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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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Westborough Financial Services, Inc.
- ---------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[x] No fee required
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0-11.
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(1) Amount previously paid:
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[Westborough Financial Services, Inc. LETTERHEAD]
December 19, 2003
Dear Shareholder:
You are cordially invited to attend the 2004 Annual Meeting of
Shareholders of Westborough Financial Services, Inc., the holding company
for The Westborough Bank, which will be held on January 29, 2004 at 3:00
p.m., local time, at the Wyndham Westborough Hotel located at 5400 Computer
Drive, Westborough, Massachusetts 01581 (the "Annual Meeting").
The attached Notice of Annual Meeting and proxy statement describe
the formal business that we will transact at the Annual Meeting. In
addition to the formal items of business, management will report on the
operations and activities of Westborough Financial Services and Westborough
Bank and you will have an opportunity to ask questions.
The Board of Directors of Westborough Financial Services has
determined that an affirmative vote on each matter to be considered at the
Annual Meeting is in the best interests of Westborough Financial Services
and its shareholders and unanimously recommends a vote "FOR" each of these
matters.
Please complete, sign and return the enclosed proxy card promptly,
whether or not you plan to attend the Annual Meeting. Your vote is
important regardless of the number of shares you own. Voting by proxy will
not prevent you from voting in person at the Annual Meeting but will assure
that your vote is counted if you cannot attend.
On behalf of the Board of Directors and the employees of Westborough
Financial Services and Westborough Bank, we thank you for your continued
support and look forward to seeing you at the Annual Meeting.
Sincerely yours,
/s/ Joseph F. MacDonough
Joseph F. MacDonough
President and Chief Executive Officer
[LOGO] Westborough Financial Services, Inc.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: Thursday, January 29, 2004
Time: 3:00 p.m., local time
Place: Wyndham Westborough Hotel
5400 Computer Drive
Westborough, Massachusetts 01581
At our 2004 Annual Meeting, we will ask you to:
1. Elect five directors to serve for a three-year term to expire
at the 2007 Annual Meeting and one director to serve for a two-
year term to expire at the 2006 Annual Meeting. The following
six directors are the Board of Directors' nominees:
* James N. Ball * Benjamin H. Colonero, Jr.
* Nelson F. Ball * Roger B. Leland
* Nancy M. Carlson * Joseph F. MacDonough
2. Ratify the appointment of Wolf & Company, P.C. as our
independent public accountant for the fiscal year ending
September 30, 2004; and
3. Transact any other business as may properly come before the
Annual Meeting.
You may vote at the Annual Meeting if you were a shareholder of
Westborough Financial Services at the close of business on December 11,
2003, the record date.
By Order of the Board of Directors,
/s/ John L. Casagrande
John L. Casagrande
Clerk
Westborough, Massachusetts
December 19, 2003
==========================================================================
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
Westborough Financial Services, Inc. is a Massachusetts-chartered
stock holding company, which owns all the capital stock of The Westborough
Bank. As used in this proxy statement, "we," "us" and "our" refer to
Westborough Financial Services 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 December 19, 2003 to all
shareholders entitled to vote. If you owned common stock of Westborough
Financial Services at the close of business on December 11, 2003, the
record date, you are entitled to vote at the Annual Meeting. On the record
date, there were 1,586,374 shares of common stock outstanding.
QUORUM
A quorum of shareholders is necessary to hold a valid meeting. If the
holders of at least a majority of the total number of the outstanding
shares of common stock entitled to vote are represented in person or by
proxy at the Annual Meeting, a quorum will exist. We will include proxies
marked as abstentions and broker non-votes to determine the number of
shares present at the Annual Meeting.
VOTING RIGHTS
You are entitled to one vote at the Annual Meeting for each share of
the common stock of Westborough Financial Services that you owned as of
record at the close of business on December 11, 2003. The number of shares
you own (and may vote) is listed at the top of the back of the proxy card.
You may vote your shares at the Annual Meeting in person or by proxy.
To vote in person, you must attend the Annual Meeting and obtain and submit
a ballot, which we will provide to you at the Annual Meeting. To vote by
proxy, you must complete, sign and return the enclosed proxy card. If you
properly complete your proxy card and send it to us in time to vote, your
"proxy" (one of the individuals named on your proxy card) will vote your
shares as you have directed. If you sign the proxy card but do not make
specific choices, your proxy will vote your shares FOR each of the
proposals identified in the Notice of the Annual Meeting.
If any other matter is presented, your proxy will vote the shares
represented by all properly executed proxies on such matters as a majority
of the Board of Directors determines. As of the date of this proxy
statement, we know of no other matters that may be presented at the Annual
Meeting, other than those listed in the Notice of the Annual Meeting.
1
VOTE BY WESTBOROUGH BANCORP, MHC
Westborough Bancorp, MHC is the holding company of Westborough
Financial Services which was formed pursuant to the reorganization of
Westborough Bank to a mutual holding company structure on February 15,
2000. As indicated under "Security Ownership of Certain Beneficial Owners
and Management," Westborough Bancorp, MHC owns 64.8% or 1,027,893 shares,
of the outstanding common stock of Westborough Financial Services.
All shares of common stock owned by Westborough Bancorp, MHC will be
voted in accordance with the instructions of the Board of Trustees of
Westborough Bancorp, MHC. Westborough Bancorp, MHC is expected to vote such
shares "FOR" Proposals 1 and 2.
VOTE REQUIRED
Proposal 1:
Election of
Directors The nominees for director who receive the most
votes will be 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.
Proposal 2:
Ratification of the
Independent Accountants Approval of this proposal requires the
affirmative vote of a majority of the
outstanding shares of our common stock. So, if
you "abstain" from voting, it has the same
effect as if you voted "against" this proposal.
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.
* Proposal 2: Ratification of the Independent Auditors. A broker non-
vote will have the effect of a vote against this proposal.
CONFIDENTIAL VOTING POLICY
Westborough Financial Services maintains a policy of keeping
shareholder votes confidential. We only let our Inspector of Election
examine the voting materials. We will not disclose your vote to management
unless it is necessary to meet legal requirements. We will, however,
forward any written comments that you may have to management.
REVOKING YOUR PROXY
You may revoke your proxy at any time before it is exercised by:
* Filing with the Clerk a letter revoking the proxy;
* Submitting another signed proxy with a later date; or
2
* Attending the Annual Meeting and voting in person, provided you
file a written revocation with the Secretary of the Annual
Meeting prior to the voting of such proxy.
If your shares are not registered in your own name, you will need
appropriate documentation from your shareholder of record to vote
personally at the Annual Meeting. Examples of such documentation include a
broker's statement, letter or other document that will confirm your
ownership of shares of Westborough Financial Services.
SOLICITATION OF PROXIES
Westborough Financial Services will pay the costs of soliciting
proxies from its shareholders. Directors, officers or employees of
Westborough Financial Services and Westborough Bank may solicit proxies by:
* mail;
* telephone; or
* other forms of communication.
We will also reimburse banks, brokers, nominees and other fiduciaries
for the expenses they incur in forwarding the proxy materials to you.
OBTAINING AN ANNUAL REPORT ON FORM 10-KSB
If you would like a copy of our Annual Report on Form 10-KSB and
audited financials for the year ended September 30, 2003, which will be
filed with the Securities and Exchange Commission ("SEC"), we will send you
one (without exhibits) free of charge. Please write to:
John L. Casagrande, Clerk
Westborough Financial Services, Inc.
100 East Main Street
Westborough, Massachusetts 01581
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS OF WESTBOROUGH FINANCIAL SERVICES
The following table contains common stock ownership information for
persons known to Westborough Financial Services to "beneficially own" 5% or
more of Westborough Financial Services's common stock as of December 11,
2003. In general, beneficial ownership includes those shares that a person
has the power to vote, sell, or otherwise dispose. Beneficial ownership
also includes the number of shares which an individual has the right to
acquire within 60 days (such as stock options) after December 11, 2003. Two
or more persons may be considered the beneficial owner of the same shares.
