted by federal law. The Plan shall be construed to comply with
applicable FDIC Regulations.
Section 8.5 Headings.
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings
and the text of the Plan, the text shall control.
Section 8.6 Non-Alienation of Benefits.
The right to receive a benefit under the Plan shall not be subject in
any manner to anticipation, alienation or assignment, nor shall such right
be liable for or subject to debts, contracts, liabilities, engagements or
torts.
Section 8.7 Taxes.
The Company shall have the right to deduct from all amounts paid by
the Company in cash with respect to an Option under the Plan any taxes
required by law to be withheld with respect to such Option. Where any
Person is entitled to receive Shares pursuant to the exercise of an Option,
the Company shall have the right to require such Person to pay the Company
the amount of any tax which the Company is required to withhold with respect
to such Shares, or, in lieu thereof, to retain, or to sell without notice, a
sufficient number of Shares to cover the minimum amount required to be
withheld under applicable law.
Section 8.8 Notices.
Any communication required or permitted to be given under the Plan,
including any notice, direction, designation, comment, instruction,
objection or waiver, shall be in writing and shall be deemed to have been
given at such time as it is delivered personally or five (5) days after
mailing if mailed, postage prepaid, by registered or certified mail, return
receipt requested, addressed to such party at the address listed below, or
at such other address as one such party may by written notice specify to the
other party:
(a) If to the Committee:
Westborough Financial Services, Inc.
100 East Main Street
Westborough, Massachusetts 01581
Attention: Clerk
(b) If to an Option holder, to the Option holder's address as
shown in the Employer's records.
Section 8.9 Required Regulatory Provisions.
The grant and settlement of Options under this Plan shall be
conditioned upon and subject to compliance with section 18(k) of the Federal
Deposit Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations
promulgated thereunder.
Section 8.10 Approval of Shareholders.
The Plan shall not be effective or implemented unless approved by the
holders (other than Westborough Bancorp, MHC) of a majority of the total
votes eligible to be cast at any duly called annual or special meeting of
the Company. No Option shall be granted prior to the date on which the Plan
becomes effective.
Article IX
Additional Provisions Subject to Further Shareholder Approval
Section 9.1 Accelerated Vesting Upon Retirement or Change in
Control.
Notwithstanding anything in the Plan to the contrary, but subject to
section 9.3: (a) in the event that any Eligible Employee terminates service
as an Employee of all Employers, or in the event that an Eligible Director
terminates service as a voting member of all Employers' boards of directors,
and such termination constitutes a Retirement, all Options outstanding to
such holder on the date of his Retirement shall, to the extent not already
exercisable, become exercisable upon Retirement; and (b) in the event of a
Change in Control, all Options outstanding under the Plan on the date of the
Change in Control shall, to the extent not already exercisable, become
exercisable on the date of the Change in Control.
Section 9.2 Discretion to Establish Vesting Schedules.
Notwithstanding anything in the Plan to the contrary, but subject to
section 9.3, section 5.5(b) shall apply in determining the exercisability of
Options granted to Eligible Employees only if no different vesting schedule
is established by the Committee and specified in the agreement evidencing an
outstanding Option.
Section 9.3 No Effect Prior to Shareholder Approval.
Notwithstanding anything contained in this Article IX to the contrary,
the provisions of this Article IX shall not be applied, and shall be of no
force or effect, unless and until the shareholders of the Company shall have
approved such provisions by affirmative vote of the holders of a majority of
the Shares represented in person or by proxy and entitled to vote at a
meeting of shareholders duly called and held after February 15, 2001.
Exhibit D
WESTBOROUGH FINANCIAL SERVICES, INC.
