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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Westfield Financial, Inc.
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(Name of Registrant as Specified in Its Charter)
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WESTFIELD FINANCIAL, INC. [LOGO]
May 24, 2002
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of Westfield Financial, Inc., the holding company for
Westfield Bank, which will be held on June 28, 2002 at 10:00 a.m., Eastern
Time, at the Tekoa Country Club, located at 459 Russell Road, Westfield,
Massachusetts 01085.
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 Westfield Financial and Westfield Bank, and
you will have an opportunity to ask questions.
The Board of Directors of Westfield Financial has determined that an
affirmative vote on each matter to be considered at the annual meeting is
in the best interests of Westfield Financial 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 Westfield
Financial and Westfield Bank, we thank you for your continued support and
look forward to seeing you at the annual meeting.
Sincerely yours,
/s/ Donald A. Williams
Donald A. Williams
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: Friday, June 28, 2002
Time: 10:00 a.m., Eastern Time
Place: Tekoa Country Club
459 Russell Road
Westfield, Massachusetts 01085
At our 2002 annual meeting, we will ask you to:
1. Elect the following individuals to serve as a director for a
term of office stated next to the individual nominee's name:
Nominees Term to Expire
-------- --------------
Robert T. Crowley, Jr. 2005
Harry C. Lane 2005
William H. McClure 2005
Paul R. Pohl 2005
2. Adopt the Proposed Westfield Financial, Inc. 2002 Stock Option
Plan.
3. Adopt the Proposed Westfield Financial, Inc. 2002 Recognition
and Retention Plan.
4. 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
Westfield Financial at the close of business on May 15, 2002, the record
date.
By Order of the Board of Directors,
/s/ Donald A. Williams
Donald A. Williams
President and Chief Executive Officer
Westfield, Massachusetts
May 24, 2002
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
Westfield Financial, Inc. is a Massachusetts-chartered stock holding
company, which was organized in November 2001. Westfield Financial is
registered as a bank holding company with the Federal Reserve Bank of
Boston and owns all of the capital stock of Westfield Bank. Westfield
Mutual Holding Company owns 53% of the outstanding shares of Westfield
Financial's common stock, which is listed on the American Stock Exchange
under the symbol "WFD." As used in this proxy statement, "we", "us" and
"our" refer to Westfield Financial and/or its subsidiaries, depending on
the context. The term "annual meeting," as used in this proxy statement,
includes any adjournment or postponement of such meeting.
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 May 24, 2002 to all shareholders
entitled to vote. If you owned common stock of Westfield Financial at the
close of business on May 15, 2002, the record date, you are entitled to
vote at the annual meeting. On the record date, there were 10,580,000
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 Westfield Financial that you owned as of the record
date at the close of business on May 15, 2002. 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 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 Annual Meeting.
VOTE BY WESTFIELD MUTUAL HOLDING COMPANY
Westfield Mutual Holding Company owns 53% of the outstanding shares
of Westfield Financial's common stock. All shares of Westfield Financial
owned by Westfield Mutual Holding Company will be voted in accordance with
the instructions of the Board of Trustees of Westfield Mutual Holding
Company. Westfield Mutual Holding Company is expected to vote "for" each
of the proposals identified in the Notice of Annual Meeting for which it is
entitled to vote.
VOTE REQUIRED
<s> <c>
Proposal 1: Election of The nominees for director who receive the most votes will be
Directors elected. So, if you do not vote for a nominee, or you indicate
"withhold authority" for any nominee on your proxy card, your vote
will not count "for" or "against" the nominee. You may not vote
your shares cumulatively for the election of directors. Because
Westfield Mutual Holding Company owns more than 50% of Westfield
Financial's outstanding shares, we expect that Westfield Mutual
Holding Company will control the outcome of the vote on this
proposal.
Proposals 2 & 3: Adoption Approval of Proposal 2 and Proposal 3 requires the affirmative vote
of the 2002 Stock Option of a majority of the outstanding shares of Westfield Financial's
Plan and the 2002 common stock that is not held by Westfield Mutual Holding
Recognition and Retention Company. Under this standard, if you "abstain" from voting, it has
Plan the same effect as if you voted "against" these proposals.
EFFECT OF BROKER NON-VOTES
If your broker holds shares that you own in "street name," the broker
may vote your shares on the proposals listed above even if the broker does
not receive instructions from you. If your broker does not vote on a
proposal, this will constitute a "broker non-vote." Here is the effect of a
"broker non-vote.
* Proposal 1: Election of Directors. A broker non-vote would
have no effect on the outcome of this proposal because only a
plurality of votes cast is required to elect a director.
* Proposals 2 & 3: Adoption of the 2002 Stock Option Plan and
the 2002 Recognition and Retention Plan. A broker non-vote
with respect to either of these proposals will be treated the
same as a vote "against" the proposal.
CONFIDENTIAL VOTING POLICY
Westfield Financial 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. Our independent tabulating agent will, however, forward any
written comments that you may have to management.
2
REVOKING YOUR PROXY
You may revoke your grant of proxy at any time before it is voted by:
* filing a written revocation of the proxy with the Clerk;
* submitting a signed proxy card bearing a later date; or
* attending and voting in person at the annual meeting, but you
also must file a written revocation with the Clerk of the
annual meeting prior to the voting.
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 Westfield Financial.
SOLICITATION OF PROXIES
Westfield Financial will pay the costs of soliciting proxies from its
shareholders. Directors, officers or employees of Westfield Financial and
Westfield Bank may solicit proxies by mail, telephone and other forms of
communication. Westfield Financial has also hired Georgeson Shareholder
Communications, Inc. to assist in the solicitation of proxies for a fee of
$5,000, plus reimbursement of out of pocket expenses.
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 Westfield Financial, Inc. 2002 Stock Option Plan and restricted
stock awards under the Westfield Financial, Inc. 2002 Recognition and
Retention Plan, being presented for shareholder approval in Proposal 2 and
Proposal 3, respectively. As a result, our directors, officers and
employees have a personal interest in the outcome of the vote on those
proposals.
OBTAINING AN ANNUAL REPORT ON FORM 10-K
If you would like a copy of our Annual Report on Form 10-K and
audited financials for the fiscal year ended December 31, 2001, filed with
the Securities and Exchange Commission ("SEC") on April 1, 2002, we will
send you one (without exhibits) free of charge. Please write to Philip R.
Smith, Clerk, Westfield Financial, Inc., 141 Elm Street, Westfield, MA
01085.
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders of Westfield Financial.
The following table contains common stock ownership information for
persons known to Westfield Financial to "beneficially own" 5% or more of
Westfield Financial's common stock as of May 15, 2002. In general,
beneficial ownership includes those shares that a person has the power to
vote, sell or otherwise dispose of. Beneficial ownership also includes
that number of shares which an individual has the right to acquire within
60 days (such as stock options) after May 15, 2002. Two or more persons
may be considered the beneficial owner of the same shares. Westfield
Financial obtained the information provided in the following table from
filings with the SEC and from Westfield Financial.
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent
-------------- ------------------- -------------------- -------
<s> <c> <c> <c>
Common Stock, par value Westfield Mutual Holding Company 5,607,400(1) 53.0%
$0.01 per share 141 Elm Street
Westfield, MA 01581
<FN>
- --------------------
<F1> As reported by Westfield Mutual Holding Company in a Schedule 13D
dated January 7, 2002, which reported sole voting and dispositive
power over 5,607,400 shares.
</FN>
4
Security Ownership of Management.
The following table shows the number of shares of Westfield
Financial's common stock beneficially owned by each director, each
executive officer named in the "Summary Compensation Table" provided
elsewhere in this proxy statement, and all directors and executive officers
of Westfield Financial as a group, as of May 15, 2002. 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 his or her name. "Voting power" is the power to vote or direct the
voting of shares, and "investment power" is the power to dispose or direct
the disposition of shares.
Position with Amount and Nature of
Westfield Financial and Beneficial Percent of Common
Name Westfield Bank Ownership(1)(2) Stock Outstanding
---- ----------------------- -------------------- -----------------
<s> <c> <c> <c>
Victor J. Carra Executive Vice President and 21,490(3) *
Director
David C. Colton, Jr. Director 2,443(4) *
Robert T. Crowley, Jr. Director 2,500(5) *
James C. Hagen Vice President and 1,648(6) *
Commercial Loan Department
Manager
Thomas J. Howard Director 500(7) *
Michael J. Janosco, Jr. Chief Financial Officer 33,000(8) *
Rebecca S. Kozaczka Vice President and Residential 962 *
Loan Officer
Harry C. Lane Director -- --
William H. McClure Director 3,000(9) *
Mary C. O'Neil Director 500(10) *
Richard C. Placek Director 5,000(11) *
Paul R. Pohl Director 9,996(12) *
Charles E. Sullivan Director 1,500 *
Thomas C. Sullivan Director 30,000 *
Donald A. Williams President, Chief Executive 30,300(13) *
Officer and Director
Other Executive Officers 153,275 1.44%
and ESOP
All Executive Officers
and Directors as a Group
(16 Persons) 296,114(14) 2.8%
(Footnotes to the table are on the next page)
5
<FN>
- --------------------
* Less than one percent of the total outstanding shares of common
stock.