We obtained the information provided in the following table from filings
with the SEC and with Westborough Financial Services. In this proxy
statement, "voting power" is the power to vote or direct the voting of
shares, and "investment power" includes the power to dispose or direct the
disposition of shares.
Amount and Nature of
Name and Address of Beneficial
Title of Class Beneficial Owner Ownership(1) Percent
- -------------- ------------------- -------------------- -------
<s> <c> <c> <c>
Common Stock Westborough Bancorp, MHC 1,027,893 64.8%
$.01 par value 100 East Main Street
Westborough, Massachusetts 01581
<FN>
- --------------------
<F1> As reported by Westborough Bancorp, MHC in a Schedule 13D dated
February 15, 2000, which reported sole voting and dispositive power
with respect to 1,027,893 shares.
</FN>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Westborough
Financial Services's common stock, par value $0.01 per share beneficially
owned by each director, and all directors and executive officers of
Westborough Financial Services as a group, as of December 11, 2003. The
percent of common stock outstanding was based on a total of 1,586,374
shares of Westborough Financial Services's common stock outstanding as of
December 11, 2003 plus shares of common stock which such person or group
has the right to acquire within 60 days after December 11, 2003 by the
exercise of stock options. Except as otherwise indicated, each person and
each group shown in the table has sole voting and investment power with
respect to the shares of common stock listed next to their name.
4
Position with Amount and
Westborough Financial Nature Percent of
Services and Westborough of Beneficial Common Stock
Name Bank Ownership(1) Outstanding
- --------------------------- --------------------------- ------------- ------------
<s> <c> <c> <c>
James N. Ball Director 700(2) *
Nelson P. Ball Director 1050(3) *
Edward S. Bilzerian Director 4,050 *
Nancy M. Carlson Director 200 *
David E. Carlstrom Director 3,550 *
John L. Casagrande Senior Vice President, 4,393(4) *
Treasurer, Clerk and Director
Benjamin H. Colonero, Jr. Director 40 *
William W. Cotting, Jr. Director 2,050 *
Robert G. Daniel Director 8,550 *
Walter A. Kinell, Jr. Chairman of the Board 7,550 *
Robert A. Klugman Director 5,450(5) *
Roger B. Leland Director 7,550(6) *
Joseph F. MacDonough President, Chief Executive 19,118(7) 1.2%
Officer and Director
Paul F. McGrath Director 6,050(8) *
Charlotte C. Spinney Director 2,640(9) *
Phyllis A. Stone Director 2,700(10) *
James E. Tashjian Director 4,050(11) *
All directors and executive
officers as a group
(21 persons)(12) 127,088 7.9%
<FN>
- --------------------
* Less than one percent of the total outstanding shares of common
stock.
<F1> Includes stock options that may be acquired by executive officers and
directors of Westborough Financial Services under the Westborough
Financial Services Inc. 2001 Stock Option Plan within 60 days after
December 1, 2003. Under the plan, each outside director, other than
Directors Ball (James), Carlson and Colonero, may acquire 600 shares
of common stock and Messrs. Casagrande and MacDonough may each
acquire 900 and 5,760 shares of common stock, respectively.
These amounts also include unvested restricted stock awards of
3,240 shares in the aggregate held by outside directors under the
Westborough Financial Services, Inc. 2001 Recognition and Retention
Plan. Under the plan, Messrs. Casagrande and MacDonough also hold
unvested restricted stock awards of 1,200 and 2,280 shares of common
stock, respectively. Each holder of an unvested restricted stock
award has sole voting power but no investment power, except in
limited circumstances, over the common stock covered by the award.
The restricted stock awards will vest at the rate of 20% per year on
each April 30th following the date of grant, the first installment of
which vested on April 30, 2002.
<F2> Includes 700 shares held jointly with his spouse.
<F3> Excludes 3,500 shares held by his spouse for which Mr. Ball disclaims
beneficial ownership.
<F4> Includes 1,785 shares held in Westborough Bank's 401(k) plan.
<F5> Includes 4,400 shares held in Mr. Klugman's individual retirement
account.
(Footnotes continued on next page.)
5
<F6> Includes 2,000 shares held in his spouse's individual retirement
account.
<F7> Includes 1,741 shares held in Mr. MacDonough's individual retirement
account, 1,814 shares held in his spouse's individual retirement
account, 1,679 shares held in Westborough Bank's 401(k) plan, and
3,500 shares held jointly with his spouse.
<F8> Includes 4,500 shares held in Mr. McGrath's individual retirement
account.
<F9> Includes 1,500 shares held in Ms. Spinney's individual retirement
account and 90 shares held as custodian for a minor child under the
Uniform Transfer to Minors Act ("UTMA").
<F10> Includes 75 shares held by Ms. Stone as custodian under the UTMA and
1,500 shares held jointly with her spouse.
<F11> Includes 3,000 shares held jointly with his spouse.
<F12> The Westborough Financial Services, Inc. Employee Stock Ownership
Plan ("ESOP") is administered by the ESOP committee of Westborough
Financial Services (the "ESOP Committee"). The ESOP's assets are
held in a trust (the "ESOP Trust"), for which Eastern Bank, serves as
trustee (the "ESOP Trustee"). The ESOP Trust purchased these shares
with funds borrowed from Westborough Financial Services, initially
placed these shares in a suspense account for future allocation to be
allocated to employees participating in the ESOP over a period of
years as its acquisition debt is retired. The ESOP Trustee is the
beneficial owner of the shares held in the ESOP Trust. The terms of
the ESOP Trust Agreement provide that, subject to the ESOP Trustee's
fiduciary responsibilities under the Employee Retirement Income
Security Act of 1974, as amended, the ESOP Trustee will vote, tender
or exchange shares of common stock held in the ESOP Trust in
accordance with instructions received from the participants. As of
December 11, 2003, 8,841 shares held by the ESOP Trust have been
released for allocation. The ESOP Trustee will vote allocated shares
as to which no instructions are received and any shares that have not
been allocated to participants' accounts in the same proportion as
allocated shares with respect to which the ESOP trustee receives
instructions are voted. The ESOP Trustee will tender or exchange any
shares in the suspense account or that otherwise have not been
allocated to participants' accounts in the same proportion as
allocated shares with respect to which the ESOP Trustee receives
instructions are tendered or exchanged, but otherwise has no
disposition power.
This amount also includes shares held in trust pursuant to the ESOP that
have been allocated to individual accounts as follows: Mr. Casagrande,
508 shares and Mr. MacDonough, 824 shares. The amount of shares for all
directors and executive officers as a group also includes 35,359 shares
held by the ESOP Trust that have not been allocated to eligible employees
as of December 11, 2003, over which the ESOP Committee (consisting of
Messrs. Carlstrom, Daniel and Leland) may be deemed to have sole
investment power, except in limited circumstances, thereby causing each
committee member to be a beneficial owner of such shares. Each of the
members of the ESOP Committee disclaims beneficial ownership of such
shares and accordingly, such shares are not attributed to the members of
the ESOP Committee individually.
</FN>
6
DISCUSSION OF PROPOSALS RECOMMENDED BY BOARD
-----------------------------
PROPOSAL 1
ELECTION OF DIRECTORS
-----------------------------
GENERAL
The Nominating Committee has nominated six persons for election as
directors at the Annual Meeting. If you elect the nominees, they will hold
office for the term set forth opposite their names or until their
successors have been elected.
