SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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14a-6(e)(2))
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
WESTFIELD FINANCIAL, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[LOGO] WESTFIELD
FINANCIAL, INC.
April 14, 2006
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of Westfield Financial, Inc., the holding company for
Westfield Bank, which will be held on May 19, 2006 at 10:00 a.m., Eastern
Time, at the Tekoa Country Club, located at 459 Russell Road, Westfield,
Massachusetts 01085.
The attached Notice of Annual Meeting and proxy statement describe
the formal business that we will transact at the annual meeting. In
addition to the formal items of business, management will report on the
operations and activities of Westfield Financial and Westfield Bank, and
you will have an opportunity to ask questions.
The Board of Directors of Westfield Financial has determined that an
affirmative vote on the matter to be considered at the annual meeting is in
the best interests of Westfield Financial and its shareholders and
unanimously recommends a vote "FOR" this matter.
Please complete, sign and return the enclosed proxy card promptly,
whether or not you plan to attend the annual meeting. Your vote is
important regardless of the number of shares you own. Voting by proxy will
not prevent you from voting in person at the annual meeting but will assure
that your vote is counted if you cannot attend.
On behalf of the Board of Directors and the employees of Westfield
Financial and Westfield Bank, we thank you for your continued support and
look forward to seeing you at the annual meeting.
Sincerely yours,
/s/ Donald A. Williams
Donald A. Williams
Chairman and Chief Executive Officer
WESTFIELD FINANCIAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: Friday, May 19, 2006
Time: 10:00 a.m., Eastern Time
Place: Tekoa Country Club
459 Russell Road
Westfield, Massachusetts 01085
At our 2006 Annual Meeting, we will ask you to:
1. Elect the following individuals to serve as directors for a
term of office stated next to the individual nominee's name:
Nominees Term to Expire
---------------------------- --------------
<s> <c>
David C. Colton, Jr. 2009
Mary C. O'Neil 2009
Donald A. Williams 2009
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
Westfield Financial at the close of business on March 24, 2006, the record
date.
By Order of the Board of Directors,
/s/ Donald A. Williams
Donald A. Williams
Chairman and Chief Executive Officer
Westfield, Massachusetts
April 14, 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
Westfield Financial, Inc. is a Massachusetts-chartered stock holding
company, which was organized in November 2001. Westfield Financial is
registered as a savings and loan holding company with the Office of Thrift
Supervision and owns all of the capital stock of Westfield Bank. Westfield
Mutual Holding Company owns 60.3% of the outstanding shares of Westfield
Financial's common stock, which is listed on the American Stock Exchange
under the symbol "WFD." As used in this proxy statement, "we", "us" and
"our" refer to Westfield Financial and/or its subsidiaries, depending on
the context. The term "annual meeting," as used in this proxy statement,
includes any adjournment or postponement of such meeting.
We have sent you this proxy statement and enclosed proxy card because
the Board of Directors is soliciting your proxy to vote at the annual
meeting. This proxy statement summarizes the information you will need to
know to cast an informed vote at the annual meeting. You do not need to
attend the annual meeting to vote your shares. You may simply complete,
sign and return the enclosed proxy card and your votes will be cast for you
at the annual meeting. This process is described below in the section
entitled "Voting Rights."
We began mailing this proxy statement, the Notice of Annual Meeting
and the enclosed proxy card on or about April 14, 2006 to all shareholders
entitled to vote. If you owned common stock of Westfield Financial at the
close of business on March 24, 2006, the record date, you are entitled to
vote at the annual meeting. On the record date, there were 9,302,715 shares
of common stock outstanding.
QUORUM
A quorum of shareholders is necessary to hold a valid meeting. If the
holders of at least a majority of the total number of the outstanding
shares of common stock entitled to vote are represented in person or by
proxy at the annual meeting, a quorum will exist. We will include proxies
marked as abstentions and broker non-votes to determine the number of
shares present at the annual meeting.
VOTING RIGHTS
You are entitled to one vote at the annual meeting for each share of
the common stock of Westfield Financial that you owned as of the record
date at the close of business on March 24, 2006. 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" the proposal
identified in the Notice of Annual Meeting.
If any other matter is presented, your proxy will vote the shares
represented by all properly executed proxies on such matters as a majority
of the Board of Directors determines. As of the date of this proxy
statement, we know of no other matters that may be presented at the annual
meeting, other than that listed in the Notice of Annual Meeting.