<F1> See "Principal Shareholders of Westfield Financial" for definition of
"beneficial ownership."
<F2> Based on a total of 10,580,000 shares of Westfield Financial's common
stock outstanding as of December 31, 2001.
<F3> Includes 13,370 shares held in Westfield Bank's 401(k) plan, 690
shares held in an individual retirement account ("IRA") for the
benefit of Mr. Carra's spouse, 830 shares held in an IRA for the
benefit of Mr. Carra, and 6,600 shares held jointly with Mr. Carra's
spouse.
<F4> Includes 1,272 shares held in an IRA for the benefit of Mr. Colton's
spouse, 671 shares held in an IRA for the benefit of Mr. Colton, and
500 shares held jointly with Mr. Colton's spouse.
<F5> Includes 2,500 shares held jointly with Mr. Crowley's spouse.
<F6> Includes 1,648 shares held in Westfield Bank's 401(k) Plan.
<F7> Includes 500 shares held by the Thomas J. Howard Revocable trust for
which Mr. Howard and his spouse serve as trustees.
<F8> Includes 20,279 shares held jointly with Mr. Janosco's spouse, 12,721
shares held in an IRA for the benefit of Mr. Janosco.
<F9> Includes 3,000 shares held jointly with Mr. McClure's spouse.
<F10> Includes 500 shares held jointly with Ms. O'Neil's spouse.
<F11> Includes 2,500 shares held by Mr. Placek's spouse.
<F12> Includes 9,996 shares held jointly with Mr. Pohl's spouse.
<F13> Includes 20,000 shares held jointly with Mr. Williams' spouse, 5,100
shares held in an IRA for the benefit of Mr. Williams, and 5,200
shares held in an IRA for the benefit of Mr. Williams' spouse.
<F14> The figures shown for each of the executive officers named in the
table do not include 152,100 shares held in trust pursuant to the
ESOP that have not been allocated as of December 31, 2001 to any
individual's account and as to which each of the executive officers
named in the table share voting powers with the other ESOP
participants. The figure shown for all directors and executive
officers as a group includes 152,100 as to which members of Westfield
Financial's Compensation Committee (consisting of Messrs. Lane, Pohl,
Thomas C. Sullivan and Williams) may be deemed to have sole
investment power, except in limited circumstances, thereby causing
each such member to be deemed a beneficial owner of such shares.
Each of the members of the Compensation Committee disclaims
beneficial ownership of such shares and, accordingly, such shares are
not attributed to the members of the Compensation Committee
individually. See "Benefit Plans-Employee Stock Ownership Plan."
</FN>
6
DISCUSSION OF PROPOSALS RECOMMENDED BY BOARD
_________________________________________________________________
PROPOSAL 1
ELECTION OF DIRECTORS
_________________________________________________________________
General
Nominees Term to Expire
-------- --------------
Robert T. Crowley, Jr. 2005
Harry C. Lane 2005
William H. McClure 2005
Paul R. Pohl 2005
All four nominees are currently serving on Westfield Financial's
Board of Directors. If you elect all the nominees listed above, they will
hold office until the annual meeting in 2005 or until their successors have
been elected and qualified.
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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL OF THE
NOMINEES FOR ELECTION AS DIRECTORS.
Nominees and Continuing Directors
Term Position(s) Held with Director
Nominees Age(1) Expires Westfield Financial Since(2)
-------- ------ ------- --------------------- --------
<s> <c> <c> <c> <c>
Robert T. Crowley, Jr. 53 2002 Director 1999
Harry C. Lane 63 2002 Director 1978
William H. McClure 66 2002 Director 1996
Paul R. Pohl 60 2002 Director 1999
7
Term Position(s) Held with Director
Continuing Directors Age(1) Expires Westfield Financial Since(2)
-------------------- ------ ------- --------------------- --------
<s> <c> <c> <c> <c>
Victor J. Carra 61 2004 Executive Vice President 1995
and Director
David C. Colton, Jr. 58 2003 Director 1980
Thomas J. Howard 69 2004 Director 1979
Mary C. O'Neil 66 2003 Director 1994
Richard C. Placek 62 2004 Director 1979
Charles E. Sullivan 58 2004 Director 1992
Thomas C. Sullivan 68 2004 Director 1989
Donald A. Williams 57 2003 President, Chief Executive 1983
Officer and Director
<FN>
- --------------------
<F1> At December 31, 2001.
<F2> Includes terms served on the Board of Directors of Westfield Bank.
All members of the current Board of Directors of Westfield Financial
have served as directors since the company's inception in 2001.
</FN>
Biographical Information
The principal occupation and business experience of each nominee for
election as director and each continuing director are set forth below.
Nominees
Robert T. Crowley, Jr. is a Certified Public Accountant and a
partner in the accounting firm of Downey, Sweeney, Fitzgerald & Co., P.C.
Mr. Crowley has been a partner with this firm since 1980 and a Certified
Public Accountant since 1979.
Harry C. Lane is the President of John S. Lane & Son, Inc., a quarry
and asphalt company located in Westfield, Massachusetts. Mr. Lane has
served in this capacity since 1986.
William H. McClure is the President of the McClure Insurance Agency,
Inc., a position he has held since 1993.
Paul R. Pohl has served as the President and Owner of Chemi-Graphic,
Inc., a name plate manufacturing company located in Ludlow, Massachusetts.
Mr. Pohl has served in this capacity since 1964.
Continuing Directors
Victor J. Carra has served as the Executive Vice President of
Westfield Bank since 1998 and Westfield Financial since its inception in
2001. Since 1975, Mr. Carra has served in various capacities during his
employment with Westfield Bank.
David C. Colton, Jr. is the owner and operator of The Colton Agency,
Inc., an insurance agency located in Westfield, Massachusetts. Mr. Colton
has served in these capacities since 1966.
8
Thomas J. Howard retired from Westfield Bank in 1994 after having
served as an Assistant Treasurer, Treasurer, Vice President and Executive
Vice President during his employment with Westfield Bank since 1964. Since
his retirement in 1994, Mr. Howard has served as a corporator and trustee
of Westfield Mutual Holding Company and a director of Westfield Bank. He
has served as a director of Westfield Financial since its inception in
2001.
Mary C. O'Neil is the Director of Development and Marketing at Noble
Health Systems, located in Westfield, Massachusetts. Ms. O'Neil has held
this position since 1993. Prior to that, she served as President of T.L.
O'Neil Insurance Agency, Inc.
Richard C. Placek is the President of Commercial Distributing
Company, located in Westfield Massachusetts. Mr. Placek has held this
position since 1985. Prior to that, he served as General Manager.
Charles E. Sullivan is the President of Charles E. Sullivan C.P.A.,
Inc., a public accounting firm located in West Springfield, Massachusetts.
Mr. Sullivan has served in this capacity since 1979.
Thomas C. Sullivan is retired and was formerly the President and
Chief Operating Officer of Sullivan Paper Co., Inc., located in West
Springfield, Massachusetts. He retired from this position in 1998. Mr.
Sullivan presently serves as a director of Sullivan Paper Co., Inc., a
position he has held since 1959. He also serves as President and Director
of Patriot Realty, located in Appleton, Wisconsin and is the Vice President
and Director of George Sullivan Realty, a realty company located in West
Springfield, Massachusetts. Mr. Sullivan has served in these capacities
since 1994 and 1970, respectively.
Donald A. Williams has served as President of Westfield Bank since
1983 and Chief Executive Officer of Westfield Bank since 1987. Mr.
Williams has served in such capacities with Westfield Financial since its
inception in 2001.
Executive Officers Who are Not Directors
Michael J. Janosco, Jr., age 55, has served as the Chief Financial
Officer and Treasurer of Westfield Bank since 1999 and of Westfield
Financial since its inception in 2001. Mr. Janosco was previously a
partner at KPMG Peat Marwick until his retirement in 1994. From 1994 to
1997, he served as the Chief Financial Officer and Treasurer of Primary
Bank, located in Peterborough, New Hampshire.
James C. Hagan, age 40, has served as Vice President and Commercial
Loan Department Manager of Westfield Bank since 1998. From 1994 through
1998, Mr. Hagan was a Commercial Loan Officer at Westfield Bank.
Rebecca S. Kozaczka, age 51, has served as Vice President and
Residential Loan Officer at Westfield Bank since 1989.
Deborah J. McCarthy, age 42, has served as Vice President and
Operations Department Manager since 2000. She has worked for Westfield
Bank in numerous capacities since 1979.
9
INFORMATION ABOUT THE BOARD OF DIRECTORS AND MANAGEMENT
Meetings and Committees of the Board of Directors
Westfield Financial's Board of Directors currently consists of twelve
members. 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 Westfield Financial. Westfield Financial's executive
officers and management oversee our day-to-day operations. 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 key executives and our principal external
advisers (legal counsel, auditors, financial advisors and other
consultants).