We know of no reason why any nominee may be unable to serve as a
director. If any nominee is unable to serve, your proxy may vote for
another nominee proposed by the Board. If for any reason these nominees
prove unable or unwilling to stand for election, the Board will nominate
alternates or reduce the size of the Board of Directors to eliminate the
vacancy. The Board has no reason to believe that its nominees would prove
unable to serve if elected.
NOMINEES AND CONTINUING DIRECTORS
Position(s) Held
with Westborough
Nominees Age(1) Term Expires Financial Services Director Since(2)
-------- ------ ------------ ------------------ -----------------
<s> <c> <c> <c> <c>
James N. Ball 41 2006(3) Director 2003
Nelson P. Ball 72 2007 Director 1980
Nancy M. Carlson 57 2007 Director 2003
Benjamin H. Colonero, Jr. 55 2007 Director 2003
Roger B. Leland 74 2007 Director 1974
Joseph F. MacDonough 57 2007 President, Chief Executive 1982
Officer and Director
Continuing Directors
- --------------------
Edward S. Bilzerian 70 2005 Director 1993
Paul F. McGrath 57 2005 Director 1993
Charlotte C. Spinney 67 2005 Director 1991
Phyllis A. Stone 60 2005 Director 1999
James E. Tashjian 62 2005 Director 1973
David E. Carlstrom 69 2006 Director 1976
John L. Casagrande 57 2006 Senior Vice President, Chief 1994
Financial Officer, Clerk and
Director
William W. Cotting, Jr. 57 2006 Director 1988
Robert A. Klugman 52 2006 Director 1991
Retiring Directors
- ------------------
Robert G. Daniel 74 2004(4) Director 1969
Walter A. Kinell, Jr. 74 2006(4) Chairman of the Board 1967
<FN>
- --------------------
<F1> As of September 30, 2003.
(Footnotes continued on next page.)
7
<F2> Includes service as a trustee of Westborough Bank prior to the
formation of Westborough Financial Services in 2000.
<F3> As permitted by the Company's Bylaws, Director Ball is being re-
elected for a two-year term to fill a vacancy created by the
retirement of Director Kinell, Jr.
<F4> Directors Daniel and Kinell, Jr. are retiring effective as of the
2004 Annual Meeting, due to a director age limitation clause under
the Company's Bylaws, which provides for mandatory retirement of a
director, effective at the Annual Meeting following the directors'
75th birthday.
</FN>
The principal occupation and business experience of each nominee for
election as director and each continuing director are set forth below.
Unless otherwise indicated, each of the following persons has held his or
her present position for the last five years.
NOMINEES
James N. Ball is the sole owner of Secure Futures, Inc., which has
operated in Westborough for nearly 20 years (as a sole proprietor prior to
1999). Mr. Ball is a financial services specialist and a member of the
National Association of Securities Dealers. Mr. Ball assists individuals
and small business owners in a broad range of financial decision-making.
Mr. Ball is the son of Nelson P. Ball, also a member of the Board of
Directors.
Nelson P. Ball is the owner of Ball Financial Services, Co., located
in Westborough, Massachusetts. He has served as a financial services
consultant for over 38 years. Mr. Ball is the father of James N. Ball, also
a member of the Board of Directors.
Nancy M. Carlson is the owner and president of Suburban Staffing,
Inc., a staffing firm located in Westborough, Massachusetts. Ms. Carlson
has worked at Suburban Staffing, Inc. since 1986 and purchased the company
in 1994. Ms. Carlson is also an investment partner and facilitator for Data
Transitions, Inc., a Westborough company that specializes in managing data
from incompatible applications. Ms. Carlson has served on the Board of
Directors of the Corridor Nine Area Chamber of Commerce since 1994 and has
been President for two years.
Benjamin H. Colonero, Jr. has served as chief financial officer and
executive director in the healthcare industry for over 20 years. Mr.
Colonero is currently the executive director of the Westborough campus of
the Salmons Family of Services, which serves the health and social needs of
over 400 seniors.
Roger B. Leland has practiced estate, tax and real estate law at
Leland Law Associates for over 30 years. During that time, he also served
as an insurance broker, selling life and casualty insurance products,
through Leland Insurance Agency, Inc. Leland Law Associates and Leland
Insurance Agency are located in Northborough, Massachusetts.
Joseph F. MacDonough has served as President and Chief Executive
Officer of Westborough Bank since 1994 and of Westborough Financial
Services since its inception in 2000. He joined Westborough Bank in 1981
and served as Vice President and Treasurer until his appointment as
President. Mr. MacDonough serves on the Board of Directors of the
Massachusetts Bankers Association.
CONTINUING DIRECTORS
Edward S. Bilzerian is retired from Bilzerian Consulting Group, Inc.,
a privately held company located in Worcester, Massachusetts, specializing
in small business turnarounds, where he served as president. Prior to that,
he was Vice President of Marketing and Finance at Bay State Abrasive's
Division
8
of Dresser Industries. He has been self-employed for over 17 years. Mr.
Bilzerian also serves as a member of the Worcester Airport Commission and
Chairman of the Worcester Health and Hospital Authority.
Paul F. McGrath is a certified public accountant and has served as
President of Mottle McGrath Braney & Flynn, P.C. for over ten years. Mottle
McGrath is a certified public accounting firm, located in Worcester,
Massachusetts, that provides accounting, tax and business advisory services
throughout central New England.
Charlotte C. Spinney is a retired social studies teacher. She taught
at Westborough High School for 41 years and, during that time, she created
the curriculum for the community service component of the school's
Sociology course.
Phyllis A. Stone had served as Vice President and Treasurer of Comey
Oil Co., Inc., located in Westborough, Massachusetts, for 13 years prior to
her retirement in 2001. She had served in various other capacities within
Comey Oil for over 30 years. She is currently President of Schenker
Properties, Inc., a real estate holding company based in Westborough,
Massachusetts. She is past Treasurer of the Regatta Point Community Sailing
Inc. of Worcester, Massachusetts.
James E. Tashjian is a partner in the law firm of Tashjian, Simsarian
& Wickstrom, located in Worcester, Massachusetts. He has engaged in the
general practice of law for over 30 years.
David E. Carlstrom has served as President of Carlstrom Pressed Metal
Co., Inc. for over 25 years. Carlstrom Pressed Metal is a contract
manufacturer of light and heavy metal stampings located in Westborough,
Massachusetts.
John L. Casagrande has served as the Senior Vice President and Chief
Financial Officer of Westborough Bank since 1993 and of Westborough
Financial Services since its inception in 2000. He joined Westborough Bank
after having been employed as a senior bank officer and certified public
accountant for over 15 years at various times by several financial
institutions (including mutual and stock institutions) and the accounting
firm of Peat Marwick. Mr. Casagrande has been serving as Clerk of
Westborough Financial Services since 2001. Mr. Casagrande serves as a
director of the Massachusetts Bank Insurance Association, a division of the
Massachusetts Bankers Association.
William W. Cotting, Jr. has been an attorney in private practice for
over 20 years. His practice is located in Northborough, Massachusetts.
Robert A. Klugman, M.D., F.A.C.P. has practiced general medicine in
Westborough, Massachusetts for over 20 years. Dr. Klugman is currently an
Associate Professor of Clinical Medicine at the University of Massachusetts
Medical School as well as Division Chief of Community Internal Medicine at
the UMASS/Memorial.
RETIRING DIRECTORS
Robert G. Daniel was employed in various capacities, including
President and Treasurer, at Carlson Daniel Insurance Agency, Inc., located
in Westborough, Massachusetts from 1958 to 1994. Mr. Daniel sold insurance
from 1994 to 1996 for Allied American Agency following its acquisition of
Carlson Daniel Insurance. From 1996 to 1999, Mr. Daniel served as President
and Treasurer of Westborough Insurance Agency, Inc., a non-active
corporation used as a vehicle for payments from Allied American as
negotiated in connection with the acquisition of Carlson Daniel.
