SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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 Under Rule14a-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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined.):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a) (2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[Westborough Financial Services, Inc. LETTERHEAD]
January 3, 2006
Dear Shareholder:
You are cordially invited to attend the 2006 Annual Meeting of
Shareholders of Westborough Financial Services, Inc., the holding company
for The Westborough Bank, which will be held on January 26, 2006 at 3:00
p.m., local time, at the Indian Meadows Country Club located at 275
Turnpike Road, 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. Directors and
officers of Westborough Financial Services as well as a representative from
our independent auditors, Wolf & Company, P.C., will be present to respond
to any questions shareholders may have.
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 26, 2006
Time: 3:00 p.m., Local Time
Place: Indian Meadows Country Club
275 Turnpike Road
Westborough, Massachusetts 01581
At our 2006 Annual Meeting, we will ask you to:
1. Elect four directors to serve for a three-year term to expire
at the 2009 Annual Meeting. The following four directors are
the Board of Directors' nominees:
* James N. Ball * John L. Casagrande
* David E. Carlstrom * Robert A. Klugman
2. 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 16,
2005, the record date.
By Order of the Board of Directors,
/s/ John L. Casagrande
John L. Casagrande
Clerk
Westborough, Massachusetts
January 3, 2006
===========================================================================
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 January 3, 2006 to all shareholders
entitled to vote. If you owned common stock of Westborough Financial
Services at the close of business on December 16, 2005, the record date,
you are entitled to vote at the Annual Meeting. On the record date, there
were 1,594,774 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 16, 2005. 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.
2
VOTE BY WESTBOROUGH BANCORP, MHC
Westborough Bancorp, MHC is the holding company of Westborough
Financial Services and 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 64.45% 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" Proposal 1.
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.
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." A broker non-vote would
have no effect on the outcome of Proposal 1 because only a plurality of
votes cast is required to elect a director.
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
* 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.
3
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, 2005, which will be
filed with the Securities and Exchange Commission (the "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
4
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' common stock as of December 6,
2005. 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 that an individual has the right to acquire
within 60 days (such as stock options) after December 6, 2005. Two or more
persons may be considered the beneficial owner of the same shares. We
obtained the information provided in the following table from filings with
the SEC and with Westborough Financial Services. In this proxy statement,
"voting power" is the power to vote or direct the voting of shares, and
"investment power" includes the power to dispose or direct the disposition
of shares.
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership(1) Percent
- --------------- -------------------------------- ----------------------- -------
<s> <c> <c> <c>
Common Stock Westborough Bancorp, MHC 1,027,893 64.45%
$0.01 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' common stock, par value $0.01 per share, beneficially
owned by each director, the named executive officers identified in the
Summary Compensation Table included elsewhere in this proxy statement, and
all directors and executive officers of Westborough Financial Services as a
group, as of December 6, 2005. The percent of common stock outstanding was
based on a total of 1,594,774 shares of Westborough Financial Services'
common stock outstanding as of December 6, 2005, plus shares of common
stock that such person or group has the right to acquire within 60 days
after December 6, 2005 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.
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 1,450(3) *
Edward S. Bilzerian Director 4,450(4) *
Nancy M. Carlson Director 200 *
David E. Carlstrom Director 3,950(5) *
John L. Casagrande Senior Vice President, Chief
Financial Officer, Treasurer, 5,102(6) *
Clerk and Director
Benjamin H. Colonero, Jr. Director 40 *
Robert A. Klugman Director 3,450(7) *
Jeffrey B. Leland Director 600 *
5
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>
Joseph F. MacDonough President, Chief Executive 21,984(8) 1.4%
Officer and Director
Paul F. McGrath Director 5,850(9) *
Charlotte C. Spinney Director 3,040(10) *
Phyllis A. Stone Director 3,100(11) *
James E. Tashjian Director 4,450(12) *
All directors and executive
officers as a group
(18 persons)(13) 99,289 6.2%
<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 6, 2005.
These amounts also include unvested restricted stock awards under
the Westborough Financial Services, Inc. 2001 Recognition and Retention
Plan. Under the plan, each of Mr. Nelson Ball, Mr. Bilzerian, Mr.
Carlstrom, Mr. Klugman, Mr. McGrath, Ms. Spinney, Ms. Stone and Mr.
Tashjian holds unvested restricted stock awards of 90 shares of
common stock. Under the plan, Mr. Casagrande and Mr. MacDonough hold
unvested restricted stock awards of 400 and 760 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 held by the outside directors and by
Messrs. Casagrande and MacDonough will vest on April 30, 2006.
<F2> Includes 700 shares held jointly with Mr. Ball's spouse.