Because Westfield Financial was not formed until November 13, 2001,
its Board of Directors met two times during the fiscal year ended December
31, 2001. The Board of Directors of Westfield Bank held 12 regular
meetings and three special meetings during the fiscal year ended December
31, 2001. 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 Westfield Financial has established the
following committees:
<s> <c>
Executive The Executive Committee exercises the powers of the Board of Directors
Committee between board meetings. The Executive Committee consists of directors
Colton, Lane, O'Neil, C. Sullivan and Williams. The Executive Committee
of Westfield Financial did not meet during the 2001 fiscal year; however,
the Executive Committee of Westfield Bank, which serves the same functions
and has the identical make-up, met 43 times during the 2001 fiscal year.
Audit Committee The Audit Committee reviews the annual audit prepared by the independent
accountants, recommends the appointment of accountants and reviews the
work of the internal auditors. The Audit Committee consists of Directors
Crowley, McClure and Placek with Director Placek serving as Chairperson of
the committee. The Audit Committee of Westfield Financial did not meet
during the 2001 fiscal year; however, the Audit Committee of Westfield
Bank, which serves the same functions and has the identical make-up, met
four times during the 2001 fiscal year.
Compensation The Compensation Committee provides advice and recommendation to the Board
Committee of Directors in the areas of employee salaries and benefit programs. The
Compensation Committee consists of directors Lane, Pohl, T. Sullivan and
Williams with Director Lane serving as Chairperson of the committee. The
Compensation Committee of Westfield Financial did not meet during the 2001
fiscal year.
Nominating The Nominating Committee recommends nominees for election as directors and
Committee reviews if any shareholder nominations comply with the notice procedures
set forth in Westfield Financial's Bylaws. Westfield Financial's Bylaws
set forth a
10
procedure for shareholders to nominate directors by notifying the Clerk of
Westfield Financial in writing and meeting other requirements set forth in
the Bylaws.
Directors Colton, Lane, O'Neil, C. Sullivan and Williams currently serve
on the committee. The Nominating Committee generally meets once a year to
make nominations.
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.
During the 2001 fiscal year, the Audit Committee of Westfield
Financial did not meet; however, the Audit Committee of Westfield Bank,
which serves the same function and has the identical make-up, held four
meetings to discuss matters consistent with its duties. The Audit
Committee's membership was comprised of Directors Crowley, McClure and
Placek with Placek serving as Chairperson.
Each member of Westfield Financial's Audit Committee is independent
as defined under the American Stock Exchange listing standards. Westfield
Financial's Audit Committee operates under a written charter approved by
the Board, a copy of which is attached as Appendix A to this proxy
statement.
Westfield Financial's Audit Committee assists the Board by overseeing
the audit coverage and monitoring the accounting, financial reporting, data
processing, regulatory and internal control environments. The primary
duties and responsibilities of the Audit Committee are to: (1) serve as an
independent and objective party to monitor Westfield Financial's financial
reporting process and internal control systems; (2) review and appraise the
audit efforts of Westfield Financial's independent auditors and internal
audit department; (3) review Westfield Financial's quarterly financial
performance, as well as its compliance with laws and regulations; (4)
oversee management's establishment and enforcement of financial policies;
and (5) provide an open avenue of communication among the independent
auditors, financial and senior management, the internal audit department,
and the Board.
Westfield Financial's Audit Committee has reviewed and discussed the
audited financial statements of Westfield Financial for the fiscal year
ended December 31, 2001 with management and Deloitte & Touche LLP,
Westfield Financial's independent auditors. Westfield Financial's Audit
Committee has discussed the matters required by Statement on Auditing
Standards No. 61 (Communication with Audit Committee) with Deloitte &
Touche LLP.
During the fiscal year ended December 31, 2001, Westfield Bank
retained and paid Deloitte & Touche LLP to provide audit and other services
as follows:
<s> <c>
Audit Fees $132,000
All Other Fees (primarily initial public offering and tax matters) $275,000
Westfield Financial's Audit Committee has also received the written
disclosures and the letter from Deloitte & Touche LLP required by
Independence Standards Board Standard No. 1 (entitled "Independence
Discussions with Audit Committees"), has discussed the independence of
Deloitte & Touche LLP and considered whether the provision of non-audit
services by Deloitte & Touche LLP is compatible with maintaining the
auditor's independence.
11
Based on the review and discussions noted above, Westfield
Financial's Audit Committee recommended to the Board that Westfield
Financial's audited financial statements be included in the company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as
filed with the SEC on April 1, 2002.
A representative of Deloitte & Touche LLP is expected to be present
at the annual meeting to respond to appropriate questions and will have the
opportunity to make a statement if she or he so desires.
Westfield Financial, Inc.
Audit Committee
Richard C. Placek, Chairperson
Robert T. Crowley, Jr.
William H. McClure
DIRECTOR COMPENSATION
Meeting Fees. The members of the board of directors of Westfield
Financial are identical to that of Westfield Bank. To date, Westfield Bank
has compensated its directors for their services to the bank. Westfield
Financial has not paid any additional compensation to its directors for
their additional services to the holding company. Westfield Financial
expects to continue this practice until there is a business reason to
establish separate compensation fees.
Westfield Bank's practice has been to pay a fee of $700 to each of
its non-employee directors for attendance at each board meeting. In
addition, each member of the Executive Committee received $1,733 per month
for attendance at meetings, while each member of the Audit Committee
received $400 for each meeting the member attended. Westfield Bank paid
fees totaling $183,000 to its non-employee directors for the year ended
December 31, 2001.
Directors' Deferred Compensation Plan. Westfield Bank has
established the Westfield Bank Directors' Deferred Compensation Plan for
the benefit of non-employee directors. Under the Deferred Compensation
Plan, each non-employee director may make an annual election to defer
receipt of all or a portion of his or her director fees received from
Westfield Financial and Westfield Bank. The deferred amounts are allocated
to a deferral account and credited with interest at an annual rate equal to
the rate on the highest yielding certificate of deposit issued by Westfield
Bank during the year or according to the investment return of other assets
as may be selected by the Compensation Committee of Westfield Bank. The
Deferred Compensation Plan is an unfunded, non-qualified plan that provides
for distribution of the amounts deferred to participants or their
designated beneficiaries upon the occurrence of certain events such as
death, retirement, disability or a change in control of Westfield Financial
or Westfield Bank (as those terms are defined in the Deferred Compensation
Plan).
12
EXECUTIVE OFFICER COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
The Compensation Committee is composed of Directors Lane, Pohl,
Thomas C. Sullivan, and Williams with Director Lane serving as the
Chairperson of the Committee. None of the members of the Compensation
Committee, except Mr. Williams, were officers or employees of Westfield
Financial or its subsidiaries during 2001 or in prior years.
The following Report of Westfield Financial's Compensation Committee
is provided in accordance with the rules and regulations of the SEC.
Pursuant to such rules and regulations, this Report shall not be deemed
"soliciting material," filed with the SEC subject to Regulation 14A or 14C
of the SEC or subject to the liabilities of Section 18 of the Exchange Act.
Compensation Committee Report on Executive Compensation
On December 27, 2001, Westfield Financial, Inc. became the holding
company for Westfield Bank upon completion of a corporate reorganization of
Westfield Mutual Holding Company and related initial stock offering by
Westfield Financial.
The Compensation Committee provides advice and recommendations to the
Board of Directors in the areas of employee salaries and benefit programs.
Compensation of the President and Chief Executive Officer and other
executive officers of Westfield Bank for the fiscal year ended 2001 was
paid by Westfield Bank and determined by the Board of Directors.
The committee reviews the compensation and benefits programs for all
executive officers on an annual basis. Mr. Williams does not participate in
the committee's decisions regarding his own compensation review and
recommendation.
The committee strives to provide a compensation program that assures
both the motivation and retention of the executive officers, proper
alignment with the financial interests of Westfield Financial's
stockholders, and competitiveness with the external marketplace. To this
end, the committee reviewed the compensation practices of a peer group of
companies with similar size and business mix to that of Westfield Bank in
order to develop recommendations for Westfield Bank's executive officers.
Westfield Bank's compensation program for executive officers consists
of: base salary, annual bonuses and long-term incentive awards. These
elements are intended to provide an overall compensation package that is
commensurate with Westfield Bank's financial resources, that is appropriate
to assure that retention of experienced management personnel, and that
aligns their financial interests with those of Westfield Financial's
shareholders.
Base Salaries
Salary levels recommended by the committee are intended to be
competitive with salary levels of the companies in Westfield Bank's peer
groups, commensurate with the executive officers' respective duties and
responsibilities, and reflect the financial performance of Westfield Bank.
13
Chief Executive Officer
The Compensation Committee recognizes the significant additional
efforts required of the President and Chief Executive Officer in bringing
about Westfield Financial's initial public offering.
Based on the foregoing criteria discussed above, for fiscal year
ended December 31, 2001, Mr. Williams' base salary was $290,498 and he was
awarded a bonus of $43,575.
Westfield Financial, Inc.
Compensation Committee
Harry C. Lane, Chairperson
Paul R. Pohl
Thomas C. Sullivan
Donald A. Williams
Compensation Committee Interlocks and Insider Participation.