2001 RECOGNITION AND RETENTION PLAN
______________________________
Adopted on October 26, 2000
TABLE OF CONTENTS
Page
ARTICLE I
Section 1.1 General Purpose of the Plan 1
ARTICLE II
DEFINITIONS
Section 2.1 Award 1
Section 2.2 Award Notice 1
Section 2.3 Bank 1
Section 2.4 Beneficiary 1
Section 2.5 Board 1
Section 2.6 Change of Control 1
Section 2.7 Code 3
Section 2.8 Committee 3
Section 2.9 Company 3
Section 2.10 Disability 3
Section 2.11 Disinterested Board Member 3
Section 2.12 Effective Date 4
Section 2.13 Eligible Director 4
Section 2.14 Eligible Employee 4
Section 2.15 Employer 4
Section 2.16 Exchange Act 4
Section 2.17 FDIC Regulations 4
Section 2.18 Person 4
Section 2.19 Plan 4
Section 2.20 Retirement 4
Section 2.21 Share 4
Section 2.22 Trust 4
Section 2.23 Trust Agreement 5
Section 2.24 Trust Fund 5
Section 2.25 Trustee 5
ARTICLE III
SHARES AVAILABLE UNDER PLAN
Section 3.1 Shares Available Under Plan 5
ARTICLE IV
ADMINISTRATION
Section 4.1 Committee 5
Section 4.2 Committee Action 6
Section 4.3 Committee Responsibilities 6
ARTICLE V
THE TRUST FUND
Section 5.1 Contributions 6
Section 5.2 The Trust Fund 7
Section 5.3 Investments 7
ARTICLE VI
AWARDS
Section 6.1 To Eligible Directors 7
Section 6.2 To Eligible Employees 7
Section 6.3 Awards in General 7
Section 6.4 Share Allocations 8
Section 6.5 Dividend Rights 8
Section 6.6 Voting Rights 8
Section 6.7 Tender Offers 9
Section 6.8 Limitations on Awards 9
ARTICLE VII
VESTING
Section 7.1 Vesting of Awards 10
Section 7.2 Designation of Beneficiary 11
Section 7.3 Manner of Distribution 11
Section 7.4 Taxes 12
ARTICLE VIII
AMENDMENT AND TERMINATION
Section 8.1 Termination 12
Section 8.2 Amendment 12
Section 8.3 Adjustments in the Event of a Business Reorganization 12
ARTICLE IX
MISCELLANEOUS
Section 9.1 Status as an Employee Benefit Plan 13
Section 9.2 No Right to Continued Employment 13
Section 9.3 Construction of Language 13
Section 9.4 Governing Law 14
Section 9.5 Headings 14
Section 9.6 Non-Alienation of Benefits 14
Section 9.7 Notices 14
Section 9.8 Required Regulatory Provisions 15
Section 9.9 Approval of Shareholders 15
ARTICLE X
ADDITIONAL PROVISIONS SUBJECT TO FURTHER SHAREHOLDER APPROVAL
Section 10.1 Accelerated Vesting Upon Retirement or Change in Control 15
Section 10.2 Discretion to Establish Vesting Schedules 15
Section 10.3 No Effect Prior to Stockholder Approval 15
WESTBOROUGH FINANCIAL SERVICES, INC.
2001 RECOGNITION AND RETENTION PLAN
ARTICLE I
Purpose
Section 1.1 General Purpose of the Plan.
The purpose of the Plan is to promote the growth and profitability of
Westborough Financial Services, Inc. and its affiliated companies and to
provide eligible directors, certain key officers and employees of
Westborough Financial Services, Inc. and its affiliated companies with an
incentive to achieve corporate objectives, to attract and retain directors,
key officers and employees of outstanding competence and to provide such
directors, officers and employees with an equity interest in Westborough
Financial Services, Inc. and its affiliated companies.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
Section 2.1 Award means a grant of Shares to an Eligible Director
or Eligible Employee pursuant to section 6.1 or 6.2.
Section 2.2 Award Notice means, with respect to a particular Award,
a written instrument signed by the Company and the Awards recipient
evidencing the granting of the Award and establishing the terms and
conditions thereof.
Section 2.3 Bank means The Westborough Bank, a Massachusetts stock
savings bank, and any successor thereto.
Section 2.4 Beneficiary means the Person designated by an Eligible
Director or Eligible Employee pursuant to section 7.2, to receive
distribution of any Shares available for distribution to such Eligible
Director or Eligible Employee, in the event such Eligible Director or
Eligible Employee dies prior to receiving distribution of such Shares.
Section 2.5 Board means the Board of Directors of the Company.
Section 2.6 Change of Control means any of the following events:
(a) the consummation of a reorganization, merger or
consolidation of the Company with one or more other persons, other
than a transaction following which:
(i) at least 51% of the equity ownership interests of
the entity resulting from such transaction are beneficially
owned (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act")) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) at least 51% of the outstanding equity ownership interests
in the Company; and
(ii) at least 51% of the securities entitled to vote
generally in the election of directors of the entity resulting
from such transaction are beneficially owned (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) at least 51% of the securities entitled to vote generally
in the election of directors of the Company;
(b) the acquisition of all or substantially all of the assets
of the Company or beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 25% or more of the
outstanding securities of the Company entitled to vote generally in
the election of directors by any person or by any persons acting in
concert;
(c) a complete liquidation or dissolution of the Company;
(d) the occurrence of any event if, immediately following
such event, at least 50% of the members of the board of directors of
the Company do not belong to any of the following groups:
(i) individuals who were members of the board of
directors of the Company on the Effective Date; or
(ii) individuals who first became members of the board
of directors of the Company after the Effective Date either:
(A) upon election to serve as a member of the
board of Directors of the Company by affirmative vote of
three-quarters of the members of such board, or of a
nominating committee thereof, in office at the time of
such first election; or
(B) upon election by the shareholders of the
Company to serve as a member of such board, but only if
nominated for election by affirmative vote of three-
quarters of the members of the board of directors of the
Company, or of a nominating committee thereof, in office
at the time of such first nomination;
provided, however, that such individual's election or nomination
did not result from an actual or threatened election contest
(within the meaning of Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents (within the meaning of Rule
14a-11 of Regulation 14A promulgated under the Exchange Act)
other than by or on behalf of the board of directors of the
Company;
(e) approval by the stockholders of the Company of any
agreement, plan or arrangement for the consummation of a transaction
which, if consummated, would result in the occurrence of an event
described in section 2.6(a), (b), (c) or (d); or
(f) any event which would be described in section 2.6(a),
(b), (c), (d) or (e) if the term "Bank" were substituted for the term
"Company" therein.