<F3> Includes options to purchase 1,000 shares that are currently vested
or will vest within 60 days of December 6, 2005. Excludes 3,500
shares held by his spouse for which Mr. Ball disclaims beneficial
ownership.
<F4> Includes options to purchase 1,000 shares that are currently vested
or will vest within 60 days of December 6, 2005.
<F5> Includes options to purchase 600 shares that are currently vested or
will vest within 60 days of December 6, 2005.
<F6> Includes 705 shares held in Westborough Bank's 401(k) plan and
options to purchase 2,700 shares that are currently vested or will
vest within 60 days of December 6, 2005.
<F7> Includes options to purchase 1,000 shares that are currently vested
or will vest within 60 days of December 6, 2005.
<F8> Includes: 1,741 shares held in Mr. MacDonough's individual retirement
account; 314 shares held in his spouse's individual retirement
account; 1,679 shares held in Westborough Bank's 401(k) plan; 3,500
shares held jointly with his spouse; and options to purchase 9,600
shares that are currently vested or will vest 60 days of December 6,
2005.
<F9> Includes 5,000 shares held in Mr. McGrath's individual retirement
account and options to purchase 400 shares that are currently vested
or will vest within 60 days of December 6, 2005.
<F10> Includes: 1,500 shares held in Ms. Spinney's individual retirement
account; 90 shares held as custodian for a minor child under the
Uniform Transfer to Minors Act ("UTMA"); and options to purchase
1,000 shares that are currently vested or will vest within 60 days of
December 6, 2005.
<F11> Includes: 75 shares held by Ms. Stone as custodian under the UTMA;
1,500 shares held jointly with her spouse and options to purchase 200
shares that are currently vested or will vest within 60 days of
December 6, 2005.
<F12> Includes 3,000 shares held jointly with his spouse and options to
purchase 1,000 shares that are currently vested or will vest within
60 days of December 6, 2005. (Footnotes continued on next page.)
6
<F13> 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 First Bankers Trust serves
as trustee (the "ESOP Trustee"). The ESOP Trust purchased these
shares with funds borrowed from Westborough Financial Services, and
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 6, 2005, 14,735 shares held by the ESOP
Trust have been released and are allocated to participant accounts.
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: 897
shares to Mr. Casagrande and 1,350 shares to Mr. MacDonough. The
amount of shares for all directors and executive officers as a group
also includes 29,465 shares held by the ESOP Trust that have not been
allocated to eligible employees as of December 6, 2005, over which
the ESOP Committee (consisting of Ms. Carlson and Messrs. Carlstrom
and Klugman) 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>
7
DISCUSSION OF PROPOSALS RECOMMENDED BY BOARD
___________________________________
PROPOSAL 1
ELECTION OF DIRECTORS
___________________________________
GENERAL
The Nominating and Corporate Governance Committee has nominated four
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 Nominating Committee of the Board of
Directors. If for any reason these nominees prove unable or unwilling to
stand for election, the Nominating Committee 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 43 2009 Director 2003
David E. Carlstrom 71 2009 Director 1976
John L. Casagrande 59 2009 Senior Vice President, Chief
Financial Officer, Treasurer,
Clerk and Director 1994
Robert A. Klugman 54 2009 Director 1994
Continuing Directors
- -------------------------
Nelson P. Ball 74 2007 Director 1980
Edward S. Bilzerian 72 2008 Director 1992
Nancy M. Carlson 59 2007 Director 2003
Benjamin H. Colonero, Jr. 57 2007 Director 2003
Jeffrey B. Leland 40 2007 Director 2005
Joseph F. MacDonough 59 2007 President, Chief Executive
Officer and Director 1982
Paul F. McGrath 59 2008 Director 1991
Charlotte C. Spinney 69 2008 Director 1990
Phyllis A. Stone 62 2008 Director 1999
James E. Tashjian 64 2008 Director 1973
<FN>
- --------------------
<F1> As of September 30, 2005.
<F2> Includes service as a trustee of Westborough Bank prior to the
formation of Westborough Financial Services in 2000.
</FN>
8
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 and president of Secure Futures, Inc.
He has been in that position since 1984. Mr. Ball is a financial
independence specialist and a member of the National Association of
Securities Dealers as a registered representative. Mr. Ball assists
individuals, families and small business owners to create and maintain
multi-generational wealth. Mr. Ball is the son of Nelson P. Ball, also a
member of the Board of Directors.
David E. Carlstrom is formerly the President of Carlstrom Pressed
Metal Co., Inc., a contract manufacturer of metal stampings located in
Westborough for the past 55 years, and now serves as a consultant to the
family owned company. Mr. Carlstrom also served in the United States Air
Force and retired as a Lieutenant Colonel. He served as the President of
the Westborough Rotary Club and is the former Vice Chairman of the CMEA,
The Employers Association.