1
VOTE BY WESTFIELD MUTUAL HOLDING COMPANY
Westfield Mutual Holding Company owns 60.3% of the outstanding shares
of Westfield Financial's common stock. All shares of Westfield Financial
owned by Westfield Mutual Holding Company will be voted in accordance with
the instructions of the Board of Directors of Westfield Mutual Holding
Company. Westfield Mutual Holding Company is expected to vote "FOR" the
proposal identified in the Notice of Annual Meeting for which it is
entitled to vote.
VOTE REQUIRED
Proposal 1: Election of Three 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. Because
Westfield Mutual Holding Company owns more than 50% of Westfield
Financial's outstanding shares, we expect that Westfield Mutual Holding
Company will control the outcome of the vote on this proposal.
EFFECT OF BROKER NON-VOTES
If your broker holds shares that you own in "street name," the broker
may vote your shares on the proposal listed above even if the broker does
not receive instructions from you. If your broker does not vote on the
proposal, this will constitute a "broker non-vote." A broker non-vote would
have no effect on the outcome of the proposal because only a plurality of
votes cast is required to elect a director.
CONFIDENTIAL VOTING POLICY
Westfield Financial maintains a policy of keeping shareholder votes
confidential. We only let our Inspector of Election and certain employees
of our independent tabulating agent examine the voting materials. We will
not disclose your vote to management unless it is necessary to meet legal
requirements. Our independent tabulating agent will, however, forward any
written comments that you may have to management.
REVOKING YOUR PROXY
You may revoke your grant of proxy at any time before it is voted by:
* filing a written revocation of the proxy with the Secretary;
* submitting a signed proxy card bearing a later date; or
* attending and voting in person at the annual meeting, but you
also must file a written revocation with the Secretary of the
annual meeting prior to the voting.
If your shares are not registered in your own name, you will need
appropriate documentation from your shareholder of record to vote
personally at the annual meeting. Examples of such documentation include a
broker's statement, letter or other document that will confirm your
ownership of shares of Westfield Financial.
SOLICITATION OF PROXIES
Westfield Financial will pay the costs of soliciting proxies from its
shareholders. Directors, officers or employees of Westfield Financial and
Westfield Bank may solicit proxies by mail, telephone and other forms of
communication.
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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-K
If you would like a copy of our Annual Report on Form 10-K and
audited financials for the fiscal year ended December 31, 2005, filed with
the Securities and Exchange Commission ("SEC"), we will send you one
(without exhibits) free of charge. Please write to Philip R. Smith,
Secretary, Westfield Financial, Inc., 141 Elm Street, Westfield,
Massachusetts 01085.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders of Westfield Financial
The following table contains common stock ownership information for
persons known to Westfield Financial to "beneficially own" 5% or more of
Westfield Financial's common stock as of March 24, 2006. In general,
beneficial ownership includes those shares that a person has the power to
vote, sell or otherwise dispose of. Beneficial ownership also includes that
number of shares that an individual has the right to acquire within 60 days
(such as stock options) after March 24, 2006. Two or more persons may be
considered the beneficial owner of the same shares. Westfield Financial
obtained the information provided in the following table from filings with
the SEC and from Westfield Financial.
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent
- -------------- ------------------- -------------------- -------
<s> <c> <c> <c>
Common Stock, Westfield Mutual Holding Company 5,607,400(1) 60.3%
par value $0.01 141 Elm Street
per share Westfield, MA 01085
<FN>
- --------------------
<F1> As reported by Westfield Mutual Holding Company on a Schedule 13D
dated January 7, 2002, which reported sole voting and dispositive
power over 5,607,400 shares.
</FN>
3
Security Ownership of Management
The following table shows the number of shares of Westfield
Financial's common stock beneficially owned by each director, each
executive officer appearing in the "Summary Compensation Table," and all
directors and executive officers of Westfield Financial as a group, as of
March 24, 2006. Except as otherwise indicated, each person and each group
shown in the table has sole voting and investment power with respect to the
shares of common stock listed next to his or her name.