In no event, however, shall a Change of Control be deemed to have occurred
as a result of any acquisition of securities or assets of the Company, the
Bank, or a subsidiary of either of them, by the Company, the Bank, or any
subsidiary of either of them, or by any employee benefit plan maintained by
any of them. For purposes of this section 2.6, the term "person" shall have
the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the
Exchange Act.
Section 2.7 Code means the Internal Revenue Code of 1986 (including
the corresponding provisions of any succeeding law).
Section 2.8 Committee means the Committee described in section 4.1.
Section 2.9 Company means Westborough Financial Services, Inc., a
corporation organized and existing under the laws of the Commonwealth of
Massachusetts, and any successor thereto.
Section 2.10 Disability means a condition of total incapacity,
mental or physical, for further performance of duty with the Company which
the Committee shall have determined, on the basis of competent medical
evidence, is likely to be permanent.
Section 2.11 Disinterested Board Member means a member of the Board
who (a) is not a current employee of the Company or a subsidiary, (b) does
not receive remuneration from the Company or a subsidiary, either directly
or indirectly, in any capacity other than as a director, except in an amount
for which disclosure would not be required pursuant to Item 404(a) of the
proxy solicitation rules of the Securities and Exchange Commission and (c)
does not possess an interest in any other transaction, and is not engaged in
a business relationship, for which disclosure would be required pursuant to
Item 404(a) or (b) of the proxy solicitation rules of the Securities and
Exchange Commission. The term Disinterested Board Member shall be
interpreted in such manner as shall be necessary to conform to the
requirements of Rule 16b-3 promulgated under the Exchange Act.
Section 2.12 Effective Date means January 25, 2001.
Section 2.13 Eligible Director means a member of the board of
directors of an Employer who is not also an employee of any Employer.
Section 2.14 Eligible Employee means any employee whom the
Committee may determine to be a key officer or employee of the Employer and
selects to receive an Award pursuant to the Plan.
Section 2.15 Employer means the Company, the Bank and any successor
thereto and, with the prior approval of the Board of Directors of the
Company, and subject to such terms and conditions as may be imposed by the
Board, any other savings bank, savings and loan association, bank,
corporation, financial institution or other business organization or
institution. With respect to any Eligible Employee or Eligible Director, the
Employer shall mean the entity which employs such person or upon whose board
of directors such person serves.
Section 2.16 Exchange Act means the Securities and Exchange Act of
1934, as amended.
Section 2.17 FDIC Regulations means the rules and regulations of
the Federal Deposit Insurance Corporation.
Section 2.18 Person means an individual, a corporation, a bank, a
savings bank, a savings and loan association, a financial institution, a
partnership, an association, a joint-stock company, a trust, an estate, an
unincorporated organization and any other business organization or
institution.
Section 2.19 Plan means the Westborough Financial Services, Inc.
2001 Recognition and Retention Plan as amended from time to time.
Section 2.20 Retirement means with respect to an Eligible Employee,
termination of all service for all Employers as an employee at or after the
normal or early retirement date set forth in any tax-qualified retirement
plan of the Bank, whether or not the individual in question actually
participates in any such tax-qualified plan of the Bank, and in the case of
an Eligible Director, termination of all service for all Employers as a
voting member of the Employer's board of directors after the attainment of
the latest age at which the Eligible Director is eligible for election or
appointment as a voting member of the Employer's board of directors under
the Employer's charter.
Section 2.21 Share means a share of common stock of Westborough
Financial Services, Inc., par value $.01 per share.
Section 2.22 Trust means the legal relationship created by the
Trust Agreement pursuant to which the Trustee holds the Trust Fund in trust.
The Trust may be referred to as the "Recognition and Retention Plan Trust of
Westborough Financial Services, Inc."
Section 2.23 Trust Agreement means the agreement between
Westborough Financial Services, Inc. and the Trustee therein named or its
successor pursuant to which the Trust Fund shall be held in trust.
Section 2.24 Trust Fund means the corpus (consisting of
contributions paid over to the Trustee, and investments thereof), and all
earnings, appreciations or additions thereof and thereto, held by the
Trustee under the Trust Agreement in accordance with the Plan, less any
depreciation thereof and any payments made therefrom pursuant to the Plan.
Section 2.25 Trustee means the Trustee of the Trust Fund from time
to time in office. The Trustee shall serve as Trustee until it is removed or
resigns from office and is replaced by a successor Trustee or Trustees
appointed by Westborough Financial Services, Inc.
ARTICLE III
SHARES AVAILABLE UNDER PLAN
Section 3.1 Shares Available Under Plan.
(a) The maximum number of Shares available for Awards under
the Plan shall be 22,139, subject to adjustment pursuant to section
8.3.
(b) An aggregate maximum of 6,641 Shares (subject to
adjustment pursuant to section 8.3) may be granted as Awards to
Eligible Directors, and a maximum of 1,106 Shares (subject to
adjustment pursuant to section 8.3) may be granted as Awards to any
one Eligible Director.