Except for Mr. Williams, who recused himself from discussions
regarding his compensation, none of the executive officers of Westfield
Financial served as a member of another entity's Board of Directors or as a
member of the Compensation Committee (or other board committee performing
equivalent functions) during 2001, which entity had an executive officer
serving on the Board of Directors or as a member of the Compensation
Committee of Westfield Financial. There are no interlocking relationships
between Westfield Financial and other entities that might affect the
determination of the compensation of our executive officers.
PERFORMANCE GRAPH
A performance graph is not included due to the fact that the
reorganization and stock offering took place on December 27, 2001 and
therefore sufficient data was unavailable at December 31, 2001.
14
SUMMARY COMPENSATION TABLE
Summary Compensation Table. The following table provides information
about the compensation paid to our President and Chief Executive Officer
and to the other most highly compensated executive officers whose annual
salary and bonus for fiscal years 2001 or 2000 was at least $100,000.
Annual Compensation
---------------------------------------
Other Annual
Name and Compensation All Other
Principal Position Year Salary($) Bonus($) ($)(1) Compensation(2)
------------------ ---- --------- -------- ------------ ---------------
<s> <c> <c> <c> <c> <c>
Donald A. Williams, President and Chief 2001 290,498 43,575 - $113,516
Executive Officer 2000 267,616 40,234 - 106,041
Michael J. Janosco, Jr., Chief Financial 2001 152,100 22,815 - 7,173
Officer and Treasurer 2000 139,000 20,850 - 4,344
Victor J. Carra, Executive Vice President 2001 142,116 21,317 - 43,282
2000 128,741 19,584 - 40,236
James C. Hagan, Vice President 2001 113,334 17,000 - 3,772
2000 95,764 14,365 - 2,938
Rebecca S. Kozaczka, Vice President 2001 92,014 13,802 - 3,784
2000 89,147 13,372 - 3,570
<FN>
- --------------------
<F1> Westfield Bank provides its executive officers with non-cash benefits
and perquisites, such as the use of employer-owned or leased
automobiles. Management of Westfield Bank believes that the aggregate
value of these benefits for 2001 did not, in the case of any
executive officer, exceed $50,000 or 10% of the aggregate salary and
annual bonus reported for him in the Summary Compensation Table.
<F2> Includes the following components for fiscal 2001 and 2000,
respectively: (1) employer matching contributions to the Westfield
Bank 401(k) Plan: Mr. Donald A. Williams, $5,100 and $5,100; Mr.
Michael J. Janosco, Jr., $4,563 and $3,210; and Mr. Victor J. Carra,
$4,264 and $3,873; (2) the dollar value of premium payments for life
insurance coverage provided by Westfield Bank: Mr. Donald A.
Williams, $4,428 and $3,964; Mr. Michael J. Janosco, Jr., $2,610 and
$1,850; and Mr. Victor J. Carra, $3,230 and $2,997; and (3) amounts
accrued under deferred compensation agreements: Mr. Donald A.
Williams, $103,988 and $96,977 and Mr. Victor J. Carra, $35,788 and
$33,366. Also includes the following components for fiscal 2001 and
2000, respectively: (1) employer matching contributions to the
Westfield Bank 401(k) Plan: Mr. James C. Hagan, $3,400 and $2,665;
and Ms. Rebecca S. Kozaczka, $2,761 and $2,675; and (2) the dollar
value of premium payments for life insurance coverage provided by
Westfield Bank: Mr. James C. Hagan, $372 and $273; and Ms. Rebecca
S. Kozaczka, $1,023 and $895.
</FN>
Employment Agreements
Westfield Financial and Westfield Bank have jointly entered into
employment agreements with Mr. Donald A. Williams to secure his services as
President and Chief Executive Officer, Mr. Victor J. Carra to secure his
services as Executive Vice President, and Mr. Michael J. Janosco, Jr., to
secure his services as Chief Financial Officer. For purposes of Westfield
Financial's obligations, the employment agreements have rolling three-year
terms beginning on January 1, 2002, which by decision of the executive or
joint decision of Westfield Financial and Westfield Bank may be converted
to a fixed three-year term. For purposes of Westfield Bank's obligations
the employment agreements have fixed terms of three years beginning on
January 1, 2002, and may be renewed annually after a review of the
executive's performance. These agreements provide for minimum annual
salaries of $305,110, $156,338 and $167,310, respectively, discretionary
cash bonuses, and participation on generally applicable terms and
conditions in other compensation and fringe benefit plans. They also
guarantee customary corporate indemnification and errors and omissions
insurance coverage throughout the employment term and for six years after
termination. Westfield Financial and Westfield Bank may terminate each
executive's employment, and each executive may resign, at any time with or
without cause. However, in the event of termination during the term without
cause, they will owe the executive severance benefits generally equal
15
to the value of the cash compensation and fringe benefits that the executive
would have received if he had continued working for an additional three
years. The same severance benefits would be payable if the executive
resigns during the term following: a loss of title, office or membership on
the board of directors; material reduction in duties, functions or
responsibilities; involuntary relocation of the executive's principal place
of employment to a location over 25 miles in distance from Westfield Bank's
principal office in Westfield, Massachusetts and over 25 miles from the
executive's principal residence; or other material breach of contract by
Westfield Financial or Westfield Bank which is not cured within 30 days.
For 60 days after a change in control, each executive may resign for any
reason and collect severance benefits as if he or she had been discharged
without cause. The employment agreements also provide uninsured death and
disability benefits. If Westfield Financial or Westfield 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. Federal tax laws impose
a 20% excise tax, payable by the executive, on excess parachute payments.
Under the employment agreements, Westfield Financial would reimburse the
executive for the amount of this excise tax and would make an additional
gross-up payment so that, after payment of the excise tax and all income
and excise taxes imposed on the reimbursement and gross-up payments, the
executive will retain approximately the same net-after tax amounts under
the employment agreement that he or she would have retained if there were
no 20% excise tax. The effect of this provision is that Westfield
Financial, rather than the executive, bears the financial cost of the
excise tax. Neither Westfield Financial nor Westfield Bank could claim a
federal income tax deduction for an excess parachute payment, excise tax
reimbursement payment or gross-up payment.
Change of Control Agreements
Westfield Bank and Westfield Financial have jointly entered into one-
year change of control agreements with three vice presidents, James C.
Hagan, Rebecca S. Kozaczka and Deborah J. McCarthy. The term of these
agreements is perpetual until Westfield Bank gives notice of non-extension,
at which time the term is fixed for one year. Generally, Westfield Bank may
terminate the employment of any officer covered by these agreements, with
or without cause, at any time prior to a change of control without
obligation for severance benefits. However, if Westfield Bank or Westfield
Financial signs a merger or other business combination agreement, or if a
third party makes a tender offer or initiates a proxy contest, it could not
terminate an officer's employment without cause without liability for
severance benefits. The severance benefits would generally be equal to the
value of the cash compensation and fringe benefits that the officer would
have received if he or she had continued working for an additional one
year. Westfield Bank would pay the same severance benefits if the officer
resigns after a change of control following a loss of title, office or
membership on the Board of Directors, material reduction in duties,
functions or responsibilities, involuntary relocation of his or her
principal place of employment to a location over 25 miles from Westfield
Bank's principal office on the day before the change of control and over 25
miles from the officer's principal residence or other material breach of
contract which is not cured within 30 days. These agreements also provide
uninsured death and disability benefits. If Westfield Bank or Westfield
Financial 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 change of control
agreements might constitute an "excess parachute payment" under current
federal tax laws. Any excess parachute payment would be subject to a
federal excise tax payable by the officer and would be non- deductible by
Westfield Bank and Westfield Financial for federal income tax purposes. The
change of control agreements do not provide a tax indemnity.
16
BENEFIT PLANS
Pension Plan. Westfield Bank maintains a pension plan for its
eligible employees. Generally, employees of Westfield Bank begin
participation in the pension plan once they reach age 21 and complete 1,000
hours of service in a consecutive 12-month period. Participants in the
pension plan become vested in their accrued benefit under the pension plan
upon the earlier of the: (1) attainment of their "normal retirement age"
(as described in the pension plan) while employed at Westfield Bank; (2)
completion of five vesting years of service with Westfield Bank; or (3)
death or disability of the participant. Participants are generally credited
with a vesting year of service for each year in which they complete at
least 1,000 hours of service. A participant's normal benefit under the
pension plan equals the sum of (1) 1.25% of the participant's average
compensation (generally defined as the average taxable compensation for the
three consecutive limitation years that produce the highest average) by the
number of years of service the participant has under the plan up to 25
years of service, plus (2) 0.6% of the excess of the participant's average
compensation over the participant's covered compensation (the social
security taxable wage base for the 35 years ending in the year the
participant becomes eligible for non-reduced social security benefits) for
each year of service under the plan up to 25 years of service. Participants
may retire at or after age 65 and receive their full benefit under the
plan. Participants may also retire early at age 62 or at age 55 with ten
years of service or at age 50 with 15 years of service under the plan and
receive a reduced retirement benefit. Pension benefits are payable in equal
monthly installments for life, or for married persons, as a joint survivor
annuity over the lives of the participant and spouse. Participants may also
elect a lump sum payment with the consent of their spouse. If a participant
dies while employed by Westfield Bank, a death benefit will be payable to
either his or her spouse or estate, or named beneficiary, equal to the
entire amount of the participant's accrued benefit in the plan. The
following table indicates the annual employer-provided retirement benefits
that would be payable under the pension plan upon retirement at age 65 to a
participant electing to receive his pension benefit in the standard form of
benefit, assuming various specified levels of plan compensation and various
specified years of credited service. Under the Internal Revenue Code,
maximum annual benefits under the pension plan are limited to $140,000 per
year and annual compensation for benefit calculation purposes is limited to
$170,000 per year for the 2001 calendar year.