Westborough Insurance Agency, Inc. dissolved in 1999.
9
Walter A. Kinell, Jr. has served as Chairman of the Board for
Westborough Bank since 1994 and for Westborough Financial Services since
its inception in 2000. Mr. Kinell joined Westborough Bank in 1959 as an
assistant treasurer, became President and Chief Executive Officer in 1969
and retired from this position in 1994.
==========================================================================
The Board of Directors unanimously recommends a vote "FOR" all of the
nominees for election as directors.
==========================================================================
10
INFORMATION ABOUT BOARD OF DIRECTORS AND MANAGEMENT
BOARD OF DIRECTORS
Westborough Financial Services's Board of Directors currently
consists of 17 members. Westborough Financial Services's Articles of
Organization provides that the Board shall be divided into three classes.
The Board of Directors has nominated six directors for election at the 2004
Annual Meeting.
The Board of Directors oversees our business and monitors the
performance of our management. In accordance with our corporate governance
procedures, the Board of Directors does not involve itself in the day-to-
day operations of Westborough Financial Services. Westborough Financial
Services's executive officers and management oversee the day-to-day
operations of Westborough Financial Services. Our directors fulfill their
duties and responsibilities by attending regular meetings of the Board
which are held on a monthly basis. Our directors also discuss business and
other matters with the Chairman, other key executives, and our principal
external advisers (legal counsel, auditors, financial advisors and other
consultants).
The Board of Directors held 12 regular meetings and no special
meetings during the fiscal year ended September 30, 2003. 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.
CORPORATE GOVERNANCE
Westborough Financial Services and Westborough Bank are committed to
establishing and maintaining high standards of corporate governance. Our
executive officers and the Board have worked together to construct a
comprehensive set of corporate governance initiatives that we believe will
serve the long-term interests of our stockholders and employees. As
discussed in more detail below, we believe these initiatives comply fully
with the Sarbanes-Oxley Act of 2002 and the rules and regulations of the
SEC adopted thereunder. In addition, we believe our corporate governance
initiatives will comply fully with the reform proposals made by The Nasdaq
Stock Market. The Board will continue to evaluate, and improve upon as
appropriate, our corporate governance principles and policies.
Code of Ethics
The Board has adopted a Code of Ethics and Conflicts of Interest
Policy that applies to each of our directors, officers and employees. The
Code of Ethics sets forth our policies and expectations on a number of
topics, including:
* acceptance of gifts;
* financial responsibility regarding both personal and business
affairs, including loans or other transactions with Westborough
Bank;
* personal conduct, including ethical behavior and outside
employment and other activities;
* affiliated transactions, including separate identities and
usurpation of corporate opportunities;
* preservation and accuracy of Westborough Financial Service's
and Westborough Bank's records;
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* compliance with laws, including insider trading compliance;
* preservation of confidential information relating to our
business and that of our clients;
* conflicts of interest;
* the safeguarding and proper use of our assets and institutional
property;
* code administration and enforcement;
* reporting, investigating and resolving of all code violations;
and
* code-related training, certification of compliance and
maintenance of code-related records.
The Audit Committee will review the Code of Ethics on a regular basis, and
propose or adopt additions or amendments to the Code of Ethics as
appropriate. The Code of Ethics is posted on our website.
Code of Ethics for Senior Financial Officers
The Board has adopted a Code of Ethics for Senior Financial Officers
that applies to each of our senior financial officers, including our
principal executive officer, principal financial officer and principal
accounting officer. The Code of Ethics for Senior Financial Officers sets
forth our policies and expectations on a number of topics, including:
* personal conduct, including ethical behavior and personal
integrity;
* conflicts of interest;
* compliance with laws, rules and regulations;
* preservation of confidential information;
* proper use of corporate assets and opportunities; and
* compliance and compliance monitoring.
The Audit Committee will review the Code of Ethics for Senior Financial
Officers on a regular basis, and propose or adopt additions or amendments
to the Code of Ethics for Senior Financial Officers as appropriate. The
Code of Ethics for Senior Financial Officers is posted on our website.
Independent Directors
The Nasdaq Stock Market's rules include a requirement that a majority
of directors of Nasdaq Stock Market-listed companies be "independent." For
a director to be "independent" under the Nasdaq Stock Market's rules, the
director must not be an officer or employee of Westborough Financial
Services, Inc. or any of its subsidiaries, and must not have a relationship
which, in the opinion of the Board of Directors, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director. The Nasdaq Stock Market's rules also expressly provide that the
following persons cannot be considered independent:
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* a director who is, or during the past three years was, employed
by Westborough Financial Services or by any subsidiary of
Westborough Financial Services;
* a director who accepts or who has a family member who accepts
any payments from Westborough Financial Services or any
subsidiary of Westborough Financial Services in excess of
$60,000 during the current fiscal year or any of the past three
fiscal years, other than (a) payments for board service, (b)
payments arising solely from investments in Westborough
Financial Services' securities, (c) compensation paid to a
family member who is a non-executive employee of Westborough
Financial Services, (d) benefits under a tax-qualified
retirement plan, or non-discretionary compensation or (e) loans
to directors and executive officers permitted under Section
13(k) of the Exchange Act;
* a director who is a family member of an individual who is, or
during the past three years was, employed by Westborough
Financial Services or by any subsidiary of Westborough
Financial Services as an executive officer;
* a director who is, or has a family member who is, a partner in,
or a controlling stockholder or an executive officer of, any
organization to which Westborough Financial Services made, or
from which Westborough Financial Services received, payments
for property or services (other than those arising solely from
investments in Westborough Financial Services' securities or
payments under non-discretionary charitable contribution
matching schemes) that exceed 5% of the recipient's
consolidated gross revenues for that year, or $200,000,
whichever is more, in the current fiscal year or any of the
past three fiscal years;
* a director of Westborough Financial Services who is employed,
or has a family member who is employed, as an executive officer
of another entity where any of the officers of Westborough
Financial Services serve on the compensation committee of such
other entity, or if such relationship existed during the past
three years; or
* a director who is, or has a family member who is, a current
partner of Westborough Financial Services' outside auditor, or
was a partner or employee of Westborough Financial Services'
outside auditor, and worked on Westborough Financial Services'
audit during the past three years.
The Board of Directors has determined that all of the Board's current
non-management members, a majority of the board, are "independent"
directors for the purposes of the Nasdaq Stock Market's rules.
Consistent with the Nasdaq Stock Market's rules, independent
directors meet in regularly scheduled executive sessions without non-
independent directors. The independent directors have selected Walter J.
Kinell, Jr., Chairman of the Board of Directors, to serve as the presiding
director at the executive sessions for the 2004 fiscal year until his
retirement at the 2004 Annual Meeting of Shareholders. The independent
directors will select a successor presiding director at the Board of
Directors' 2004 Annual Meeting. The presiding director will take a lead
role in the Board's self-evaluation process.
The Nasdaq Stock Market's rules, as well as recently adopted SEC
rules, impose additional independence requirements for all members of the
Audit Committee. The Nasdaq Stock Market's rules add to the "independence"
requirement for audit committee membership the requirement that directors
(1) be able to read and understand fundamental financial statements,
including Westborough Financial Services' balance sheet, income statement,
and cash flow statement, and (2) not have participated in the
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preparation of the financial statements of Westborough Financial Services
or any of its subsidiaries at any time during the past three years. The
Board of Directors believes that the current members of the Audit Committee
meet these additional standards for independence. Furthermore, the Nasdaq
Stock Market rules require that Westborough Financial Services certify that
the Audit Committee has, and will continue to have, at least one member who
has past employment experience in finance or accounting, requisite
professional certification in accounting, or any other comparable
experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer,
chief financial officer or other senior officer with financial oversight
responsibilities.