(c) An aggregate maximum of 22,139 Shares (subject to
adjustment pursuant to section 8.3) may be granted as Awards to
Eligible Employees, and a maximum of 5,534 Shares (subject to
adjustment pursuant to section 8.3) may be granted as Awards to any
one Eligible Employee.
ARTICLE IV
ADMINISTRATION
Section 4.1 Committee.
The Plan shall be administered by the members of the Compensation
Committee of Westborough Financial Services, Inc. who are Disinterested
Board Members. If the Committee consists of fewer than two Disinterested
Board Members, then the Board shall appoint to the Committee such additional
Disinterested Board Members as shall be necessary to provide for a Committee
consisting of at least two Disinterested Board Members.
Section 4.2 Committee Action.
The Committee shall hold such meetings, and may make such
administrative rules and regulations, as it may deem proper. A majority of
the members of the Committee shall constitute a quorum, and the action of a
majority of the members of the Committee present at a meeting at which a
quorum is present, as well as actions taken pursuant to the unanimous
written consent of all of the members of the Committee without holding a
meeting, shall be deemed to be actions of the Committee. All actions of the
Committee shall be final and conclusive and shall be binding upon the
Company and all other interested parties. Any Person dealing with the
Committee shall be fully protected in relying upon any written notice,
instruction, direction or other communication signed by the Secretary of the
Committee and one member of the Committee, by two members of the Committee
or by a representative of the Committee authorized to sign the same in its
behalf.
Section 4.3 Committee Responsibilities.
Subject to the terms and conditions of the Plan and such limitations
as may be imposed by the Board, the Committee shall be responsible for the
overall management and administration of the Plan and shall have such
authority as shall be necessary or appropriate in order to carry out its
responsibilities, including, without limitation, the authority:
(a) to interpret and construe the Plan, and to determine all
questions that may arise under the Plan as to eligibility for Awards
under the Plan, the amount of Shares, if any, to be granted pursuant
to an Award, and the terms and conditions of such Award;
(b) to adopt rules and regulations and to prescribe forms for
the operation and administration of the Plan; and
(c) to take any other action not inconsistent with the
provisions of the Plan that it may deem necessary or appropriate.
ARTICLE V
THE TRUST FUND
Section 5.1 Contributions.
Westborough Financial Services, Inc. shall contribute, or cause to be
contributed, to the Trust, from time to time, such amounts of money or
property as shall be determined by the Board, in its discretion. No
contributions by Eligible Directors or Eligible Employees shall be
permitted.
Section 5.2 The Trust Fund.
The Trust Fund shall be held and invested under the Trust Agreement
with the Trustee. The provisions of the Trust Agreement shall include
provisions conferring powers on the Trustee as to investment, control and
disbursement of the Trust Fund, and such other provisions not inconsistent
with the Plan as may be prescribed by or under the authority of the Board.
No bond or security shall be required of any Trustee at any time in office.
Section 5.3 Investments.
The Trustee shall invest the Trust Fund in Shares and in such other
investments as may be permitted under the Trust Agreement, including savings
accounts, time or other interest bearing deposits in or other interest
bearing obligations of the Company, in such proportions as shall be
determined by the Committee; provided, however, that in no event shall the
Trust Fund be used to purchase more than 22,139 Shares (subject to
adjustment pursuant to section 8.3). Notwithstanding the immediately
preceding sentence, the Trustee may temporarily invest the Trust Fund in
short-term obligations of, or guaranteed by, the U.S. Government or an
agency thereof, or the Trustee may retain the Trust Fund uninvested or may
sell assets of the Trust Fund to provide amounts required for purposes of
the Plan.
ARTICLE VI
AWARDS
Section 6.1 To Eligible Directors.
Subject to the limitations of the Plan and such limitations as the
Board may from time to time impose, the number of Shares as to which an
Eligible Director may be granted an Award shall be determined by the
Committee in its discretion; provided, however, that in no event shall the
number of Shares allocated to an Eligible Director in an Award exceed the
number of Shares then held in the Trust and not allocated in connection with
other Awards.
Section 6.2 To Eligible Employees.
Subject to the limitations of the Plan and such limitations as the
Board may from time to time impose, the number of Shares as to which an
Eligible Employee may be granted an Award shall be determined by the
Committee in its discretion; provided, however, that in no event shall the
number of Shares allocated to an Eligible Employee in an Award exceed the
number of Shares then held in the Trust and not allocated in connection with
other Awards.
Section 6.3 Awards in General.
Any Award shall be evidenced by an Award Notice issued by the
Committee to the Eligible Director or Eligible Employee, which notice shall:
(a) specify the number of Shares covered by the Award;
(b) specify the date of grant of the Award;
(c) specify the dates on which such Shares shall become
vested; and
(d) contain such other terms and conditions not inconsistent
with the Plan as the Board or Committee may, in its discretion,
prescribe.
Section 6.4 Share Allocations.