Years of Service
Average Annual -------------------------------------------------------
Compensation 10 15 20 25 30
- -------------- -- -- -- -- --
<s> <c> <c> <c> <c> <c>
$100,000 $16,394 $24,591 $32,788 $40,985 $40,985
125,000 21,019 31,529 42,038 52,548 52,548
150,000 25,644 38,466 51,288 64,110 64,110
170,000 29,344 44,016 58,688 73,360 73,360
200,000 29,344 44,016 58,688 73,360 73,360
300,000 29,344 44,016 58,688 73,360 73,360
400,000 29,344 44,016 58,688 73,360 73,360
The benefits listed on the table above for the pension plan are not subject
to a reduction for Social Security benefits or any other offset amount. As of
December 31, 2001, Messrs. Williams, Janosco, Carra, Hagan and Ms. Kozaczka
had 28, 2, 25, 6 and 11 years of service, respectively, for purposes of the
pension plan.
401(k) Plan. Westfield Bank has adopted the SBERA 401(k) Plan, a tax-
qualified defined contribution plan, for substantially all employees of
Westfield Bank who have attained age 21 and completed at least three months
of service. Eligible employees may contribute from 1% to 15% of annual
compensation to the plan on a pre-tax basis each year, subject to
limitations of the Internal Revenue Code
17
(for 2001 the limit was $10,500). Westfield Bank makes a matching
contribution to the plan equal to 50% of the first six percent of annual
compensation contributed to the plan on a pre-tax basis by a participant
after such participant has completed one year of service. This plan has an
individual account for each participant's contributions and allows each
participant to direct the investment of his or her account. One permitted
investment is the common stock of Westfield Financial.
Employee Stock Ownership Plan (ESOP). This plan is a tax-qualified
plan that covers substantially all employees who have completed 1,000 hours
of service in a 12 month period and attained age 21. The ESOP took effect
at the completion of the reorganization. Westfield Financial has lent this
plan enough money to purchase up to 8% of the shares of the total number of
shares held by persons other than Westfield Mutual Holding Company. The
plan intends to purchase all of these shares in private transactions or on
the open market from time to time to the extent that shares are available
for purchase on reasonable terms. Although contributions to this plan will
be discretionary, Westfield Bank intends to contribute enough money each
year to make the required principal and interest payments on the loan from
Westfield Financial. This loan is for a term of 30 years and calls for
level annual payments of principal and interest. The plan pledges the
shares it purchases as collateral for the loan and holds them in a suspense
account. The plan will not distribute the pledged shares right away.
Instead, it will release a portion of the pledged shares annually. Assuming
the plan repays its loan as scheduled over a 30-year term, we expect that
1/30th of the shares will be released annually in years 2002 through 2032.
The plan will allocate the shares released each year among the accounts of
participants in proportion to their compensation for the year. For example,
if a participant's compensation for a year represents 1% of the total
compensation of all participants for the year, the plan would allocate to
that participant 1% of the shares released for the year, subject to certain
legal limitations imposed on tax qualified plans. Participants direct the
voting of shares allocated to their accounts. Shares in the suspense
account will usually be voted by the plan trustee in a way that mirrors the
votes which participants cast for shares in their individual accounts. As
of December 31, 2001, the plan had not purchased any shares of common
stock. 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. Westfield Financial has also established
the Benefit Restoration Plan of Westfield Financial in order to provide
restorative payments to executives who are prevented from receiving the
full benefits contemplated by the ESOP's benefit formula as well as the
401(k) Plan's benefit formula. The restorative payments consist of payments
in lieu of shares that cannot be allocated to participants under the ESOP
due to the legal limitations imposed on tax-qualified plans and, in the
case of participants who retire before the repayment in full of the ESOP's
loan, payments in lieu of the shares that would have been allocated if
employment had continued through the full term of the loan. The restorative
payments also consist of amounts unable to be provided under the 401(k)
Plan due to certain legal limitations imposed on tax-qualified plans.
Deferred Compensation Agreements. Westfield Bank has also entered
into deferred compensation agreements with each of Donald A. Williams and
Victor J. Carra. Under these agreements, each executive is guaranteed
monthly payments equal to 70% of his monthly salary after retirement for
the remainder of the executive's life or 240 months, whichever is greater.
The amounts of these payments is reduced by any payments received from the
pension plan and are also reduced by Social Security payments attributable
to contributions made by Westfield Bank. These agreements also provide for
payments upon the death or disability of the executive that are equal in
amount to the payments that would have been payable to the executive upon
retirement with such payments being made for a period of 120 months.
18
LIMITATIONS ON FEDERAL TAX DEDUCTIONS FOR EXECUTIVE OFFICER COMPENSATION
As a private entity, Westfield Bank had been subject to federal tax
rules which permitted it to claim a federal income tax deduction for a
reasonable allowance for salaries or other compensation for personal
services actually rendered. Because Westfield Bank is now a subsidiary of
a public company, federal tax laws may limit this deduction in future years
to $1 million each tax year for each executive officer named in the summary
compensation table in Westfield Financial's proxy statement for that year.
This limit will not apply to non-taxable compensation under various broad-
based retirement and fringe benefit plans, to compensation that is
"qualified performance-based compensation" under applicable law or to
compensation that is paid in satisfaction of commitments that arose before
the conversion. Westfield Financial and Westfield Bank expect that the
Compensation Committee will take this deduction limitation into account
with other relevant factors in establishing future compensation levels of
their executive officers and in setting the terms of compensation programs.
Currently, none of our executive officers receive annual compensation
expected to exceed this limit. However, there is no assurance that all
compensation paid to our executive officers will be deductible for federal
income tax purposes. To the extent that compensation paid to any executive
officer is not deductible, the net after-tax cost of providing the
compensation will be higher and the net after-tax earnings of Westfield
Financial and Westfield Bank will be reduced.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Westfield Bank makes loans to its executive officers, employees and
directors. These loans are made in the ordinary course of business and on
the same terms and conditions as those of comparable transactions with the
general public prevailing at the time, in accordance with our underwriting
guidelines, and do not involve more than the normal risk of collectibility
or present other unfavorable features. At December 31, 2001, loans to non-
employee directors and their associates totaled $1.2 million.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Westfield Financial's directors and executive officers, and
persons who own more than 10% of Westfield Financial's common stock, to
report to the Securities and Exchange Commission their initial ownership of
Westfield Financial's common stock and any subsequent changes in that
ownership. Specific due dates for these reports have been established by
the Securities and Exchange Commission and Westfield Financial is required
to disclose in this proxy statement any late filings or failures to file.
Based solely on its review of the copies of such reports furnished to
Westfield Financial and written representations that no other reports were
required during the fiscal year ended December 31, 2001, all Section 16(a)
filing requirements applicable to Westfield Financial's executive officers
and directors during fiscal 2001 were met.
19
_________________________________________________________________
PROPOSAL 2
ADOPTION OF THE WESTFIELD FINANCIAL, INC.
2002 STOCK OPTION PLAN
_________________________________________________________________
General Plan Information
The Board of Directors of Westfield Financial has adopted the
Westfield Financial, Inc. 2002 Stock Option Plan, subject to approval by
the holders of a majority of our outstanding shares of common stock that
are not owned by Westfield Mutual Holding Company. 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 Appendix B and is incorporated by reference
into this proposal.
Why We Are Asking for Shareholder Approval
We are asking for shareholders to approve the Westfield Financial,
Inc. 2002 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
packages would link the financial interest 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 the reorganization by Westfield Mutual Holding Company 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
the issued and outstanding shares of our common stock that are not owned by
Westfield Mutual Holding Company. 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 Westfield Financial and its shareholders, to provide certain key
officers, directors and employees of Westfield Financial 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 Westfield Financial.
20
Description of the Plan
Administration. The plan will be administered by those members of
the Compensation Committee of the Board who are "disinterested directors"
under the federal tax and securities laws. In general, disinterested
directors are directors who (1) are not, and never were, executive officers
or employees of Westfield Financial or Westfield Bank; and (2) do not
receive material compensation from Westfield Financial or Westfield Bank
except for service as a director. There must be at least two disinterested
directors on the Compensation Committee and this committee has broad
discretionary powers.