Amount and Nature of Percent of
Position with Beneficial Common Stock
Name Westfield Financial Ownership(1)(2)(3)(4)(5) Outstanding
- ------------------------- ------------------------- ------------------------ ------------
<s> <c> <c> <c>
Victor J. Carra Director 96,680(6) *
Gerald P. Ciejka Vice President, General 2,500(7) *
Counsel and Director of
Human Resources
David C. Colton, Jr. Director 15,668(8) *
Robert T. Crowley, Jr. Director 15,300(9) *
James C. Hagan President and Chief 18,001 *
Operating Officer
Michael J. Janosco, Jr. Chief Financial Officer 90,445(10) *
and Treasurer
Harry C. Lane Director 12,800 *
William H. McClure Director 15,800(11) *
Alan J. Miles, III Senior Vice President 3,280 *
and Chief Lending Officer
Mary C. O'Neil Director 13,200(12) *
Richard C. Placek Director 17,800(13) *
Paul R. Pohl Director 22,796(14) *
Charles E. Sullivan Director 19,800(15) *
Thomas C. Sullivan Director 37,800 *
Donald A. Williams Chairman and Chief 165,145(16) *
Executive Officer
Other Executive Officers 376,923(17) 1.8%
and ESOP
All Executive Officers 923,938 9.7%
and Directors as a Group
(17 Persons)
<FN>
- --------------------
* Less than one percent of the total outstanding shares of common
stock.
<F1> See "Principal Shareholders of Westfield Financial" for definition of
"beneficial ownership."
<F2> Based on a total of 9,302,715 shares of Westfield Financial's Common
Stock outstanding as of March 24, 2006.
<F3> Includes unvested shares of restricted stock awards held in trust as
part of the Westfield Financial, Inc. 2002 Recognition and Retention
Plan (the "RRP"), with respect to which the beneficial owner has
voting but not investment power as follows: Messrs. Colton, Crowley,
Lane, McClure, Placek, Pohl, C. Sullivan, T. Sullivan and Ms. O'Neil
each - 2,000 shares; Mr. Williams - 19,600 shares; Mr. Ciejka - 800
shares; Mr. Janosco - 11,760 shares; Mr. Hagan - 4,000 shares; and
Mr. Miles - 1,000 shares.
(Footnotes continue on the next page)
4
<F4> Includes shares allocated to the account of the individuals under the
Westfield Financial, Inc. Employee Stock Ownership Plan (the "ESOP")
with respect to which each individual has voting but not investment
powers as follows; Mr. Williams - 2,701 shares; Mr. Carra - 2,022
shares; Mr. Janosco - 2,485 shares; Mr. Hagan - 1,989 shares; and Mr.
Miles - 1,503 shares. Includes shares held in trust in Westfield
Bank's 401(k) Plan as to which each participant has investment but
not voting powers as follows: Mr. Carra - 13,538 shares; Mr. Hagan -
1,452 shares; Mr. Miles - 277 shares and Mr. Williams - 9,374 shares.
<F5> Includes 7,800 shares of common stock which may be acquired by each
of Messrs. Colton, Crowley, Lane, McClure, Placek, Pohl, C. Sullivan,
and T. Sullivan, Ms. O'Neil and includes 5,200 shares of common stock
which may be acquired by Mr. Placek pursuant to vested options
granted to them under the 2002 Stock Option Plan (the "Stock Option
Plan"). Also includes shares of common stock which may be acquired
pursuant to vested options issued under the Stock Option Plan as
follows: Mr. Williams - 72,000 shares; Mr. Janosco - 43,200 shares;
Mr. Carra - 37,255 shares and Mr. Hagan - 7,200 shares; Mr. Ciejka -
500 shares; and Mr. Miles - 500 shares.
<F6> Includes 690 shares held in an individual retirement account ("IRA")
for the benefit of Mr. Carra's spouse, 830 shares held in an IRA for
the benefit of Mr. Carra, and 7,600 shares held jointly with Mr.
Carra's spouse.
<F7> Includes 1,000 shares held in an IRA for the benefit for Mr. Ciejka.
<F8> Includes 1,432 shares held in an IRA for the benefit for Mr. Colton's
spouse, 936 shares held in an IRA for the benefit of Mr. Colton, and
500 shares held jointly with Mr. Colton's spouse.
<F9> Includes 2,500 shares held jointly with Mr. Crowley's spouse.
<F10> Includes 20,279 shares held jointly with Mr. Janosco's spouse, and
12,721 shares held in an IRA for the benefit of Mr. Janosco.
<F11> Includes 3,000 shares held jointly with Mr. McClure's spouse.