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 had served as a
director of the Massachusetts Bank Insurance Association, a division of the
Massachusetts Bankers Association.
Robert A. Klugman, M.D., F.A.C.P. has practiced general medicine in
Westborough, Massachusetts for over 25 years. Dr. Klugman is currently the
Vice Chair of Medicine at the University of Massachusetts Medical School as
well as Medical Director of Managed Care for UMASS/Memorial.
CONTINUING 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 40 years. Mr. Ball is the father of James N. Ball, also
a member of the Board of 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 of Dresser Industries. He has been self-employed for over 18
years. Mr. Bilzerian was a member of the Worcester Airport Commission and
was Chairman of the Worcester Health and Hospital Authority.
Nancy M. Carlson is the owner and president of Suburban Staffing,
Inc., a full-service staffing firm located in Westborough, Massachusetts
since 1968. She purchased the company in 1994 and has grown in size and
services to include consulting services, Human Resources and Management
training, automated data management and conversions.
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 430 seniors.
9
Jeffrey B. Leland has practiced estate administration, elder law and
real estate law and other general practices of law at Leland Law
Associates, P.C. for 14 years. At the same time, he has also served as an
insurance broker selling property and casualty insurance through Leland
Insurance Agency, Inc. Both Leland Law Associates, P.C. and Leland
Insurance Agency, Inc. are located in Northborough, Massachusetts. Mr.
Leland is an officer and director of both of the corporations.
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.
Paul F. McGrath is a certified public accountant and has served as
President of Mottle McGrath Braney & Flynn, P.C. for over fifteen 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. Ms. Spinney
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 served as Vice President and Treasurer of Comey Oil
Co., Inc., located in Westborough, Massachusetts, for 13 years prior to her
retirement in 2001. Ms. Stone served in various other capacities within
Comey Oil for over 30 years. Ms. Stone 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 an attorney engaged in the general practice of
law and is associated with the firm of Tashjian, Simsarian & Wickstrom, LLP
located in Worcester, Massachusetts. He has engaged in the general practice
of law for over 30 years.
===========================================================================
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' Board of Directors currently consists
of 14 members. Westborough Financial Services' Articles of Organization
provides that the Board shall be divided into three classes. The Nominating
and Corporate Governance Committee of the Board of Directors has nominated
four directors for election at the 2006 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' 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 the Chairman,
other key executives and our principal external advisers (legal counsel,
auditors, financial advisors and other consultants).
The Board of Directors held 13 regular meetings and 0 special
meetings during the fiscal year ended September 30, 2005. 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 fully comply with the rules of 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;
11
* 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,
www.westboroughbank.com. A copy of the Code of Ethics may also be obtained
free of charge by sending a written request to:
John L. Casagrande, Clerk
Westborough Financial Services, Inc.
100 East Main Street
Westborough, Massachusetts 01581
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.
12
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, www.westboroughbank.com. A copy of the Code of Ethics for
Senior Financial Officers may also be obtained free of charge by sending a
written request to:
John L. Casagrande, Clerk
Westborough Financial Services, Inc.
100 East Main Street
Westborough, Massachusetts 01581
Independent Directors
Although the stock of Westborough Financial Services, Inc. is not
traded on The Nasdaq Stock Market, we use the definition of independence of
the The Nasdaq Stock Market's rules to determine the independence of our
directors. 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 that, 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:
* 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
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* 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 under 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 James E.
Tashjian to serve as the presiding director at the executive sessions for
the 2006 fiscal year. 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. Specifically, in addition to the "independence"
requirements discussed above, "independent" audit committee members must:
(1) not accept, directly or indirectly, any consulting, advisory, or other
compensatory fess from Westborough Financial Services or any subsidiary of
Westborough Financial Services other than in the member's capacity as a
member of the board of directors and any board committee; (2) not be an
affiliated person of Westborough Financial Services or any subsidiary of
Westborough Financial Services; and (3) not have participated in the
preparation of the financial statements of Westborough Financial Services
or any current subsidiary of Westborough Financial Services at any time
during the past three years. In addition, The Nasdaq Stock Market's rules
require that all audit committee members be able to read and understand
fundamental financial statements, including Westborough Financial Services'
balance sheet, income statement, and cash flow statement. The Board of
Directors believes that the current members of the Audit Committee meet
these additional standards.
Furthermore, the SEC requires that Westborough Financial Services
disclose whether the Audit Committee has, and will continue to have, at
least one member who is "financial expert." The Board of Directors has
determined that Paul F. McGrath meets the SEC's definition of an audit
committee financial expert.