In addition, the rules recently adopted by the SEC for determining
whether an audit committee member is "independent" set forth two basic
criteria. First, audit committee members would be barred from accepting -
directly or indirectly- any consulting, advisory or other compensatory fee
from the issuer or an affiliate of the issuer, other than in the member's
capacity as a member of the board of directors and any board committee. The
SEC indicated that payments for services to law firms, accounting firms,
consulting firms, investment banks or similar entities in which audit
committee members are partners or hold similar positions are the kinds of
compensatory payments that were intended to be precluded. The second basic
criterion for determining independence provides that a member of an audit
committee of a company may not be an affiliated person of the issuer or any
subsidiary of the issuer apart from his or her capacity as a member of the
board and any board committee. For this purpose, designees of affiliated
persons are also disqualified.
COMMITTEES OF THE BOARD
The Board of Directors of Westborough Financial Services has
established the following committees:
EXECUTIVE COMMITTEE The Executive Committee exercises the
powers of the Board of Directors in
between Board meetings.
Directors Carlstrom, Daniel, Klugman,
Leland, MacDonough and Tashjian currently
serve as members of the committee. Mr.
MacDonough is the Chairman of the
Committee. The Executive Committee met 24
times in the 2003 fiscal year.
COMPENSATION COMMITTEE The Compensation Committee provides advice
and recommendations to the Board of
Directors in the areas of employee
salaries and benefit programs.
Directors Carlstrom, Daniel and Leland
currently serve on the committee. Mr.
Daniel is the Chairman of the Committee.
The Compensation Committee met 8 times in
the 2003 fiscal year.
LONG RANGE The Long Range Planning Committee sets
PLANNING long-range goals and objectives and
COMMITTEE develops plans for their achievement.
Directors Carlson, Carlstrom, Daniel,
Kinell, Klugman, Leland, MacDonough,
McGrath, Casagrande and Tashjian currently
serve on the committee. Mr. Leland is the
Chairman of the Committee. The Long Range
Planning Committee met 7 times in the 2003
fiscal year.
NOMINATING COMMITTEE The Nominating Committee recommends
nominees for election as directors and
reviews, if any, shareholder nominations
to ensure compliance with the notice
procedures set forth in Westborough
Financial Services's Bylaws.
Westborough Financial Services's Bylaws
set forth a procedure for shareholders to
nominate directors by notifying the Clerk
of Westborough
14
Financial Services in writing and meeting
other requirements set forth in the
Bylaws.
Directors Carlstrom, Kinell and McGrath
currently serve on the committee. Mr.
McGrath is the Chairman of the Committee.
The Nominating Committee met once in the
2003 fiscal year to select the nominees
for election as directors at the Annual
Meeting.
AUDIT COMMITTEE The Audit Committee reviews the annual
audit prepared by the independent
accountants and recommends the appointment
of accountants. The board of directors of
Westborough Financial Services has adopted
a written charter for the Audit Committee.
Directors Bilzerian, Colonero, Cotting and
McGrath currently serve as members of the
committee. Mr. McGrath is the Chairman of
the Committee. All members of the Audit
Committee are independent directors as
defined under the Nasdaq Stock Market
listing standards.
The Audit Committee met 6 times in the
2003 fiscal year.
AUDIT COMMITTEE REPORT
WESTBOROUGH FINANCIAL SERVICES, INC. AUDIT COMMITTEE REPORT
The following Audit Committee Report is provided in accordance with
the rules and regulations of the Securities and Exchange Commission (the
"SEC"). Pursuant to such rules and regulations, this report shall not be
deemed "soliciting materials," filed with the SEC, subject to Regulation
14A or 14C of the SEC or subject to the liabilities of section 18 of the
Securities Exchange Act of 1934, as amended.
The Audit Committee has reviewed and discussed the audited financial
statements with management. The committee has also reviewed and discussed
with Wolf & Company, P.C., their independent auditors the matters required
to be discussed by SAS 61, as may be modified or supplemented.
The Audit Committee also has received the written disclosures and the
letter from the independent accountants required by Independence Standards
Board Standard No. 1 (Independence Standards Board Standard No.1,
Independence Discussions with Audit Committee), as may be modified or
supplemented, and has discussed with Wolf & Company, P.C. its independence.
Based on the foregoing discussions, the Audit Committee recommended
to the Board of Directors of Westborough Financial Services that the
audited financial statements be included in the Westborough Financial
Services's Annual Report on Form 10-KSB for the year ended September 30,
2003.
Audit Committee of Westborough
Financial Services, Inc.
Paul F. McGrath (Chairman)
Edward S. Bilzerian
Benjamin H. Colonero, Jr.
William W. Cotting, Jr.
15
DIRECTORS' COMPENSATION
Meeting Fees. Currently, each non-employee director of Westborough
Bank receives the following fees:
* $250 per Board of Directors meeting attended; and
* $250 per committee meeting attended, with the Chairman of each
committee receiving a fee of $275.
In addition, Directors Carlstrom, Daniel, Klugman, Leland, and
Tashjian receive an annual retainer of $5,000 as members of the Executive
Committee, and Director Kinell receives an annual retainer of $5,000 as
Chairman of the Board. Directors Bilzerian, Cotting and McGrath receive an
annual retainer of $3,500 as members of the Audit Committee. Directors Ball
(Nelson), Spinney and Stone receive an annual retainer of $2,500.
Total directors' meeting and committee fees for fiscal 2003 were
$154,075. We do not compensate our employee-directors for service as
directors. Directors are also entitled to the protection of certain
indemnification provisions in our Articles of Organization.
Stock Option Plan and Recognition and Retention Plan. Our directors
are eligible to participate in the Westborough Financial Services, Inc.
2001 Stock Option Plan and the Westborough Financial Services, Inc. 2001
Recognition and Retention Plan. These stock benefit plans are discussed
under "--Benefit Plans -- 2001 Stock Option Plan" and "-- 2001 Recognition
and Retention Plan."
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Biographical information and the business experience of each non-
director executive officer of Westborough Financial Services and
Westborough Bank is set forth below.
In addition to Messrs. Casagrande and MacDonough, Westborough
Financial Services and Westborough Bank have the following executive
officers:
Michael D. Allard, age 41, is Vice President of Marketing and Retail
Sales, a position he has held since 2001. Prior to joining Westborough Bank
in 2001, he served as Senior Vice President of Sales, Marketing and Branch
Administration at Ipswich Bank, a position he held from 2000 to 2001. Prior
to that, from 1996 to 2000, he served as Vice President and Regional Sales
and Marketing Coordinator of US Trust Bank. Mr. Allard has over 17 years
retail banking experience.
Vickie A. Bouvier, age 46, currently serves as Senior Vice President
and Senior Operations Officer of Westborough Bank. She has worked for
Westborough Bank in various capacities since 1976. In 2001, she was named
Senior Vice President and Senior Operations Officer. Prior to that, she
served as Vice President and Senior Operations Officer.
Margaret I. Duquette, age 51, has worked for Westborough Bank as its
Vice President-- Director of Human Resources since 1997. Prior to 1997, she
held the position of Director of Human Resources at Bay State Savings Bank
in Worcester, Massachusetts where she worked for 19 years.
16
Robert K. McCann, age 46, currently serves as the Senior Vice
President and Senior Lender of Westborough Bank. Mr. McCann joined
Westborough Bank in 1999 as Assistant Vice President, Commercial Lending.
Prior to joining Westborough Bank, he worked in a similar capacity at
Citizens-Union Savings Bank, located in Massachusetts. Mr. McCann has over
22 years of finance and banking experience.