Upon the grant of an Award to an Eligible Director or Eligible
Employee, the Committee shall notify the Trustee of the Award and of the
number of Shares subject to the Award. Thereafter, until such time as the
Shares subject to such Award become vested or are forfeited, the books and
records of the Trustee shall reflect that such number of Shares have been
awarded to such Award recipient.
Section 6.5 Dividend Rights.
(a) Unless the Committee determines otherwise with respect to
any Award and specifies such determination in the relevant Award
Notice, any cash dividends or distributions declared and paid with
respect to Shares subject to the Award that are, as of the record date
for such dividend, allocated to an Eligible Director or Eligible
Employee in connection with such Award shall be promptly paid to and
retained by such Eligible Director or Eligible Employee. Any cash
dividends declared and paid with respect to Shares that are not, as of
the record date for such dividend, allocated to any Eligible Director
or Eligible Employee in connection with any Award shall, at the
direction of the Committee, be held in the Trust or used to pay the
administrative expenses of the Plan, including any compensation due to
the Trustee.
(b) Unless the Committee determines otherwise with respect to
any Award and specifies such determination in the relevant Award
Notice, any dividends or distributions declared and paid in property
other than cash with respect to Shares shall be subject to the same
vesting and other restrictions as the Shares to which the Award
relates. Any such dividends declared and paid with respect to Shares
that are not, as of the record date for such dividend, allocated to
any Eligible Director or Eligible Employee in connection with any
Award shall, at the direction of the Committee, be held in the Trust
or used to pay the administrative expenses of the Plan, including any
compensation due to the Trustee or, in the case of a stock dividend,
used for future Awards.
Section 6.6 Voting Rights.
(a) Each Eligible Director or Eligible Employee to whom an
Award has been made that is not fully vested shall have the right to
exercise, or direct the exercise of, all voting rights appurtenant to
unvested Shares related to such Award. Such a direction for any Shares
as to which the Eligible Director or Eligible Employee is not the
record owner shall be given by completing and filing, with the
inspector of elections, the Trustee or such other person who shall be
independent of the Company as the Committee shall designate in the
direction, a written direction in the form and manner prescribed by
the Committee. If no such direction is given by an Eligible Director
or Eligible Employee, then the voting rights appurtenant to the Shares
allocated to him shall not be exercised.
(b) To the extent that the Trust Fund contains Shares that
are not allocated in connection with an Award, all voting rights
appurtenant to such Shares shall be exercised by the Trustee in such
manner as the Committee shall direct to reflect the voting directions
given by Eligible Directors or Eligible Employees with respect to
Shares allocated in connection with their Awards.
(c) The Committee shall furnish, or cause to be furnished, to
each Eligible Director or Eligible Employee who is not the record
holder of the Shares relating to his or her Award all annual reports,
proxy materials and other information furnished by Westborough
Financial Services, Inc., or by any proxy solicitor, to the holders of
Shares.
Section 6.7 Tender Offers.
(a) Each Eligible Director or Eligible Employee to whom an
Award has been made that is not fully vested shall have the right to
respond, or to direct the response, with respect to the Shares related
to such Award, to any tender offer, exchange offer or other offer made
to the holders of Shares. Such a direction for any Shares as to which
the Eligible Director or Eligible Employee is not the record owner
shall be given by completing and filing, with the inspector of
elections, the Trustee or such other person who shall be independent
of the Company as the Committee shall designate in the direction, a
written direction in the form and manner prescribed by the Committee.
If no such direction is given by an Eligible Director or Eligible
Employee, then the Shares shall not be tendered or exchanged.
(b) To the extent that the Trust Fund contains Shares that
are not allocated in connection with an Award, all responses to
tender, exchange and other offers appurtenant to such Shares shall be
given by the Trustee in such manner as the Committee shall direct to
reflect the responses given by Eligible Directors or Eligible
Employees with respect to Shares allocated in connection with their
Awards.
(c) The Committee shall furnish, or cause to be furnished, to
each Eligible Director or Eligible Employee, all information furnished
by the offeror to the holders of Shares.
Section 6.8 Limitations on Awards.
(a) No Award shall be granted under the Plan prior to the
date on which the Plan is approved by shareholders pursuant to section
9.9;
(b) No Award granted under the Plan shall become vested more
rapidly than under the following schedule:
(i) prior to the first anniversary of the Effective
Date, no part of any Award shall be vested in the absence of the
death or Disability of the Award recipient;
(ii) on and after the first anniversary of the
Effective Date and prior to the second anniversary of the
Effective Date, an Award will be vested as to a maximum of
twenty percent (20%) of the Shares subject to the Award when
granted in the absence of the death or Disability of the Award
recipient;
(iii) on and after the second anniversary of the
Effective Date and prior to the third anniversary of the
Effective Date, an Award may be vested as to a maximum of forty
percent (40%) of the Shares subject to the Award when granted in
the absence of the death or Disability of the Award recipient;
(iv) on and after the third anniversary of the
Effective Date and prior to the fourth anniversary of the
Effective Date, an Award may be vested as to a maximum of sixty
percent (60%) of the Shares subject to the Award when granted in
the absence of the death or Disability of the Award recipient;
(v) on and after the fourth anniversary of the
Effective Date and prior to the fifth anniversary of the
Effective Date, an Award may be vested as to a maximum of eighty
percent (80%) of the Shares subject to the Award when granted in
the absence of the death or Disability of the Award recipient;
and
(vi) on and after the fifth anniversary of the
Effective Date, the Award may be vested as to one hundred
percent (100%) of the Shares subject to the Award when granted;
and
(vii) an Award may become fully vested on the date of
the Award holder's death or Disability without regard to the
time expired from and after the Effective Date.