COMMITTEES OF THE BOARD
The Board of Directors of Westborough Financial Services has
established the following committees:
EXECUTIVE The Executive Committee exercises the powers of the Board
COMMITTEE of Directors in between Board meetings.
Directors Carlson, Carlstrom, Klugman, MacDonough, McGrath
and Tashjian currently serve as members of the committee.
Mr. MacDonough is the Chairman of the Committee. The
Executive Committee met 21 times in the 2005 fiscal year.
COMPENSATION The Compensation Committee provides advice and
COMMITTEE recommendations to the Board of Directors in the areas of
employee salaries and benefit programs.
Directors Carlson, Carlstrom, and Klugman currently serve
on the committee. Mr. Carlstrom is the Chairman of the
Committee. The Compensation Committee met 6 times in the
2005 fiscal year.
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LONG RANGE The Long Range Planning Committee sets long-range goals
PLANNING and objectives and develops plans for their achievement.
COMMITTEE The Long Range Planning Committee also recommends nominees
to the Board of Directors for consideration by the
Nominating and Corporate Governance Committee.
Directors Ball (J.), Carlson, Carlstrom, Casagrande,
Colonero, Klugman, MacDonough, McGrath, and Tashjian
currently serve on the committee. Dr. Klugman is the
Chairman of the Committee. The Long Range Planning
Committee met 9 times in the 2005 fiscal year.
NOMINATING The Nominating and Corporate Governance Committee (the
AND CORPORATE "Nominating Committee") selects nominees for election as
GOVERNANCE directors and develops and recommends to the Board of
COMMITTEE Directors corporate governance guidelines. The Board of
Directors has adopted a Charter for the Nominating
Committee, a copy of which was attached to the Westborough
Financial Services proxy statement for the 2005 Annual
Meeting.
Directors Carlstrom, McGrath and Tashjian currently serve
on the Nominating Committee. Each of the members is
independent as defined by the Nasdaq rules. Mr. McGrath is
the Chairman of the Committee. The Nominating Committee
met 5 times in the 2005 fiscal year.
As set forth in Westborough Financial Services' bylaws, it
is the policy of the Nominating Committee to consider
director candidate recommended by shareholders.
Recommendations for the 2007 annual meeting should be
submitted no later than August 29, 2006 to the Nominating
Committee in care of the Clerk of Westborough Financial
Services, Inc., 100 East Main Street, Westborough,
Massachusetts 01581. Each recommendation should include a
personal biography of the suggested nominee, an indication
of the background or experience that the shareholder
believes qualifies the person for consideration, a
statement that the person has agreed to serve if nominated
and elected, and any other information required under the
bylaws.
The Nominating Committee has used an informal process to
identify potential candidates for nomination as directors.
Each of the candidates for nomination have been
recommended by the Long Range Planning Committee, and
considered by the Nominating Committee and the Board of
Directors. In evaluating candidates for nomination, the
committee will consider the factors it believes to be
appropriate, which include the candidate's personal and
professional integrity, knowledge of the banking business,
business judgment, relevant experience and skills,
involvement in community, business and civic affairs, and
potential to be an effective director in conjunction with
the rest of the Board of Directors in collectively serving
the long-term interests of the Company's shareholders.
Although the Nominating Committee has the authority to
retain a search firm to assist it identify director
candidates, there has to date been no need to employ a
search firm. The Nominating Committee does not evaluate
potential nominees for director differently based on
whether they are recommended to the Committee by a
security holder, an officer, a director or any other
person.
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AUDIT The Audit Committee reviews the annual audit prepared by
COMMITTEE the independent accountants and recommends the appointment
of accountants. The Board of Directors of Westborough
Financial Services has adopted a written charter for the
Audit Committee, which was attached to the Westborough
Financial Services proxy statement for the 2005 Annual
Meeting.
Directors Bilzerian, Colonero, and McGrath currently serve
as members of the committee. Mr. McGrath is the Chairman
of the Committee. Mr. McGrath has been determined by the
Board of Directors to meet the definition of an "audit
committee financial expert" as such term is defined in
Section 401(e) of Regulation S-B as promulgated by the
U.S. SEC. In addition, all members of the Audit Committee
are independent directors as defined under The Nasdaq
Stock Market listing standards.
The Audit Committee met 7 times in the 2005 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 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 Westborough Financial Services'
Annual Report on Form 10-KSB for the year ended September 30, 2005.
Audit Committee of Westborough
Financial Services, Inc.
Paul F. McGrath (Chairman)
Edward S. Bilzerian
Benjamin H. Colonero, Jr.