<F12> Includes 400 shares held jointly with Ms. O'Neil's spouse.
<F13> Includes 5,100 shares held by Mr. Placek's spouse
<F14> Includes 9,996 shares held jointly with Mr. Pohl's spouse.
<F15> Includes 3,000 shares held in an IRA for the benefit of Mr. Sullivan.
<F16> Includes 20,700 shares held jointly with Mr. Williams' spouse, 5,650
shares held in an IRA for the benefit of Mr. Williams, and 5,720
shares held in an IRA for the benefit of Mr. Williams' spouse.
<F17> The figures shown for each of the executive officers named in the
table do not include 343,950 shares held in trust pursuant to the
ESOP that have not been allocated as of December 31, 2005 to any
individual's account and as to which each of the executive officers
named in the table share voting powers with the other ESOP
participants. The figure shown for all directors and executive
officers as a group includes 343,950 shares as to which members of
Westfield Financial's Compensation Committee (consisting of Messrs.
Lane, Pohl and T. Sullivan) may be deemed to have sole investment
power, except in limited circumstances, thereby causing each such
member to be deemed a beneficial owner of such shares. Each of the
members of the Compensation Committee disclaims beneficial ownership
of such shares and, accordingly, such shares are not attributed to
the members of the Compensation Committee individually. See "Benefit
Plans - Employee Stock Ownership Plan."
</FN>
5
_____________________________
PROPOSAL 1
ELECTION OF DIRECTORS
_____________________________
GENERAL
Nominees Term to Expire
---------------------------- --------------
<s> <c>
David C. Colton, Jr. 2009
Mary C. O'Neil 2009
Donald A. Williams 2009
All three nominees are currently serving on Westfield Financials
Board of Directors. If you elect all the nominees listed above, they will
hold office until the annual meeting in 2009 or until their successors have
been elected and qualified.
We know of no reason why any nominee may be unable to serve as a
director. If any nominee is unable to serve, your proxy may vote for
another nominee proposed by the Board. If for any reason these nominees
prove unable or unwilling to stand for election, the Board will nominate
alternates or reduce the size of the Board of Directors to eliminate the
vacancy. The Board has no reason to believe that its nominees would prove
unable to serve if elected.
===========================================================================
The Board of Directors unanimously recommends a vote "FOR" all of the
nominees for election as directors.
===========================================================================
NOMINEES AND DIRECTORS
Term Position(s) Held with Director
Nominees Age(1) Expires Westfield Financial Since(2)
- -------------------- ------ ------- ------------------------------------ --------
<s> <c> <c> <c> <c>
David C. Colton, Jr. 62 2009 Director 1980
Mary C. O'Neil 70 2009 Director 1994
Donald A. Williams 61 2009 Chairman and Chief Executive Officer 1983
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Term Position(s) Held with Director
Continuing Directors Age(1) Expires Westfield Financial Since(2)
- ---------------------- ------ ------- --------------------- --------
<s> <c> <c> <c> <c>
Richard C. Placek 66 2007 Director 1979
Charles E. Sullivan 62 2007 Director 1992
Thomas C. Sullivan 72 2007 Director 1989
Robert T. Crowley, Jr. 57 2008 Director 1999
Harry C. Lane 67 2008 Director 1978
William H. McClure 70 2008 Director 1996
Paul R. Pohl 64 2008 Director 1999
<FN>
- --------------------
<F1> At December 31, 2005.
<F2> Includes terms served on the Board of Directors of Westfield Bank.
All members of the current Board of Directors of Westfield Financial
have served as directors since the company's inception in 2001.
</FN>
BIOGRAPHICAL INFORMATION
The principal occupation and business experience of each nominee for
election as director and each director are set forth below.
Nominees
David C. Colton, Jr. is the former owner and operator of The Colton
Agency, Inc., an insurance agency located in Westfield, Massachusetts for
the past 65 years. He recently sold the business and is serving as an
independent consultant.
Mary C. O'Neil is the Vice President of Development and Community
Relations at Noble Health Systems, located in Westfield, Massachusetts. Ms.
O'Neil has held this position since 1993. Prior to that, she served as
President of T.L. O'Neil Insurance Agency, Inc.
Donald A. Williams served as President of Westfield Bank from 1983
through 2005 and Westfield Financial from its inception in 2001 through
2005. Mr. Williams has served as Chief Executive Officer of Westfield Bank
since 1987 and Westfield Financial since its inception in 2001.