EXECUTIVE COMPENSATION
The following table sets forth compensation paid during the fiscal
year ended September 30, 2003 to the Chief Executive Officer of Westborough
Financial Services and Westborough Bank and to the other most highly
compensated executive officers of Westborough Financial Services and
Westborough Bank whose salary and bonus for 2003 was at least $100,000. We
refer to these individuals as "named executive officers" in this proxy
statement.
Summary Compensation Table
Long Term Compensation
------------------------------------------------
Annual Compensation Awards Payouts
----------------------------------- --------------------- -----------------------
Other Restricted
Annual Stock LTIP All Other
Name and Principal Bonus Compensation Awards Options Payouts Compensation
Positions Year Salary($) ($) ($)(1) ($)(2) (#)(3) ($) ($)(4)
- ------------------------ ---- --------- ----- ------------ ---------- ------- ------- ------------
<s> <c> <c> <c> <c> <c> <c> <c> <c>
Joseph F. MacDonough 2003 $209,386 $6,500 - - - - $98,185
President and Chief 2002 $206,259 - - - - - $96,769
Executive Officer 2001 $205,365 - - $39,186 9,600 - $96,307
John L. Casagrande 2003 $108,306 $4,000 - - - - $52,071
Senior Vice President, 2002 $110,276 - - - - - $53,636
Treasurer and Clerk 2001 $103,089 $5,000 - $20,624 4,500 - $53,367
<FN>
- --------------------
<F1> Westborough Bank provides Mr. MacDonough with certain non-cash
benefits and perquisites, such as the use of an automobile, club
membership dues and certain other personal benefits, the aggregate
value of which did not exceed the lesser of $50,000 or 10% of the
total annual salary and annual bonus reported for him in the Summary
Compensation Table.
<F2> Pursuant to the Westborough Financial Services, Inc. 2001 Recognition
and Retention Plan, Mr. MacDonough and Mr. Casagrande were awarded
3,800 and 2,000 shares of restricted stock, respectively as of
January 25, 2001, which vest in 20% increments on April 30th of each
year, the first installment of which vested on April 30, 2002.
Dividends attributable to such shares are held in the trust fund of
the Westborough Financial Services, Inc. 2001 Recognition and
Retention Plan and are distributed as soon as it is administratively
feasible. The dollar amounts shown in the table for 2001 are based on
the fair market value of a share of common stock on January 25, 2001
which was $10.312. The aggregate fair market value of the restricted
stock awards made to Messrs. MacDonough and Casagrande were $114,000
and $60,000, respectively, on September 30, 2003, based on a closing
price of $30.00 per share.
<F3> Represents shares of common stock as to which the named individuals
have the right to acquire beneficial ownership pursuant to the
exercise of stock options. Such options were granted on January 25,
2001 pursuant to the Westborough Financial Services, Inc. 2001 Stock
Option Plan, and vest in 20% increments on January 25th of each year.
The first installment vested on January 25, 2002.
<F4> Includes the dollar value of the benefit of the following components:
(1) premiums paid by Westborough Bank under their split dollar life
and group term life insurance arrangements during 2003: Mr.
MacDonough, $85,774 and Mr. Casagrande, $47,751; (2) contributions on
behalf of Westborough Bank's 401(k) plan during 2003: Mr. MacDonough,
$4,448 and Mr. Casagrande, $2,670; (3) allocations of common stock
under the ESOP during 2003: Mr. MacDonough, $6,361 and Mr.
Casagrande, $1,650; and (4) accruals under the benefit restoration
plan for Mr. MacDonough during 2003 were $1,602.
</FN>
Employment Agreements. Westborough Financial Services had entered
into separate employment agreements with Messrs. MacDonough and Casagrande
to secure their services as President and Chief Executive Officer, and
Senior Vice President and Treasurer, respectively. The employment
agreements provide for an initial term of three years in the case of Mr.
MacDonough, and two years in the
17
case of Mr. Casagrande. Commencing on the first anniversary of the
effective date of each agreement, and continuing on each anniversary date
thereafter, the employment agreements may be extended, after review by the
Compensation Committee of the Board of the executive's performance, for an
additional one-year period, so that the remaining term will be three years
in the case of Mr. MacDonough, and two years in the case of Mr. Casagrande.
The employment agreements provide for each executive's base salary to
be reviewed annually by the Board. Each executive's base salary may be
adjusted based on his job performance and the overall performance of
Westborough Financial Services and Westborough Bank. In addition to base
salary, each employment agreement provides for participation in stock,
retirement, and welfare benefit plans and eligibility for fringe benefits
applicable to executive personnel. Mr. MacDonough's agreement provides for
the reimbursement of his ordinary and necessary business expenses, which
specifically include travel and entertainment expenses, expenses related to
the use of an automobile, and fees for membership in clubs and
organizations that he and Westborough Financial Services agree are for
business purposes. Mr. Casagrande's agreement provides for the
reimbursement of his ordinary and necessary business expenses, which
specifically include certain travel and entertainment expenses.
Westborough Financial Services may terminate each executive's
employment at any time with or without cause, and each executive may resign
at any time provided he provides 30 days' prior written notice and fully
cooperates in the transition of his duties. In the event an executive's
employment is terminated without cause during the term of the employment
agreement, the executive will be entitled to severance benefits. These
severance benefits include a lump sum payment equal to the present value of
the base salary and bonus payments that would have been made to the
executive for the remaining term of his employment agreement, assuming the
executive would have been awarded a bonus for each year remaining in the
agreement term equal to the highest annual bonus paid to him in the
preceding three-year period and paid his base salary during the remaining
agreement term at the annual rate in effect as of the termination. In
addition, the executive would be entitled to continue his participation in
the group life, health, dental, accidental death and long-term disability
plans sponsored by Westborough Bank for the remaining term of his
employment agreement. The same severance benefits would be payable if the
executive resigns during the term of the employment agreement following:
failure of the Board to reappoint the executive to the position provided
for in his employment agreement; failure of Westborough Financial Services
to vest in the executive the duties set forth in the agreement; and
Westborough Financial Services's material breach of the agreement. The
employment agreements also provide certain uninsured benefits in the event
the executive's employment terminates because of death or disability.
Under his employment agreement, Mr. MacDonough agrees that for the
three-year period following his termination of employment, he will not take
a position with any competitor that would require him to work within a 50
mile radius of the headquarters of Westborough Financial Services or
Westborough Bank. Mr. Casagrande agrees under his employment agreement that
for a period of two years following his termination of employment he will
not take a position with any competitor that would require him to work
within a 30 mile radius of the headquarters of Westborough Financial
Services or Westborough Bank.
Change in Control Provisions. In the event Mr. MacDonough or Mr.
Casagrande resigns for any reason or is terminated without cause following
a change in control of Westborough Financial Services or Westborough Bank,
he will be entitled to certain severance benefits. These severance benefits
include a lump sum payment equal to the present value of the base salary
and bonus payments that would have been made to the executive for the
remaining term of his employment agreement, assuming the executive would
have been awarded a bonus for each year remaining in the agreement term
equal to the highest annual bonus paid to him in the preceding three-year
period and paid his base salary during the remaining agreement term at the
annual rate in effect as of the termination. However, in no event will the
amount of
18
this lump sum payment be more than 2.99 multiplied by the executive's
average annual compensation for the preceding five years. In addition, the
executive will be entitled to continue his participation in the group life,
health, dental, accidental death and long-term disability plans sponsored
by Westborough Bank for the remaining term of his employment agreement. A
second-step conversion will not trigger additional benefits or accelerate
benefits under the employment agreements or under any other arrangement.
If Westborough Financial Services or Westborough Bank experiences a
change in ownership, a change in effective ownership or control or a change
in the ownership of a substantial portion of their assets as contemplated
by section 280G of the Internal Revenue Code, a portion of any severance
payments under the employment agreements might constitute an "excess
parachute payment" under current federal tax laws. Any excess parachute
payment would be subject to a 20% federal excise tax payable by the
executive. Neither Westborough Bank nor Westborough Financial Services
could claim a federal income tax deduction for an excess parachute payment.