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SHAREHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS AND ATTENDANCE AT
ANNUAL MEETINGS
The Board of Directors maintains a process for shareholders to
communicate with the Board and its committees. Shareholders of Westborough
Financial Services and other interested persons may communicate with the
Board or the Chairperson of the Nominating Committee, Audit Committee or
Compensation Committee or Executive Committee by writing to the Clerk of
Westborough Financial Services, Inc., 100 East Main Street, Westborough,
Massachusetts 01581. All communications that relate to matters that are
within the scope of the responsibilities of the Board will be presented to
the Board no later than the next regularly scheduled meeting.
Communications that relate to matters that are within the responsibility of
one of the Board committees will be forwarded to the Chairperson of the
appropriate committee. Communications that relate to ordinary business
matters that are not within the scope of the Board's responsibilities, such
as customer complaints, will be forwarded to the appropriate officer.
Solicitations, junk mail and obviously frivolous or inappropriate
communications are not forwarded, but will be made available to any
director who wishes to review them.
Directors are expected to prepare themselves for and attend all Board
meetings, the Annual Meeting of Shareholders and the meetings of the
committees on which they serve, with the understanding that on occasion a
director may be unable to attend a meeting. All of our directors, excepting
Mr. James N. Ball and Mr. Nelson P. Ball, attended our 2005 Annual Meeting.
DIRECTORS' COMPENSATION
Meeting Fees. Currently, each non-employee director of Westborough
Bank receives the following fees:
* $275 per Board of Directors meeting attended; and
* $275 per committee meeting attended, with the Chairman of each
committee receiving a fee of $350.
In addition, Directors Carlson, Carlstrom, Klugman, McGrath and
Tashjian receive an annual retainer of $7,500 as members of the Executive
Committee. Directors Bilzerian and Colonero receive an annual retainer of
$5,000 as members of the Audit Committee. The remaining directors,
Directors Ball (J.), Ball (N.), Leland, Spinney and Stone receive an annual
retainer of $3,500.
Total directors' meeting and committee fees for fiscal year 2005 were
$184,575. 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.
Deferred Income Agreements. Westborough Bank has entered into
deferred income agreements with Directors Carlstrom and Tashjian. Under
these agreements, Directors Carlstrom and Tashjian (or his beneficiary in
the event of his death) are entitled to payments for ten years following
the attainment of age 65 equal to $14,567 and $21,500, respectively, per
year payable in monthly installments. These agreements also provide for
payments upon the death of the director as if the director had attained age
65. Pursuant to his agreement, Director Carlstrom was paid an aggregate of
$14,567 in the last fiscal year.
Supplemental Compensation Agreements. Westborough Bank has also
entered into supplemental compensation agreements with Directors Ball (N.),
Bilzerian, Carlstrom, Klugman McGrath, Spinney, Stone and Tashjian which
provide for benefits when they each retire from service after age 75. Under
these agreements, each director retiring after age 75 (or his or her
beneficiary in the event of death) is entitled to an annual benefit equal
to eighty percent (80%) of the average annual fees
17
paid as calculated from the average of the highest three (3) years paid to
the director by Westborough Bank payable in monthly installments for a
period of ten (10) years. These agreements also provide for payments upon
the death or disability of the director as if the director had retired
after age 75 or upon the change of control of Westborough Bank (as defined
in the agreements).
Stock Option Plan and Recognition and Retention Plan. Our directors
(except Ball (James), Carlson, Colonero and Leland) 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 are set forth below.
Michael D. Allard, age 43, is Senior Vice President of Marketing and
Retail Sales of Westborough Bank, 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 48, 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 53, 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.
Robert K. McCann, age 48, 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 was Assistant Vice President,
Commercial Lending at Citizens-Union Savings Bank, located in
Massachusetts. Mr. McCann has over 24 years of finance and banking
experience.
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EXECUTIVE COMPENSATION
The following table sets forth compensation paid during the fiscal
year ended September 30, 2005 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 2005 was in excess of $100,000.
We refer to these individuals as "named executive officers" in this proxy
statement.
Summary Compensation Table
Long Term Compensation
------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------ --------------------- -----------------------
Other Restricted
Annual Stock LTIP All Other
Name and Principal Bonus Compensation Awards Options Payouts Compensation
Positions Year Salary($) ($) ($)(1) ($) (#) ($) ($)(2)
- ------------------------- ---- --------- ------- ------------ ---------- ------- ------- ------------
<s> <c> <c> <c> <c> <c> <c> <c> <c>
Joseph F. MacDonough 2005 $220,509 $ 6,130 - - - - $20,731
President and Chief 2004 $216,827 - - - - - $23,682
Executive Officer 2003 $209,386 $ 6,500 - - - - $98,185
John L. Casagrande 2005 $119,877 $13,393 - - - - $10,788
Senior Vice President, 2004 $120,600 - - - - - $14,404
Chief Financial Officer 2003 $108,306 $ 4,000 - - - - $52,071
Treasurer and Clerk
<FN>
- --------------------
<F1> Westborough Bank provides Mr. MacDonough with certain non-cash
benefits and perquisites, such as the use of an automobile, club
membership dues and certain other personal benefits, the aggregate
value of which did not exceed the lesser of $50,000 or 10% of the
total annual salary and annual bonus reported for him in the Summary
Compensation Table.