(c) An Award by its terms shall not be transferable by the
Eligible Director or Eligible Employee other than by will or by the
laws of descent and distribution, and the Shares granted pursuant to
such Award and held in the Trust shall be distributable, during the
lifetime of the Recipient, only to the Recipient.
ARTICLE VII
VESTING
Section 7.1 Vesting of Awards.
Subject to the terms and conditions of the Plan, unless otherwise
determined by the Committee and specified in the Award Notice relating to an
Award, Shares subject to each Award granted to an Eligible Director or
Eligible Employee under the Plan shall become vested as follows: (i) twenty
percent (20%) of such Shares shall become vested thirty (30) calendar days
after the end of the calendar quarter that includes the first anniversary of
the date of grant; (ii) an additional twenty percent (20%) of such Shares
shall become vested thirty (30) calendar days after the end of the calendar
quarter that includes the second anniversary of the date of grant; (iii) an
additional twenty percent (20%) of such Shares shall become vested thirty
(30) calendar days after the end of the calendar quarter that includes the
third anniversary of the date of grant; (iv) an additional twenty percent
(20%) of such Shares shall become vested thirty (30) calendar days after the
end of the calendar quarter that includes the fourth anniversary of the date
of grant; (v) an additional twenty percent (20%) of such Shares shall become
vested thirty (30) calendar days after the end of the calendar quarter that
includes the fifth anniversary of the date of grant; and provided, further,
an Award shall become 100% vested upon the Award recipient's death or
Disability.
Section 7.2 Designation of Beneficiary.
An Eligible Director or Eligible Employee who has received an Award
may designate a Beneficiary to receive any undistributed Shares that are, or
become, available for distribution on, or after, the date of his death. Such
designation (and any change or revocation of such designation) shall be made
in writing in the form and manner prescribed by the Committee. In the event
that the Beneficiary designated by an Eligible Director or Eligible Employee
dies prior to the Eligible Director or Eligible Employee, or in the event
that no Beneficiary has been designated, any undistributed Shares that are,
or become, available for distribution on, or after, the Eligible Director's
or Eligible Employee's death shall be paid to the executor or administrator
of the Eligible Director's or Eligible Employee's estate, or if no such
executor or administrator is appointed within such time as the Committee, in
its sole discretion, shall deem reasonable, to such one or more of the
spouse and descendants and blood relatives of such deceased person as the
Committee may select.
Section 7.3 Manner of Distribution.
(a) Except as provided in section 7.3(b), as soon as
practicable following the date any Shares granted pursuant to an Award
become vested pursuant to sections 7.1, the Committee shall take such
actions as are necessary to cause the transfer of record ownership of
the Shares that have become vested from the Trustee to the Award
holder and shall cause the Trustee to distribute to the Award holder
all property other than Shares then being held in connection with the
Shares being distributed.
(b) The Committee may, in its discretion, cause the transfer
to an Award recipient of record ownership of the Shares subject to
such Award that have not yet vested. Any such Shares shall be held in
certificated form only, and the certificate therefor shall bear the
following or a substantially similar legend:
The securities evidenced hereby are subject to the terms
of an Award Notice dated [date] between the issuer and
[name of Award recipient] pursuant to the Westborough
Financial Services, Inc. 2001 Recognition and Retention
Plan, a copy of which is on file with the issuer and may
be inspected at the issuer's executive offices at 100 East
Main Street, Westborough, Massachusetts 01581. No sale,
transfer, hypothecation or other disposition of these
securities may be made except in compliance with the terms
of such Award Notice and the terms of the Plan.
(c) The Company's obligation to deliver Shares with respect to
an Award shall, if the Committee so requests, be conditioned upon the
receipt of a representation as to the investment intention of the
Eligible Director or Eligible Employee or Beneficiary to whom such
Shares are to be delivered, in such form as the Committee shall
determine to be necessary or advisable to comply with the provisions
of applicable federal, state or local law. It may be provided that any
such representation shall become inoperative upon a registration of
the Shares or upon the occurrence of any other event eliminating the
necessity of such representation. The Company shall not be required to
deliver any Shares under the Plan prior to (i) the admission of such
Shares to listing on any stock exchange on which Shares may then be
listed, or (ii) the completion of such registration or other
qualification under any state or federal law, rule or regulation as
the Committee shall determine to be necessary or advisable.
Section 7.4 Taxes.