The employment agreements require Westborough Financial Services to
indemnify each executive against the financial effects of the excise tax.
BENEFIT PLANS
Pension Plans. Westborough Bank maintains a tax-qualified pension
plan that covers substantially all employees who have attained age 21 and
have at least one year of service. The following table shows the estimated
aggregate benefits payable under the pension plan upon retirement at age 65
with various years of service and average compensation combinations.
Years of Service
Average --------------------------------------------------------------
Compensation 10 15 20 25 30 35
- ------------ -- -- -- -- -- --
<s> <c> <c> <c> <c> <c> <c>
$100,000 $15,862 $23,793 $31,724 $39,655 $39,655 $39,655
$120,000 $19,562 $29,343 $39,124 $48,905 $48,905 $48,905
$125,000 $20,487 $30,730 $40,974 $51,217 $51,217 $51,217
$140,000 $23,262 $34,893 $46,524 $58,155 $58,155 $58,155
$150,000 $25,112 $37,668 $50,224 $62,780 $62,780 $62,780
$160,000 $26,962 $40,443 $53,924 $67,405 $67,405 $67,405
$175,000 $29,737 $44,605 $59,474 $74,342 $74,342 $74,342
$200,000 $34,362 $51,543 $68,724 $85,905 $85,905 $85,905
$300,000 $34,362 $51,543 $68,724 $85,905 $85,905 $85,905
$400,000 $34,362 $51,543 $68,724 $85,905 $85,905 $85,905
The benefits shown in the preceding table are annual benefits payable
in the form of a single life annuity and are not subject to any deduction
for Social Security benefits or other offset amounts. At September 30,
2003, Mr. MacDonough's and Mr. Casagrande's average compensation and
estimated years of service were $198,135 and 25.75 years of service and
$117,908 and 9.75 years of service, respectively.
Mr. MacDonough and Mr. Casagrande are entitled to supplemental
retirement benefits under an Executive Supplemental Compensation Agreement
each has entered into with Westborough Bank. Under each agreement, each
executive is entitled to an annual retirement benefit, payable at age 65 in
the form of a single life annuity, equal to 70% of his benefit computation
base, but reduced by the sum of: 2% multiplied by the executive's annual
primary Social Security benefit multiplied by his years of service, plus
his annual retirement benefit under any tax-qualified defined benefit
pension plan, plus the annual annuity payable to the executive under his
Split Dollar Agreement. Under the agreements, the executive's benefit
computation base is his average annual compensation during the 12
consecutive calendar quarters in which his compensation is the highest.
19
Employee Stock Ownership Plan. This plan is a tax-qualified plan that
covers substantially all employees of Westborough Bank and Westborough
Financial Services who have at least one year of service and have attained
age 21.
The ESOP purchased 44,200 shares of common stock issued by
Westborough Financial Services in its mutual holding company reorganization
with borrowed funds. This loan is for a term of 15 years and calls for
level annual payments of principal and interest. The plan has pledged the
shares as collateral for the loan and holds them in a suspense account.
The plan will release a portion of the pledged shares annually,
allocating the shares released each year among the accounts of participants
in proportion to their salary for the year. For example, if a participant's
base salary for a year represents 1% of the total base salaries of all
participants for the year, the plan would allocate to that participant 1%
of the shares released for the year. Participants direct the voting of
shares allocated to their accounts. Shares in the suspense account will
usually be voted in a way that mirrors the votes which participants cast
for shares in their individual accounts.
This plan may purchase additional shares in the future, and may do so
using borrowed funds, cash dividends, periodic employer contributions or
other cash flow.
Benefit Restoration Plan. Westborough Financial Services has also
adopted a benefit restoration plan for Mr. MacDonough. This plan is
designed to provide Mr. MacDonough with the benefits that would otherwise
be earned by him as a participant in the 401(k) Plan and the employee stock
ownership plan if such benefits were not limited by certain provisions of
the Internal Revenue Code. The benefit restoration plan provides for a
benefit equal in value to the allocations under the employee stock
ownership plan and the 401(k) that would have been made on Mr. MacDonough's
behalf but for these IRS limits, including employer matching contributions
that would have been made under the 401(k) Plan if Mr. MacDonough had
elected to make pre-tax contributions to the 401(k) Plan up to the maximum
percentage of salary permitted under the terms of the plan and the annual
IRS limit on pre-tax contributions did not apply.
Under the benefit restoration plan, a bookkeeping account has been
established for Mr. MacDonough which will be credited with a number of
"stock units" equal to the number of shares that could not be allocated on
his behalf under the employee stock ownership plan each year because of the
IRS limits. The value of this supplemental employee stock ownership plan
bookkeeping account at any time is equal to the number of stock units
credited to the account multiplied by the current fair market value per
share. A bookkeeping account also has been established for Mr. MacDonough
which will be credited each year with an amount equal to the employer
matching contributions that could not be allocated to his account under the
401(k) Plan because of the IRS limits. Each year, this supplemental
employer matching contribution bookkeeping account will be credited with
hypothetical investment earnings as if the amount credited to the account
were invested in certain investment funds selected by the Compensation
Committee.
Unless a different time or form of distribution is elected by Mr.
MacDonough within the 30-day period following the effective date of the
plan, the value of his supplemental employee stock ownership plan and
employer matching contribution bookkeeping accounts will be paid to him in
one lump sum cash payment as soon as possible following the end of the
calendar year in which his employment terminates. The benefit restoration
plan is an unfunded plan, and benefits payable thereunder will be paid from
the general assets of Westborough Financial Services.
Officers' Deferred Compensation Plan. Westborough Financial Services
also maintains the Officers' Deferred Compensation Plan of Westborough
Financial Services, Inc., a non-qualified plan, in
20
order to offer eligible executives the opportunity to defer the receipt of
a portion of their income in a manner that defers the taxation of such
income.
2001 Stock Option Plan. The Westborough Financial Services, Inc. 2001
Stock Option Plan was adopted by our Board of Directors and approved by our
shareholders at an annual meeting held on January 25, 2001. Article IX of
the Westborough Financial Services, Inc. 2001 Stock Option Plan ("Stock
Option Plan") to allow for acceleration of vesting upon retirement of the
option holder or a change in control of Westborough Financial Services,
terms that are defined in the plan, was approved by our shareholders at our
2002 Annual Meeting. No additional options were granted to the named
executive officers during the 2003 fiscal year.
The purpose of the Stock Option Plan is to encourage the retention of
key employees and directors by facilitating their purchase of a stock
interest in Westborough Financial Services. The Stock Option Plan is not
subject to ERISA and is not a tax-qualified plan. Westborough Financial
Services has reserved an aggregate of 55,348 shares of common stock for
issuance upon the exercise of stock options granted under the plan.
Awards typically vest and become distributable at the rate of 20% per
year, over a five year period, subject to automatic full vesting on the
date of the Award holder's death, disability, retirement or upon a change
in control of Westborough Financial Services.
Westborough Financial Services may amend or terminate the Stock
Option Plan, in whole or in part, at any time, subject to the requirements
of all applicable laws.
The following table provides the value for "in-the-money" options,
which represent the positive spread between the exercise price of any such
existing stock options and the closing price per share of the common stock
on September 30, 2003, the last trading day of the 2003 fiscal year for
Westborough Financial Services, which was $30.00 per share.