<F2> Includes the dollar value of the benefit of the following components:
(1) premiums paid by Westborough Bank under their split dollar life
and group term life insurance arrangements during 2005: Mr.
MacDonough, $4,396 and Mr. Casagrande, $1,601; (2) contributions on
behalf of Westborough Bank's 401(k) plan during 2005: Mr. MacDonough,
$5,369 and Mr. Casagrande, $3,900; (3) allocations of common stock
under the ESOP during 2005: Mr. MacDonough, $7,837 and Mr.
Casagrande, $5,287; and (4) accruals under the benefit restoration
plan for Mr. MacDonough during 2005 were $3,129.
</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 as
Senior Vice President, Chief Financial Officer, Treasurer, and Clerk,
respectively. The employment agreements provide for an initial term of
three years in the case of Mr. MacDonough, and two years in the case of Mr.
Casagrande. Commencing on the first anniversary of the effective date of
each agreement, and continuing on each anniversary date thereafter, the
employment agreements may be extended, after review by the Compensation
Committee of the Board of the executive's performance, for an additional
one-year period, so that the remaining term will be three years in the case
of Mr. MacDonough, and two years in the case of Mr. Casagrande.
The employment agreements provide for each executive's base salary to
be reviewed annually by the Board. Each executive's base salary may be
adjusted based on his job performance and the overall performance of
Westborough Financial Services and Westborough Bank. In addition to base
salary, each employment agreement provides for participation in stock,
retirement and welfare benefit plans, and eligibility for fringe benefits
applicable to executive personnel. Mr. MacDonough's agreement provides for
the reimbursement of his ordinary and necessary business expenses, which
specifically include travel and entertainment expenses, expenses related to
the use of an automobile, and fees for membership in clubs and
organizations that he and Westborough Financial Services agree are for
business purposes. Mr. Casagrande's agreement provides for the
reimbursement of his ordinary and necessary business expenses, which
specifically include certain travel and entertainment expenses.
19
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:
(1) failure of the Board to reappoint the executive to the position
provided for in his employment agreement; (2) failure of Westborough
Financial Services to vest in the executive the duties set forth in the
agreement; and (3) Westborough Financial Services' material breach of the
agreement. The employment agreements also provide certain uninsured
benefits in the event the executive's employment terminates because of
death or disability.
Under his employment agreement, Mr. MacDonough agrees that for the
three-year period following his termination of employment, he will not take
a position with any competitor that would require him to work within a 50
mile radius of the headquarters of Westborough Financial Services or
Westborough Bank. Mr. Casagrande agrees under his employment agreement that
for a period of two years following his termination of employment he will
not take a position with any competitor that would require him to work
within a 30 mile radius of the headquarters of Westborough Financial
Services or Westborough Bank.
Change in Control Provisions. In the event Mr. MacDonough or Mr.
Casagrande resigns for any reason or is terminated without cause following
a change in control of Westborough Financial Services or Westborough Bank,
he will be entitled to certain severance benefits. These severance benefits
include a lump sum payment equal to the present value of the base salary
and bonus payments that would have been made to the executive for the
remaining term of his employment agreement, assuming the executive would
have been awarded a bonus for each year remaining in the agreement term
equal to the highest annual bonus paid to him in the preceding three-year
period and paid his base salary during the remaining agreement term at the
annual rate in effect as of the termination. However, in no event will the
amount of this lump sum payment be less than 2.99 multiplied by the
executive's average annual compensation for the preceding five years. In
addition, the executive will be entitled to continue his participation in
the group life, health, dental, accidental death and long-term disability
plans sponsored by Westborough Bank for the remaining term of his
employment agreement. A second-step conversion will not trigger additional
benefits or accelerate benefits under the employment agreements or under
any other arrangement.
If Westborough Financial Services or Westborough Bank experiences a
change in ownership, a change in effective ownership or control or a change
in the ownership of a substantial portion of their assets as contemplated
by section 280G of the Internal Revenue Code of 1988, as amended (the
"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.