The Company, the Committee or the Trustee shall have the right to
require any person entitled to receive Shares pursuant to an Award to pay
the amount of any tax which is required to be withheld with respect to such
Shares, or, in lieu thereof, to retain, or to sell without notice, a
sufficient number of Shares to cover the amount required to be withheld.
ARTICLE VIII
AMENDMENT AND TERMINATION
Section 8.1 Termination.
The Board may suspend or terminate the Plan in whole or in part at any
time by giving written notice of such suspension or termination to the
Committee; provided, however, that the Plan may not be terminated while
there are outstanding Awards that may thereafter become vested. Upon the
termination of the Plan, the Trustee shall make distributions from the Trust
Fund in such amounts and to such persons as the Committee may direct and
shall return the remaining assets of the Trust Fund, if any, to Westborough
Financial Services, Inc.
Section 8.2 Amendment.
The Board may amend or revise the Plan in whole or in part at any
time; provided, however, that no such amendment or revision shall alter the
stockholder approval standard set forth in Article X as a condition
precedent to the effectiveness of Article X or otherwise directly or
indirectly give effect to the substance of the provisions of Article X
without compliance with the stockholder approval requirement set forth
therein.
Section 8.3 Adjustments in the Event of a Business Reorganization.
(a) In the event of any merger, consolidation, or other
business reorganization (including but not limited to a Change of
Control) in which Westborough Financial Services, Inc. is the
surviving entity, and in the event of any stock split, stock dividend
or other event generally affecting the number of Shares held by each
person who is then a holder of record of Shares, the number of Shares
held or permitted to be held in the Trust Fund, the number of Shares
covered by outstanding Awards, and the number of Shares available as
Awards in total or to particular individuals or groups shall be
adjusted to account for such event. Such adjustment shall be effected
by multiplying such number of Shares by an amount equal to the number
of Shares that would be owned after such event by a person who,
immediately prior to such event, was the holder of record of one
Share, unless the Committee, in its discretion, establishes another
appropriate method of adjustment.
(b) In the event of any merger, consolidation, or other
business reorganization (including but not limited to a Change of
Control) in which Westborough Financial Services, Inc. is not the
surviving entity, the Trustee shall hold in the Trust Fund any money,
stock, securities or other property received by holders of record of
Shares in connection with such merger, consolidation, or other
business reorganization. Any Award with respect to which Shares had
been allocated to an Eligible Director or Eligible Employee shall be
adjusted by allocating to the Eligible Director or Eligible Employee
receiving such Award the amount of money, stock, securities or other
property received by the Trustee for the Shares allocated to such
Eligible Director or Eligible Employee, and such money, stock,
securities or other property shall be subject to the same terms and
conditions of the Award that applied to the Shares for which it has
been exchanged.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Status as an Employee Benefit Plan.
This Plan is not intended to satisfy the requirements for
qualification under section 401(a) of the Code or to satisfy the
definitional requirements for an "employee benefit plan" under section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended. It is
intended to be a non-qualified incentive compensation program that is exempt
from the regulatory requirements of the Employee Retirement Income Security
Act of 1974, as amended. The Plan shall be construed and administered so as
to effectuate this intent.
Section 9.2 No Right to Continued Employment.
Neither the establishment of the Plan nor any provisions of the Plan
nor any action of the Board or the Committee with respect to the Plan shall
be held or construed to confer upon any Eligible Director or Eligible
Employee any right to continue in the service of any Employer. The Employers
reserve the right to dismiss any Eligible Director or Eligible Employee or
otherwise deal with any Eligible Director or Eligible Employee to the same
extent as though the Plan had not been adopted.
Section 9.3 Construction of Language.
Whenever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular,
and words importing the masculine gender may be read as referring equally to
the feminine or the neuter. Any reference to an Article or section number
shall refer to an Article or section of this Plan unless otherwise
indicated.
Section 9.4 Governing Law.
The Plan shall be construed and enforced in accordance with the laws
of the Commonwealth of Massachusetts without giving effect to the conflict
of laws principles thereof, except to the extent that such laws are
preempted by the federal laws of the United States of America. The Plan
shall be construed to comply with applicable FDIC Regulations.
Section 9.5 Headings.
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and
the text of the Plan, the text shall control.
Section 9.6 Non-Alienation of Benefits.
The right to receive a benefit under the Plan shall not be subject in
any manner to anticipation, alienation or assignment, nor shall such right
be liable for or subject to debts, contracts, liabilities, engagements or
torts; provided, however, that any recipient of an Award who makes an
election pursuant to section 83(b) of the Code to include the value of the
Shares subject to such Award in gross income for federal income purposes
when granted rather than when vested shall have the right to margin such
Shares to finance the payment of taxes. Any Shares so margined shall
nevertheless remain subject to the forfeiture provisions and other terms and
conditions of the Award.
Section 9.7 Notices.
Any communication required or permitted to be given under the Plan,
including any notice, direction, designation, comment, instruction,
objection or waiver, shall be in writing and shall be deemed to have been
given at such time as it is personally delivered or 5 days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below, or at such
other address as one such party may by written notice specify to the other:
(a) If to the Committee:
Westborough Financial Services, Inc.