Continuing Directors
Richard C. Placek is the Chairman of Commercial Distributing Company,
located in Westfield Massachusetts. Mr. Placek has held this position since
1985. Prior to that, he served as General Manager.
Charles E. Sullivan is the President of Charles E. Sullivan C.P.A.,
Inc., a public accounting firm located in West Springfield, Massachusetts.
Mr. Sullivan has served in this capacity since 1979.
Thomas C. Sullivan is the former President and Chief Operating
Officer of Sullivan Paper Co., Inc., located in West Springfield,
Massachusetts. He retired from this position in 1998. Mr. Sullivan
presently serves as a director of Sullivan Paper Co., Inc., a position he
has held since 1959. He also serves as President and Director of Patriot
Realty, located in Appleton, Wisconsin, and is the Vice
7
President and Director of George Sullivan Realty, a realty company located
in West Springfield, Massachusetts. Mr. Sullivan has served in these
capacities since 1994 and 1970, respectively.
Robert T. Crowley, Jr. is a Certified Public Accountant and a partner
in the accounting firm of Downey, Sweeney, Fitzgerald & Co., P.C. The firm
provides tax, accounting and auditing services to the public. Mr. Crowley
has been a partner with this firm since 1980 and a Certified Public
Accountant since 1979.
Harry C. Lane is the President of John S. Lane & Son, Inc., a quarry
and asphalt company located in Westfield, Massachusetts, incorporated in
1904. Mr. Lane has served in this capacity since 1986.
William H. McClure is the President of the McClure Insurance Agency,
Inc., a position he has held since December 1993. He is the owner of 51% of
this insurance agency, which sells and services fire, casualty, life and
health insurance. He is also an owner of 103 Van Deene Realty Trust, which
is made up of a building located at that same address.
Paul R. Pohl serves as the President and Owner of Chemi-Graphic,
Inc., a name plate manufacturing company located in Ludlow, Massachusetts.
Mr. Pohl has served in this capacity since 1964.
Executive Officers Who are Not Directors
James C. Hagan, age 44, has served as President and Chief Operating
Officer of Westfield Financial and Westfield Bank since June 2005. Prior to
that, he served as Senior Vice President and Commercial Loan Department
Manager of Westfield Bank from 1998. From 1994 through 1998, Mr. Hagan was
a Vice President at Westfield Bank.
Gerald P. Ciejka, age 45, was appointed Vice President of Westfield
Financial on February 22, 2005. Mr. Ciejka was previously a partner at the
Springfield, Massachusetts law firm of Bulkley, Richardson and Gelinas in
the business organization and real estate departments. From 1997 to 2004,
he served as branch manager and senior underwriting counsel for First
American Title Insurance Company and Chicago Title Insurance Company.
Michael J. Janosco, Jr., age 59, has served as the Chief Financial
Officer and Treasurer of Westfield Bank since 1999 and of Westfield
Financial since its inception in 2001. Mr. Janosco was previously a partner
at KPMG Peat Marwick until his retirement in 1994. From 1994 to 1997, he
served as the Chief Financial Officer and Treasurer of Primary Bank,
located in Peterborough, New Hampshire. From October 1997 to March 1999, he
was a consultant to various banks.
Rebecca S. Kozaczka, age 54, has served as Vice President and
Residential Loan Officer at Westfield Bank since 1989. She worked as a
Mortgage Loan Officer and Assistant Vice President from 1985 until 1989.
Deborah J. McCarthy, age 46, has served as Vice President since 2000.
She is the Manager of the Operations and Information Systems departments.
She has worked for Westfield Bank in numerous capacities since 1979.
Alan J. Miles, III, age 43, has served as Senior Vice President and
Chief Lending Officer since August 2005. From 1998 to 2005 he served as
Vice President and Commercial loan officer.
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Leo R. Sagan, Jr., age 43, has served as the Vice President and
Controller of Westfield Financial since 2003. Prior to that he served as
Controller of Westfield Financial from 2002 to 2003 and as Assistant
Treasurer of Westfield Financial from 1999 to 2002.
SHAREHOLDER COMMUNICATIONS WITH OUR BOARD OF DIRECTORS
Shareholders may contact Westfield Financial's Board of Directors by
contacting Philip R. Smith, Secretary, at Westfield Financial, Inc., 141
Elm Street, Westfield, Massachusetts 01085 or at (413) 568-1911. All
comments will be forwarded directly to the Board of Directors.