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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 $15,578 $23,367 $31,156 $38,946 $38,946 $38,946
$120,000 $19,278 $28,917 $38,556 $48,196 $48,196 $48,196
$125,000 $20,203 $30,305 $40,406 $50,508 $50,508 $50,508
$140,000 $22,978 $34,467 $45,956 $57,446 $57,446 $57,446
$150,000 $24,828 $37,242 $49,656 $62,071 $62,071 $62,071
$160,000 $26,678 $40,017 $53,356 $66,696 $66,696 $66,696
$175,000 $29,453 $44,180 $58,906 $73,633 $73,633 $73,663
$200,000 $34,078 $51,117 $68,156 $85,196 $85,196 $85,196
$300,000 $35,928 $53,892 $71,856 $89,821 $89,821 $89,821
$400,000 $35,928 $53,892 $71,856 $89,821 $89,821 $89,821
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,
2005, Mr. MacDonough's and Mr. Casagrande's average compensation and
estimated years of service were $201,667 and 27.75 years of service and
$144,750 and 11.75 years of service, respectively.
Mr. MacDonough, Mr. Casagrande and one other executive officer are
entitled to supplemental retirement benefits under a Supplemental Executive
Retirement Agreement each has entered into with Westborough Bank. Under
each agreement, each executive is entitled to an annual retirement benefit
equal to 37%, 35% and 20%, respectively, of the executive's final average
compensation for life with fifteen years certain (payable either in the
annuity form or a lump sum as elected by each executive). Under the
agreements, each executive's final average compensation is the average
annual compensation for the final three calendar years of the executive's
service to Westborough Bank. These agreements provide for full payments at
age 65 with a discount applied for retirement prior to age 65. 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 at age 65. The agreements also
provide benefits to be paid upon the termination of employment following a
change of control of Westborough Bank and Westborough Financial Services as
if the executive had attained age 65 with a five percent imputed increase
in compensation each year until age 65 would have been attained.
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
21
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 ESOP if such
benefits were not limited by certain provisions of the Code. The benefit
restoration plan provides for a benefit equal in value to the allocations
under the ESOP and the 401(k) Plan 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 that 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 ESOP each year because of the IRS limits. The value of
this supplemental ESOP 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 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 (the "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 Stock Option Plan, which allows 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
2005 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
22
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, 2005, the last trading day of the 2005 fiscal year for
Westborough Financial Services, which was $28.00 per share.
2005 Fiscal Year-End Option/SAR Values(1)
- ---------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Shares Value Underlying Unexercised In-the-Money
Acquired Realized Options/SARs at Fiscal Options/SARs at Fiscal
on on Year-End Year-End
Exercise Exercise (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable(2)
- -------------------- -------- -------- ------------------------- ----------------------------
<s> <c> <c> <c> <c>
Joseph F. MacDonough - - 7,680/1,920 135,844/33,961
John L. Casagrande - - 1,800/900 31,838/15,919
<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, 2005,
the last trading day of the 2005 fiscal year, was $28.00, and all
options have an exercise price of $10.312 per share, which equals a
spread of $17.688 per share.
</FN>
2001 Recognition and Retention Plan. The Westborough Financial
Services, Inc. 2001 Recognition and Retention Plan (the "RRP") 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 RPP, which allows 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 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
23
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
In the normal course of business, Westborough Bank makes loans to its
Directors, Officers and employees. These loans bear interest and have the
same underwriting terms that apply to any non-affiliated borrower. The
outstanding principal balance of such loans to Directors and Officers
totaled $2.352 million or 8.2% of Westborough Financial Services' total
equity at September 30, 2005.
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, 2005 did
not exceed 5% of the firm's gross revenues.
Westborough Financial Services retains Suburban Staffing, Inc., to
provide temporary staffing as needed. Nancy M. Carlson, a director of
Westborough Financial Services and Westborough Bank, is the owner and
president of Suburban Staffing, Inc., a full-service staffing firm located
in Westborough, Massachusetts since 1968, which Ms. Carlson purchased in
1994. The fees received by Suburban Staffing, Inc. for staffing services
rendered to Westborough Bank during the year ended September 30, 2005 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' directors and executive officers,
and persons who own more than 10% of Westborough Financial Services' common
stock, to report to the SEC their initial ownership of Westborough
Financial Services' common stock, on Form 3, and any subsequent changes in
that ownership, on Form 4. Reports on Form 3 must be filed within 10 days
of becoming a beneficial owner, director or officer. Reports on Form 4 must
be filed before the end of the second business day following the day on
which the transaction effecting a change in ownership occurred. Westborough
Financial Services is required to disclose in this proxy statement any late
filings or failures to file.
To Westborough Financial Services' 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, 2005, all Section 16(a) filing
requirements applicable to Westborough Financial Services' executive
officers and directors during fiscal year 2005 were met, with the exception
of the following: a Form 4 filing for director, President and CEO Joseph F.