Stock Subject to the 2002 Stock Option Plan. Westfield Financial has
reserved 497,260 shares of common stock of Westfield Financial for issuance
upon the exercise of options under the plan. Such shares may be authorized
and unissued shares or shares previously issued that Westfield Financial
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 May 15, 2002, the aggregate fair market value of the shares reserved for
issuance under the plan was $7,896,489 based on the latest closing sales
price per share of common stock of $15.88 on the American Stock Exchange on
May 15, 2002.
Eligibility. The committee may select people who receive stock
option grants. Any employee of Westfield Financial, Westfield Bank or any
affiliate approved by the Board of Directors may be selected to receive
option grants. As of May 15, 2002, the committee has not selected the
employees and directors who will be eligible to receive option grants.
Terms and Conditions of Options. The 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 124,315 shares
to any one employee until December 28, 2002. In addition, it
may not grant options to purchase more than 24,863 shares to
any one non-employee director or options to purchase more than
149,178 shares of Westfield Financial's common stock to all
outside directors in the aggregate until December 28, 2002.
* It may not grant a stock option with a purchase price that is
less than the fair market value of a share of Westfield
Financial's common stock on the date it grants the stock
option.
* It may not grant a stock option with a term that is longer than
ten 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 for options granted
prior to December 28, 2002, with acceleration permitted only in
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 Westfield
Financial 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 committee authorizes. Options may be transferred prior to exercise
only to certain family members, certain non-profit organizations and on the
death of the option holder.
21
Mergers and Reorganizations; Adjustments for Stock 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 Westfield Financial 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 Westfield Financial is not the surviving entity,
outstanding options may be canceled upon 30 days' written notice to the
option holder so long as the option holder receives payment determined by
Westfield Financial's Board of Directors 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 Westfield Financial 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 result in income
that may increase taxable income, but will create an item of adjustment
that may affect liability for alternative minimum tax. 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 options, 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.
22
Federal Tax Consequences for Westfield Financial. When a non-
qualified stock option is exercised, Westfield Financial 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. No
executive of Westfield Financial or Westfield Bank currently receives
compensation that would be rendered nondeductible by this limitation.
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 WESTFIELD FINANCIAL, INC. 2002 STOCK OPTION PLAN.
23
_________________________________________________________________
PROPOSAL 3
ADOPTION OF THE WESTFIELD FINANCIAL, INC.
2002 RECOGNITION AND RETENTION PLAN
_________________________________________________________________
General Plan Information
The Board of Directors of Westfield Financial has adopted the
Westfield Financial, Inc. 2002 Recognition and Retention Plan, subject to
approval by a majority of the holders of the outstanding shares of our
common stock that are not held by Westfield Mutual Holding Company. 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 Appendix C and is incorporated by reference into this proposal.
Why We Are Asking for Shareholder Approval
We are asking for shareholders to approve the Westfield Financial,
Inc. 2002 Recognition and Retention Plan so that we will be able to grant
stock awards to certain key officers, employees and directors. 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, officers
and employees. 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 packages would link the
financial interest of our directors, officers and employees 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 the reorganization by Westfield Mutual Holding Company and
our initial public offering. These regulations permit us to implement a
stock award 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 Westfield Mutual Holding
Company. 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, directors and employees 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
Westfield Financial and its shareholders, to provide certain key officers,
employees and directors of Westfield Financial 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 Westfield Financial.
24
Description of the Recognition and Retention Plan
Administration. The plan will be administered by those members of the
Compensation Committee of the Board 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
Westfield Financial or Westfield Bank; and (2) do not receive material
compensation from Westfield Financial or Westfield Bank except for service
as a director. There must be at least two disinterested directors on the
Compensation Committee and this committee has broad discretionary powers.
Stock Subject to the Recognition and Retention Plan. Westfield
Financial will establish a trust and will contribute certain amounts of
money or property to be determined by the Board of Directors, 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 fund will purchase common stock on the open
market or in private transactions and that the trust will not purchase
previously authorized but unissued shares from Westfield Financial. The
trust is not authorized to purchase more than 198,904 shares of common
stock of Westfield Financial and cannot purchase more than this number. As
of May 15, 2002, the aggregate fair market value of the shares to be
purchased under this plan was $3,158,596 based on the closing sales price
per share of Westfield Financial's common stock of $15.88 on the American
Stock Exchange on May 15, 2002.
Eligibility. The committee selects the people who receive restricted
stock awards under the plan. Any employee of Westfield Financial,
Westfield Bank or any affiliate approved by the Board of Directors may be
selected to receive stock awards. As May 15, 2002, the committee had not
selected the employees and directors who will receive stock awards.
Terms and Conditions of Awards. The committee may, in its
discretion, grant awards of restricted stock to eligible individuals, up to
a maximum of 198,904 shares. The 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 prior to December 28,
2002 for more than 49,726 shares of Westfield Financial's
common stock to any one officer or employee, more than 9,945
shares of common stock to any one non-employee director or more
than 59,671 shares of common stock to all non-employee
directors in the aggregate.
* It may not grant restricted stock awards that vest more rapidly
than at the rate of 20% per year measured from the date we
receive shareholder approval for the plan prior to December 28,
2002, 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 fund to
the award recipient. While the shares are held in the fund, the award
recipient receives dividends and exercises voting rights. In the
alternative, the 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 awards to individual officers and directors
and to non-employee directors in the aggregate, and
25
any outstanding awards will be adjusted to reflect any merger, consolidation
or business reorganization in which Westfield Financial 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 Westfield Financial is not the
surviving entity, the funding agent will hold any money, stock, securities or
other property received in the 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 of Westfield Financial has the authority to suspend or
terminate the plan in whole or in part at any time by giving written notice
to the committee, but the plan may not be terminated while there are
outstanding awards that may vest in the future. Upon the termination of
the plan, the trustee will make distributions from the trust as directed by
the committee and will return any remaining assets of the trust to
Westfield Financial.
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 Westfield Financial 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 Westfield Financial 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.
Westfield Financial 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. Westfield Financial will be allowed
to claim a deduction for compensation expense for this amount as well.
Section 162(m) of the Internal Revenue Code limits Westfield
Financial '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. No
executive of Westfield Financial currently receives compensation subject to
this limitation. We expect that the committee will take these deduction
limits into account in setting the size and the terms and conditions of
restricted stock awards. However, the 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 WESTFIELD FINANCIAL, INC. 2002 RECOGNITION AND RETENTION PLAN.
26
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP served as independent public accountants for
the purpose of auditing Westfield Financial's consolidated financial
statements for the year ended December 31, 2001 and will continue to serve
as Westfield Financial's independent accountants for the year ended
December 31, 2002. A representative of Deloitte & Touche LLP is expected
to be present at the annual meeting to answer questions concerning the
financial statements presented and will be permitted to make a statement at
the meeting.
ADDITIONAL INFORMATION
Information About Shareholder Proposals
If you wish to submit proposals to be included in our proxy statement
for the 2003 annual meeting of Westfield Financial shareholders, we must
receive them on or before January 24, 2003, pursuant to the proxy
soliciting regulations of the SEC. Nothing in this paragraph shall be
deemed to require Westfield Financial to include in its proxy statement and
proxy card for such meeting any shareholder proposal which does not meet
the requirements of the SEC in effect at the time. Any such proposal will
be subject to 17 C.F.R. [SECTION]240.14a-8 of the Rules and Regulations
promulgated by the SEC under the Exchange Act.
In addition, under Westfield Financial's Bylaws, if you wish to
nominate a director or bring other business before an annual meeting (which
is not included in the proxy statement for the 2003 Annual Meeting), the
following criteria must be met: (i) you must be a shareholder of record;
(ii) you must have given timely notice in writing to the Clerk of Westfield
Financial; and (iii) your notice must contain specific information required
in our Bylaws. To be considered timely for inclusion in our 2003 Annual
Meeting, we must receive your advance written notice of business or
nominations to the Board of Directors no later than 120 days preceding the
anniversary date of this year's annual meeting. For example, if we hold
this year's annual meeting on June 28, 2002, we must receive your advance
notice of business or nomination no later than February 28, 2003, provided
however, that in the event less than 130 days notice or prior public
disclosure of the meeting is given or made, we must receive your notice by
the close of business on the tenth (10th) day following the date on which
notice of the 2003 Annual Meeting is first given to shareholders as
provided in the Bylaws.
By Order of the Board of Directors,
/s/ Philip R. Smith
Philip R. Smith
Clerk
Westfield, Massachusetts
May 24, 2002
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.
27
APPENDIX A
----------
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
WESTFIELD FINANCIAL, INC.
CHARTER
I. STATEMENT OF POLICY
The primary function of the Audit Committee of the Board of Directors
of Westfield Financial, 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
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 meets
The American Stock Exchange's definition of independent director. 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 member 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 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 Chairperson 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
significant 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.
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 Articles of Organization or bylaws or the Board of Directors:
A-1
1. The Audit Committee shall review and reassess this charter annually
and recommend any proposed changes to the Board for approval. The
charter is to be published as an appendix to the proxy statement
every three years.