2003 Fiscal Year-End Option/SAR Values(1)
- -------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Shares Value Underlying Unexercised In-the-Money
Acquired Realized Options/SARs at Fiscal Options/SARs at Fiscal
on on Year-End Year-End
Exercise Exercise (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable(2)
- -------------------- -------- -------- ------------------------- ----------------------------
<s> <c> <c> <c> <c>
Joseph F. MacDonough - - 3,840/5,760 75,602/113,403
John L. Casagrande 1,800 33,908 0/2,700 0/53,158
<FN>
- --------------------
<F1> All options were granted on January 25, 2001, and vest at the rate of
20% per year beginning on January 25, 2002.
<F2> The closing price per share of common stock on September 30, 2003,
the last trading day of the 2003 fiscal year, was $30.00, and all
options have an exercise price of $10.312 per share, which equals a
spread of $19.688 per share.
</FN>
2001 Recognition and Retention Plan. The Westborough Financial
Services, Inc. 2001 Recognition and Retention Plan was adopted by our Board
of Directors and approved by our shareholders at an annual meeting held on
January 25, 2001. Article X of the Westborough Financial Services, Inc.
2001 Recognition and Retention Plan ("RRP") to allow for acceleration of
vesting upon retirement or change in control of Westborough Financial
Services, terms which are defined in the plan, was approved by our
shareholders at our 2002 Annual Meeting.
Similar to the Stock Option Plan, the RRP functions as a long-term
incentive compensation program for eligible officers, employees and
directors of Westborough Financial Services and
21
Westborough Bank. The RRP is not subject to ERISA and is not a tax-
qualified plan. Westborough Financial Services pays all costs and expenses
of administering the RRP.
The maximum number of restricted stock awards ("Awards") that may be
granted under the RRP is 22,139 shares of common stock. Shares of common
stock subject to an Award are held in a trust until the Award vests at
which time the shares of common stock attributable to the portion of the
Award that have vested are distributed to the Award holder. An Award
recipient is entitled to exercise voting rights and receive cash dividends
with respect to the shares of common stock subject to his Award, whether or
not the underlying shares have vested.
Awards typically vest and become distributable at the rate of 20% per
year, over a five year period, subject to automatic full vesting on the
date of the Award holder's death, disability, retirement or upon a change
in control of Westborough Financial Services.
Westborough Financial Services may amend or terminate the RRP, in
whole or in part, at any time, subject to the requirements of all
applicable laws.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Westborough Bank does not make loans to its executive officers or
employees. However, Westborough Bank does make loans to its non-employee
directors. These loans bear interest at the same rate as loans offered to
non-director borrowers and have the same underwriting terms that apply to
non-director borrowers. The outstanding principal balance of such loans to
directors totaled $1,235,580 or 4.30% of Westborough Financial Services's
total equity at September 30, 2003.
Westborough Financial Services retains the law firm of Tashjian,
Simsarian & Wickstrom. Mr. James E. Tashjian, a director of Westborough
Financial Services and Westborough Bank, and a trustee of Westborough
Bancorp, MHC, has been a partner of Tashjian, Simsarian & Wickstrom since
1995. The legal fees received by the law firm for professional services
rendered to Westborough Bank during the year ended September 30, 2003 did
not exceed 5% of the firm's gross revenues.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Westborough Financial Services's directors and executive officers,
and persons who own more than 10% of Westborough Financial Services's
common stock, to report to the SEC their initial ownership of Westborough
Financial Services's common stock and any subsequent changes in that
ownership. Specific due dates for these reports have been established by
the SEC and Westborough Financial Services is required to disclose in this
proxy statement any late filings or failures to file.
To Westborough Financial Services's knowledge, based solely on its
review of the copies of such reports furnished to Westborough Financial
Services and written representations that no other reports were required
during the fiscal year ended September 30, 2003, all Section 16(a) filing
requirements applicable to Westborough Financial Services's executive
officers and directors during fiscal 2003 were met.
22
----------------------
PROPOSAL 2
RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
-------------------------
The Board of Directors has appointed Wolf & Company, P.C. to act as
the independent public accountants for Westborough Financial Services for
the fiscal year ending September 30, 2004, and we are asking shareholders
to ratify the appointment. Representatives of Wolf & Company, P.C. are
expected to attend the Annual Meeting.
==========================================================================
The Board of Directors unanimously recommends a vote "FOR" the ratification
of the appointment of Wolf & Company, P.C. as independent public
accountants for Westborough Financial Services.
==========================================================================
AUDIT FEES
During the fiscal year ended September 30, 2003, Westborough
Financial Services retained and paid the following fees to Wolf & Company,
P.C. for services rendered:
* Audit services, including quarterly reviews of interim
financial information, of $83,000; and
* All other fees, including tax compliance, of $19,750.
<page> 23
ADDITIONAL INFORMATION
INFORMATION ABOUT SHAREHOLDER PROPOSALS
Under the proxy solicitation regulations of the SEC, if you wish to
submit a proposal to be included in our proxy statement for the 2005 Annual
Meeting, we must receive it by August 21, 2004. SEC rules contain standards
as to whether shareholder proposals are required to be included in the
proxy statement. Any such proposal will be subject to 17 C.F.R. [SECTION]
240.14a-8 of the rules and regulations promulgated by the SEC.
In addition, under Westborough Financial Services's Bylaws, if you
wish to bring other business before an annual meeting (which is not
included in the proxy statement for the 2005 Annual Meeting), you must be a
shareholder of record and have given timely notice in writing to the Clerk
of Westborough Financial Services according to the procedures set forth in
our Bylaws.
By Order of the Board of Directors,
/s/ John L. Casagrande
John L. Casagrande
Clerk
Westborough, Massachusetts
December 19, 2003
==========================================================================
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.
==========================================================================
24
REVOCABLE PROXY
Westborough Financial Services, Inc.
This proxy is solicited on behalf of the Board of Directors of
Westborough Financial Services, Inc.
for the Annual Meeting of Stockholders to be held on
Thursday, January 29, 2004.
The undersigned stockholder of Westborough Financial Services, Inc.
hereby appoints Paul F. McGrath and James E. Tashjian, or each of them, with
full powers of substitution, to attend and act as proxy for the undersigned
and to vote all shares of common stock of Westborough Financial Services,
Inc. which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders to be held at the Wyndham Westborough Hotel located at 5400
Computer Drive, Westborough, Massachusetts 01581, on Thursday, January 29,
2004, at 3:00 p.m., local time, and at any adjournment or postponement
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF YOU DO NOT GIVE US ANY DIRECTION,
THIS PROXY WILL BE VOTED FOR THE PROPOSALS IN ITEMS 1 AND 2.
(Continued on Reverse Side)
PLEASE COMPLETE, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE
AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
The Board of Directors recommends a vote "FOR" each of the proposals in Items
1 and 2.
Please mark your vote as indicated in this example. [X]
I will attend the annual meeting. [ ]
(Please mark box if you plan to attend the annual meeting.) (Important: If
your shares are not registered in your name, you will need additional
documentation to attend the annual meeting.)
1. Election of five directors for terms of FOR WITHHOLD
three years each and one director for a all nominees for all nominees
term of two years. (except as
otherwise
Nominees: James N. Ball, Nelson F. Ball, indicated)
Nancy M. Carlson, Benjamin H. Colonero, Jr., [ ] [ ]
Roger B. Leland and Joseph F. MacDonough.
Instruction: TO WITHOLD AUTHORITY to vote for any individual nominee, write
that nominee's name in the space provided:
________________________________________________
2. Ratify the appointment of Wolf & Company, P.C. as our independent public
accountant for the fiscal year ending September 30, 2004.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The undersigned hereby acknowledges
receipt of the Notice of Annual
Meeting of Stockholders and the proxy
statement for the annual meeting.
(Signature(s))__________________________
Dated:__________________________________
Please sign exactly as your name
appears on this proxy. Joint owners
should each sign personally. If
signing as attorney, executor,
administrator, trustee or guardian,
please include your full title.
Corporate or partnership proxies
should be signed by an authorized
officer.