MacDonough reflecting shares of common stock disposed of on December 7,
2004 was filed late on January 13, 2005; a Form 4 filing for Senior Vice
President Michael D. Allard reflecting stock options exercised and common
stock acquired on February 8, 2005 and common stock disposed of on February
10, 2005 was filed late on February 11, 2005; a Form 4 filing for Senior
Vice President and Senior Operations Officer Vickie A. Bouvier reflecting
stock options exercised and common stock acquired on
24
February 8, 2005 and common stock disposed of on February 11, 2005 was
filed late on February 11, 2005; and a Form 4 filing for director, Senior
Vice President, Chief Financial Officer, Treasurer and Clerk John L.
Casagrande reflecting common stock disposed of on February 14, 2005 was
filed late on February 23, 2005.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
During the fiscal years ended September 30, 2005 and 2004,
Westborough Financial Services retained Wolf & Company, P.C. to provide
audit and other services and incurred fees as follows:
2005 2004
---- ----
<s> <c> <c>
Audit fees(1) $ 94,650 $ 89,600
Tax fees(2) 20,800 20,000
All other fees -- 8,400
-------- --------
Total $115,450 $118,000
======== ========
<FN>
- --------------------
<F1> Audit fees consisted of work performed in connection with the audit
of the consolidated financial statements as well as work generally
only the independent auditors can reasonably be expected to provide,
such as quarterly reviews and review of the annual form 10-KSB
filings.
<F2> Tax fees consisted of fees related to the preparation of Westborough
Financial Services' income tax returns and reviews of income tax
provisions.
</FN>
AUDIT COMMITTEE PRE-APPROVAL POLICY
The Audit Committee, or a designated member of the Audit Committee,
shall preapprove all auditing services and permitted non-audit services
(including the fees and terms) to be performed for the Company by its
independent auditor, subject to the de minimis exceptions for non-audit
services that are approved by the Audit Committee prior to completion of
the audit, provided that: (i) the aggregate amount of all such services
provided constitutes no more than five percent of the total amount of
revenues paid by the Company to its auditor during the fiscal year in which
the services are provided; (ii) such services were not recognized by the
Company at the time of the engagement to be non-audit services; and (iii)
such services are promptly brought to the attention of the Audit Committee
and approved prior to the completion of the audit by the Audit Committee or
by one or more members of the Audit Committee who are members of the board
of directors to whom authority to grant such approvals has been delegated
by the Audit Committee. Of the services set forth in the table above, all
were preapproved by the Audit Committee.
25
ADDITIONAL INFORMATION
INFORMATION ABOUT SHAREHOLDER PROPOSALS
Shareholders may submit proposals for consideration at the 2007
Annual Meeting. In order to be included in our proxy statement for the 2007
Annual Meeting, we must receive such proposal no later than August 29,
2006. Proposals should be addressed to John L. Casagrande, Clerk,
Westborough Financial Services, Inc., 100 East Main Street, Westborough,
Massachusetts 01581. 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' bylaws, if you
wish to submit a proposal to the 2007 Annual Meeting without including such
proposal in the proxy statement for that meeting, that proposal will be
considered untimely, and the proxies solicited by the Board of Directors
will confer discretionary authority to vote on the proposal as the proxies
solicited see fit, unless you have given notice in writing according to the
procedures set forth in our bylaws to the Clerk of Westborough Financial
Services, mailed to John L. Casagrande, Clerk, Westborough Financial
Services, Inc., 100 East Main Street, Westborough, Massachusetts 01581, and
received by September 28, 2006.
By Order of the Board of Directors,
/s/ John L. Casagrande
John L. Casagrande
Clerk
Westborough, Massachusetts
January 3, 2006
===========================================================================
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.
===========================================================================
26
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 Shareholders to be held
on Thursday, January 26, 2006.
The undersigned shareholder of Westborough Financial Services, Inc.
hereby appoints Paul F. McGrath and Benjamin H. Colonero, Jr., 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 Shareholders to be held at the Indian Meadows Country Club located
at 275 Turnpike Road, Westborough, Massachusetts 01581, on Thursday, January
26, 2006, 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 SHAREHOLDER. IF YOU DO NOT GIVE US ANY
DIRECTION, THIS PROXY WILL BE VOTED FOR THE PROPOSAL IN ITEM 1.
(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" the proposal in Item 1.
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 four directors for terms of FOR WITHHOLD
three years. all nominees for all nominees
(except as
Nominees: James N. Ball, David E. otherwise
Carlstrom, John L. Casagrande and indicated)
Robert A. Klugman [ ] [ ]
Instruction: TO WITHHOLD AUTHORITY to vote for any individual nominee, write
that nominee's name in the space provided:
____________________________________________________________________________
The undersigned hereby acknowledges
receipt of the Notice of Annual Meeting
of Shareholders 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.