2. The Audit Committee shall nominate, select, evaluate and, when
appropriate, recommend the replacement of the outside auditor,
subject to the approval of the Board of Directors, who is ultimately
accountable to the Audit Committee and Board of Directors as
representatives of the Company's shareholders. As part of the audit
process, the Audit Committee shall meet with the outside auditors to
discuss and determine the scope of the audit. 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.
3. 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.
4. 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.
5. 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.
6. 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 reviewed 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.
7. 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.
8. The Audit Committee shall meet with the outside auditors and
management to review the Company's quarterly reports on Form 10-Q and
annual report on Form 10-K and discuss any significant adjustments,
management judgments and accounting estimates and any significant new
accounting policies before such forms are filed with the U.S.
Securities and Exchange Commission.
A-2
9. 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.
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 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.
12. The Audit Committee shall receive reports from the Company's internal
auditor, which include a summary of findings from completed internal
audits and a progress report on the internal audit plan, together
with explanations for any deviations from the original plan.
13. 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.
14. The Audit Committee shall review and concur in the appointment,
replacement, reassignment or dismissal of the Company's internal
auditor.
15. The Audit Committee shall determine whether the internal audit
function may be performed by a staff internal auditor or may be
outsourced to a third party, as deemed appropriate.
16. 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.
17. 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).
18. The Audit Committee shall review and resolve any identifiable
material weaknesses in the Company's system of internal controls.
19. 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.
20. The Audit Committee shall prepare any report required by the rules of
the U.S. Securities and Exchange Commission to be included in the
Company's annual proxy statement.
A-3
APPENDIX B
Westfield Financial, Inc.
2002 Stock Option Plan
______________________________
Effective as of June 28, 2002
B-1
TABLE OF CONTENTS Page
----
Article I
Purpose
Section 1.1 General Purpose of the Plan B-5
Article II
Definitions
Section 2.1 Bank B-5
Section 2.2 Board B-5
Section 2.3 Change in Control B-5
Section 2.4 Code B-7
Section 2.5 Committee B-7
Section 2.6 Company B-7
Section 2.7 Disability B-7
Section 2.8 Disinterested Board Member B-7
Section 2.9 Effective Date B-7
Section 2.10 Eligible Director B-7
Section 2.11 Eligible Employee B-7
Section 2.12 Employer B-8
Section 2.13 Exchange Act B-8
Section 2.14 Exercise Price B-8
Section 2.15 Fair Market Value B-8
Section 2.16 Family Member B-8
Section 2.17 FDIC Regulations B-8
Section 2.18 Incentive Stock Option B-8
Section 2.19 Non-Profit Organization B-8
Section 2.20 Non-Qualified Stock Option B-9
Section 2.21 Option B-9
Section 2.22 Option Period B-9
Section 2.23 Person B-9
Section 2.24 Plan B-9
Section 2.25 Retirement B-9
Section 2.26 Share B-9
Section 2.27 Termination for Cause B-9
Article III
Available Shares
Section 3.1 Available Shares B-10
B-2
TABLE OF CONTENTS Page
----
Article IV
Administration
Section 4.1 Committee B-11
Section 4.2 Committee Action B-11
Section 4.3 Committee Responsibilities B-11
Article V
Stock Option Grants
Section 5.1 Grant of Options B-12
Section 5.2 Size of Option B-12
Section 5.3 Exercise Price B-12
Section 5.4 Option Period B-13
Section 5.5 Required Regulatory Provisions B-13
Section 5.6 Additional Restrictions on Incentive Stock Options B-15
Article VI
Options - In General
Section 6.1 Method of Exercise B-16
Section 6.2 Limitations on Options B-17
Article VII
Amendment and Termination
Section 7.1 Termination B-18
Section 7.2 Amendment B-18
Section 7.3 Adjustments in the Event of a Business Reorganization B-18
Article VIII
Miscellaneous
Section 8.1 Status as an Employee Benefit Plan B-19
Section 8.2 No Right to Continued Employment B-19
Section 8.3 Construction of Language B-19
Section 8.4 Governing Law B-20
Section 8.5 Headings B-20
B-3
TABLE OF CONTENTS Page
----
Section 8.6 Non-Alienation of Benefits B-20
Section 8.7 Taxes B-20
Section 8.8 Notices B-20
Section 8.9 Required Regulatory Provisions B-21
Section 8.10 Approval of Shareholders B-21
Article IX
Additional Provisions Subject to Further Shareholder Approval
Section 9.1 Accelerated Vesting Upon Retirement or Change
in Control B-21
Section 9.2 No Effect Prior to Shareholder Approval B-21
B-4
Westfield Financial, Inc. 2002 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
Westfield Financial, Inc., to provide eligible directors, certain key
officers and employees of Westfield Financial, 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 Westfield Financial, 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 Westfield 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,
B-5
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 provided, however, that this section
2.3(d) shall only apply if the Company is not majority owned by
Westfield Mutual Holding 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 2.3(a), (b), (c) or (d); or
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(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" therein.
In no event, however, shall a Change of Control be deemed to have occurred
as a result of (i) 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 or (ii) the conversion of Westfield Mutual
Holding Company to a stock form company and the issuance of additional
shares of the Company in connection therewith. 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 Westfield Financial, 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 June 28, 2002.
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.
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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.
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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 Westfield Financial, Inc. 2002 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
share, of Westfield Financial, 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.
B-9
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) 497,260 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 149,178 Shares
(subject to adjustment pursuant to section 7.3) may be granted to Eligible
Directors, and Options to purchase a maximum of 24,863 Shares (subject to
adjustment pursuant to section 7.3) may be granted to any one Eligible
Director; provided, however, that the limitations of this section 3.1(b)
shall only apply to Options granted prior to December 28, 2002.
(c) Options to purchase an aggregate maximum of 497,260 Shares
(subject to adjustment pursuant to section 7.3) may be granted to Eligible
Employees, and Options to purchase a maximum of 124,315 Shares (subject to
adjustment pursuant to section 7.3) may be granted to any one Eligible
Employee; provided, however, that the limitations of this section 3.1(c)
shall only apply to Options granted prior to December 28, 2002.
(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.
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Article IV
----------
Administration
--------------
Section 4.1 Committee.
The Plan shall be administered by the members of the Compensation
Committee of Westfield Financial, 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.
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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.
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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) each Option granted to an Eligible Employee or Eligible
Director prior to December 28, 2002 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;
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(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.
Notwithstanding anything in the Plan to the contrary, section 5.5(b)
shall apply in determining the exercisability of Options granted
after December 27, 2002 only if no different vesting schedule is
established by the Committee and specified in the agreement
evidencing the outstanding Option.
(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
B-14
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:
B-15
(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
B-16
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. The Committee shall have no
obligation to allow, and may in its sole and absolute discretion decline to
allow, the use of any exercise method described in section 6.1(b)(i), (ii)
or (iii) in any one or more case or in all cases.
(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
B-17
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
B-18
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.
B-19
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 Massachusetts and 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:
Westfield Financial, Inc.
141 Elm Street
Westfield, MA 01085
Attention: Clerk
B-20
(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 prior to December 28,
2002 unless approved by the holders of a majority of the total votes
eligible to be cast at any duly called annual or special meeting of the
Company (excluding those votes eligible to be cast by Westfield Mutual
Holding Company), in which case the Plan shall be effective as of the later
of (a) June 27, 2002 or (b) the date of such approval. If not effective
prior to such one year anniversary, the Plan shall be effective on such
later date as is specified by the Board. 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 9.2: (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 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 (excluding those Shares held by Westfield Mutual
Holding Company) represented in person or by proxy and entitled to vote at
a meeting of shareholders duly called and held after December 27, 2002.
B-21
APPENDIX C
WESTFIELD FINANCIAL, INC.