100 East Main Street
Westborough, Massachusetts
Attention: Clerk
(b) If to an Eligible Director or Eligible Employee, to the
Eligible Director's or Eligible Employee's address as shown in the
Employer's records.
Section 9.8 Required Regulatory Provisions.
The making and payment of Awards under this Plan shall be conditioned
upon and subject to compliance with section 18(k) of the Federal Deposit
Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations promulgated
thereunder.
Section 9.9 Approval of Shareholders.
The Plan shall not be effective or implemented unless approved by the
holders (other than Westborough, MHC) of a majority of the total votes
eligible to be cast at any duly called annual or special meeting of the
Company. No Award shall be made prior to the date on which the Plan becomes
effective.
ARTICLE X
ADDITIONAL PROVISIONS SUBJECT TO FURTHER SHAREHOLDER APPROVAL
Section 10.1 Accelerated Vesting Upon Retirement or Change in
Control.
Notwithstanding anything in the Plan to the contrary, but subject to
section 10.3, unless otherwise determined by the Committee and specified in
the Award Notice relating to an Award: (a) in the event that any Eligible
Employee terminates service as an Employee of all Employers, or in the event
that an Eligible Director terminates service as a voting member of all
Employers' boards of directors, and such termination constitutes a
Retirement, all Awards outstanding to such holder on the date of his
Retirement shall, to the extent not already vested, become vested upon
Retirement; and (b) in the event of a Change of Control, all Awards
outstanding under the Plan on the date of the Change of Control shall, to
the extent not already vested, become vested on the date of the Change of
Control.
Section 10.2 Discretion to Establish Vesting Schedules.
Notwithstanding anything in the Plan to the contrary, but subject to
section 10.3, section 7.1 shall apply in determining the vesting of Awards
only if no different vesting schedule is established by the Committee and
specified in the Award Notice.
Section 10.3 No Effect Prior to Stockholder Approval.
Notwithstanding anything contained in this Article X to the contrary,
the provisions of this Article X shall not be applied, and shall be of no
force or effect, unless and until the shareholders of the Company shall have
approved such provisions by affirmative vote of the holders of a majority of
the Shares represented in person or by proxy and entitled to vote at a
meeting of shareholders duly called and held after February 15, 2001.
REVOCABLE PROXY
Westborough Financial Services, Inc.
This proxy is solicited on behalf of the Board of Directors of
Westborough Financial Services, Inc.
for the Annual Meeting of Stockholders to be held on
Thursday, January 25, 2001
The undersigned stockholder of Westborough Financial Services, Inc.
hereby appoints Walter A. Kinell, Jr., James E. Tashjian and David E.
Carlstrom, or each of them, with full powers of substitution, to attend and
act as proxy for the undersigned and to vote all shares of common stock of
Westborough Financial Services, Inc. which the undersigned may be entitled
to vote at the Annual Meeting of Stockholders to be held at Westborough
Bank, located at, 100 East Main Street, Westborough, Massachusetts 01581, on
Thursday, January 25, 2001, at 4:00 p.m., local time, and at any adjournment
or postponement thereof.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If you do not give us any
direction, this Proxy will be voted FOR the proposals in Items 1, 2, 3, 4
and 5.
(Continued on Reverse Side)
PLEASE COMPLETE, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE
AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
The Board of Directors recommends Please mark your vote as
a vote "FOR"each of the proposals indicated in this example. [X]
in Items 1, 2, 3, 4 and 5.
I will attend the annual
meeting. [ ]
(Please mark box if you plam
to attend the annual meeting.)
(Important: If your shares are
not registered in your name,
you will need additional
documentation to attend the
annual meeting.)
1. Approval to amend Article VI, Section 1 of Westborough Financial
Service's Articles of Organization to clarify that directors are
allowed to continue serving on the company's board of directors until
the annual meeting immediately following his or her 75th birthday.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Election of five directors for terms of three years each.
Nominees: Nelson P. Ball, Robert G. Daniel, Earl H. Hutt,
Roger B. Leland, and Joseph F. MacDonough.
FOR WITHHOLD
all nominees (except as for all
otherwise indicated) nominees
[ ] [ ]
Instruction: TO WITHHOLD AUTHORITY to vote for any individual nominee, write
that nominee's name in the space provided:
___________________________________________________________________________
3. Ratification of the appointment of Wolf & Co., P.C. as independent
public accountants for the fiscal year ending September 30, 2001.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Approval of the Proposed Westborough Financial Services, Inc. 2001
Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. Approval of the Proposed Westborough Financial Services, Inc. 2001
Recognition and Retention Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The undersigned hereby acknowledges
receipt of the Notice of Annual
Meeting of Stockholders and the proxy
statement for the annual meeting.
(Signature(s)) _____________________
Dated: ______________________, _____
Please sign exactly as your name
appears on this proxy. Joint owners
should each sign personally. If
signing as attorney, executor,
administrator, trustee or guardian,
please include your full title.
Corporate or partnership proxies
should be signed by an authorized
officer.