2002 RECOGNITION AND RETENTION PLAN
______________________________
Effective as of June 28, 2002
C-1
TABLE OF CONTENTS Page
----
Article I
Purpose
Section 1.1 General Purpose of the Plan C-5
Article II
Definitions
Section 2.1 Award C-5
Section 2.2 Award Notice C-5
Section 2.3 Bank C-5
Section 2.4 Beneficiary C-5
Section 2.5 Board C-5
Section 2.6 Change of Control C-6
Section 2.7 Code C-7
Section 2.8 Committee C-7
Section 2.9 Company C-7
Section 2.10 Disability C-7
Section 2.11 Disinterested Board Member C-7
Section 2.12 Effective Date C-8
Section 2.13 Eligible Director C-8
Section 2.14 Eligible Employee C-8
Section 2.15 Employer C-8
Section 2.16 Exchange Act C-8
Section 2.17 FDIC Regulations C-8
Section 2.18 Fund C-8
Section 2.19 Funding Agent C-8
Section 2.20 Funding Agreement C-8
Section 2.21 Person C-9
Section 2.22 Plan C-9
Section 2.23 Retirement C-9
Section 2.24 Share C-9
Article III
Shares Available Under Plan
Section 3.1 Shares Available Under Plan C-9
C-2
TABLE OF CONTENTS Page
----
Article IV
Administration
Section 4.1 Committee C-10
Section 4.2 Committee Action C-10
Section 4.3 Committee Responsibilities C-10
Article V
The Fund
Section 5.1 Contributions C-11
Section 5.2 The Fund C-11
Section 5.3 Investments C-11
Article VI
Awards
Section 6.1 To Eligible Directors C-11
Section 6.2 To Eligible Employees C-12
Section 6.3 Awards in General C-12
Section 6.4 Share Allocations C-12
Section 6.5 Dividend Rights C-12
Section 6.6 Voting Rights C-13
Section 6.7 Tender Offers C-13
Section 6.8 Limitations on Awards C-14
Article VII
Vesting
Section 7.1 Vesting of Awards C-15
Section 7.2 Designation of Beneficiary C-15
Section 7.3 Manner of Distribution C-15
Section 7.4 Taxes C-16
C-3
TABLE OF CONTENTS Page
----
Article VIII
Amendment and Termination
Section 8.1 Termination C-17
Section 8.2 Amendment C-17
Section 8.3 Adjustments in the Event of a Business Reorganization C-17
Article IX
Miscellaneous
Section 9.1 Status as an Employee Benefit Plan C-18
Section 9.2 No Right to Continued Employment C-18
Section 9.3 Construction of Language C-18
Section 9.4 Governing Law C-18
Section 9.5 Headings C-18
Section 9.6 Non-Alienation of Benefits C-19
Section 9.7 Notices C-19
Section 9.8 Required Regulatory Provisions C-19
Section 9.9 Approval of Shareholders C-19
Article X
Additional Provisions Subject to Further Shareholder Approval
Section 10.1 Accelerated Vesting Upon Retirement or Change
in Control C-20
Section 10.2 No Effect Prior to Stockholder Approval C-20
C-4
Westfield Financial, Inc.
-------------------------
2002 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
Westfield Financial, Inc. and its affiliated companies and to provide
eligible directors, certain key officers and employees of Westfield
Financial, 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 Westfield Financial, 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 Westfield 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.
C-5
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
C-6
(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; provided, however, that this section
2.6(d) shall only apply if the Company is not majority owned by
Westfield Mutual Holding 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 (i) 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 or (ii) the conversion of Westfield Mutual
Holding Company to a stock form company and the issuance of additional
shares of the Company in connection therewith. 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 Westfield Financial, Inc., a corporation
organized and existing under the laws of the State 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,
C-7
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 June 28, 2002.
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 Fund means the corpus (consisting of contributions paid
over to the Funding Agent, and investments thereof), and all earnings,
appreciations or additions thereof and thereto, held by the Funding Agent
under the Funding Agreement in accordance with the Plan, less any
depreciation thereof and any payments made therefrom pursuant to the Plan.
Section 2.19 Funding Agent means the trustee or custodian of the
Fund from time to time in office. The Funding Agent shall serve as Funding
Agent until it is removed or resigns from office and is replaced by a
successor Funding Agent or Funding Agents appointed by Westfield Financial,
Inc.
Section 2.20 Funding Agreement means the agreement between Westfield
Financial, Inc. and the Funding Agent therein named or its successor
pursuant to which the Fund shall be held in trust or custody.
C-8
Section 2.21 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 2.22 Plan means the Westfield Financial, Inc. 2002
Recognition and Retention Plan as amended from time to time.
Section 2.23 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 2.24 Share means a share of common stock of Westfield
Financial, Inc., par value $.01 per share.
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 198,904, subject to adjustment pursuant to section 8.3.
(b) An aggregate maximum of 59,671 Shares (subject to adjustment
pursuant to section 8.3) may be granted as Awards to Eligible Directors,
and a maximum of 9,945 Shares (subject to adjustment pursuant to section
8.3) may be granted as Awards to any one Eligible Director; provided,
however, that the limitations of this section 3.1(b) shall only apply to
Awards granted prior to December 28, 2002.
(c) An aggregate maximum of 198,904 Shares (subject to adjustment
pursuant to section 8.3) may be granted as Awards to Eligible Employees,
and a maximum of 49,726 Shares (subject to adjustment pursuant to section
8.3) may be granted as Awards to any one Eligible Employee; provided,
however, that the limitations of this section 3.1(c) shall only apply to
Awards granted prior to December 28, 2002.
C-9
Article IV
----------
Administration
--------------
Section 4.1 Committee.
The Plan shall be administered by the members of the Compensation
Committee of Westfield Financial, 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.
C-10
Article V
---------
The Fund
--------
Section 5.1 Contributions.
Westfield Financial, Inc. shall contribute, or cause to be
contributed, to the Fund, 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 Fund.
The Fund shall be held and invested under the Funding Agreement with
the Funding Agent. The provisions of the Funding Agreement shall include
provisions conferring powers on the Funding Agent 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 Funding Agent
at any time in office.
Section 5.3 Investments.
The Funding Agent shall invest the Trust Fund in Shares and in such
other investments as may be permitted under the Funding 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 Fund be used to purchase more than 198,904 Shares (subject to
adjustment pursuant to section 8.3). Notwithstanding the immediately
preceding sentence, the Funding Agent may temporarily invest the Fund in
short-term obligations of, or guaranteed by, the U.S. Government or an
agency thereof, or the Funding Agent may retain the Trust Fund uninvested
or may sell assets of the 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 Fund and not allocated in connection with
other Awards.
C-11
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 Funding Agent 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 Funding Agent 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 Funding Agent.
(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
C-12
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 Funding Agent 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
Funding Agent 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 Fund contains Shares that are not
allocated in connection with an Award, all voting rights appurtenant to
such Shares shall be exercised by the Funding Agent 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 Westfield Financial, 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 Funding Agent 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 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 Funding
Agent 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-13
(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 later of
the date on which the Plan is approved by shareholders pursuant to section
9.9 or June 27, 2002;
(b) No Award granted under the Plan prior to December 28, 2002
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 date on
which the Plan is approved by shareholders pursuant to section
9.9, 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
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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 twenty (20)
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 twenty (20) 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 twenty (20) 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 twenty (20)
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 twenty (20) 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 Funding Agent to the Award holder and shall cause
the Funding Agent
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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 Westfield Financial, Inc. 2002
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 141 Elm Street, Westfield, Massachusetts, 01085. 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 Funding Agent 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.
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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 Funding Agent shall make distributions from
the Fund in such amounts and to such persons as the Committee may direct
and shall return the remaining assets of the Fund, if any, to Westfield
Financial, 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
Westfield Financial, 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 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
Westfield Financial, Inc. is not the surviving entity, the Funding Agent
shall hold in the 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 Funding Agent 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.
C-17
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 Massachusetts and 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.
C-18
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:
Westfield Financial, Inc.
141 Elm Street
Westfield, MA 01085
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 prior to December 28,
2002 unless approved by the holders of a majority of the total votes
eligible to be cast at any duly called annual or special meeting of the
Company (excluding those votes eligible to be cast by Westfield Mutual
Holding Company), in which case the Plan shall be effective as of the later
of (a) June 27, 2002 or (b) the date of such approval. No Award shall be
made prior to the date on which the Plan becomes effective.
C-19
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 10.2, 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 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 (excluding those Shares held by Westfield Mutual
Holding Company) represented in person or by proxy and entitled to vote at
a meeting of shareholders duly called and held on or after December 27,
2002.
C-20
Westfield Financial, Inc. REVOCABLE PROXY
This Proxy is solicited on behalf of the Board of Directors of
Westfield Financial, Inc. for the Annual Meeting of Stockholders
to be held on June 28, 2002.
The undersigned stockholder of Westfield Financial, Inc. hereby appoints
David C. Colton, Jr., Thomas J. Howard and Mary C. O'Neil, each of them,
with full powers of substitution, to represent and to vote as proxy, as
designated, all shares of common stock of Westfield Financial, Inc. held of
record by the undersigned on May 15, 2002, at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at 10:00 a.m., Eastern Time,
on June 28, 2002, or at any adjournment or postponement thereof, upon the
matters described in the accompanying Notice of the Annual Meeting of
Stockholders and Proxy Statement, dated May 24, 2002 and upon such other
matters as may properly come before the Annual Meeting. The undersigned
hereby revokes all prior proxies.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is given, this
Proxy will be voted FOR the election of all nominees listed in Item 1 and
FOR the proposals listed in Items 2 and 3.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
The Board of Directors unanimously recommends a vote "FOR" all of the
nominees named in Item 1 and a vote "FOR" each of the proposals in Items 2
and 3.
I Will Attend Annual Meeting. [ ]
Please Mark Your Choice Like This
in Blue or Black Ink.
[X]
1. Election of four directors for terms of three years each. Nominees:
Robert T. Crowley, Jr., Harry C. Lane, William McClure and Paul R. Pohl.
For Against Abstain
[ ] [ ] [ ]
Instruction: TO WITHHOLD AUTHORITY to vote for any individual
nominee, write that nominee's name in the space provided:
---------------------------------------
2. Approval of the proposed Westfield Financial, Inc. 2002 Stock Option
Plan.
For Against Abstain
[ ] [ ] [ ]
3. Approval of the proposed Westfield Financial, Inc. 2002 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 dated May 24, 2002.
____________________________________
____________________________________
Signature(s)
Dated: _______________________, 2002
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.