It is Westfield Financial's policy that all directors and nominees
should attend the Annual Meeting. At the 2005 Annual Meeting, ten members
of the Board of Directors were in attendance.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND MANAGEMENT
Meetings and Committees of the Board of Directors
Westfield Financial's Board of Directors currently consists of ten
members. The Board of Directors oversees our business and monitors the
performance of our management. In accordance with our corporate governance
procedures, the Board of Directors does not involve itself in the day-to-
day operations of Westfield Financial. Westfield Financial's executive
officers and management oversee our day-to-day operations. Our directors
fulfill their duties and responsibilities by attending regular meetings of
the Board, which are held on a quarterly basis. Our directors also discuss
business and other matters with key executives and our principal external
advisers (legal counsel, auditors, financial advisors and other
consultants).
The Board of Directors of Westfield Financial held four regular
meetings and one special meeting during the fiscal year ended December 31,
2005. The Board of Directors of Westfield Bank held thirteen meetings
during the fiscal year ended December 31, 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.
Committees of the Board
The Board of Directors of Westfield Financial has established the
following committees:
Executive Committee. The Executive Committee exercises the powers of
the Board of Directors between Board meetings. The Executive Committee
consists of Directors Colton, Lane, O'Neil, C. Sullivan and Williams. The
Executive Committee of Westfield Financial did not meet during the 2005
fiscal year; however, the Executive Committee of Westfield Bank, which
serves the same functions and has the identical make-up, met forty-seven
times during the 2005 fiscal year.
Audit Committee. The Audit Committee is chaired by Director Placek,
with Directors Crowley and McClure as members. The Audit Committee assists
the Board by overseeing the audit coverage and monitoring the accounting,
financial reporting, data processing, regulatory and internal control
environments. The primary duties and responsibilities of the Audit
Committee are to: (1) oversee and monitor the financial reporting process
and internal controls system; (2) review and evaluate the audit performed
by outside auditors and report any substantive issues found during the
audit to the Board; (3) appoint, compensate and oversee the work of the
independent auditors; (4) review and approve all transactions with
affiliated parties; and (5) provide an open avenue of communication among
the independent auditors, financial and senior management, the internal
audit department and the Board. All
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members of the Audit Committee are independent directors as defined under
the American Stock Exchange listing standards. Westfield Financial believes
that Mr. Crowley qualifies as an Audit Committee Financial Expert as that
term is defined by SEC regulations. The Board of Directors has adopted a
written charter for the Audit Committee, a copy of which was attached as
Appendix A to the proxy statement filed with the SEC on April 15, 2005. The
Audit Committee of Westfield Financial met five times in the 2005 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. The Compensation Committee consists of
Directors Lane, Pohl and T. Sullivan with Director Lane serving as
Chairperson of the Committee. All members of the Compensation Committee are
independent directors as defined by the American Stock Exchange listing
standards. The Compensation Committee of Westfield Financial met five times
during the 2005 fiscal year.
Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee (the "Nominating Committee") reviews and
recommends nominees for election as directors and develops and recommends
to the Board corporate governance guidelines. Directors T. Sullivan, C.
Sullivan, Colton, and O'Neil are members of the Nominating Committee. All
members of the Nominating Committee are independent directors as defined
under the American Stock Exchange listing standards. The Board of Directors
has adopted a written charter for the Nominating and Corporate Governance
Committee, a copy of which is attached as Appendix A. The Nominating
Committee met once during the year ended December 31, 2005.
In accordance with Westfield Financial's bylaws, nominations of
individuals for election to the Board at an annual meeting of shareholders
may be made by any shareholder of record of Westfield Financial entitled to
vote for the election of directors at such meeting who provides timely
notice in writing to the Secretary of Westfield Financial. To be timely, a
shareholder's notice must be delivered to or received by the Secretary not
less than one hundred twenty (120) calendar days in advance of the
anniversary date of Westfield Financial's proxy statement released to
shareholders in connection with the previous year's annual meeting of
shareholders. The shareholder's notice to the Secretary must set forth
certain information regarding the proposed nominee and the shareholder
making such nomination. If a nomination is not properly brought before the
meeting in accordance with Westfield Financial's bylaws, the Chairman of
the meeting may determine that the nomination was not properly brought
before the meeting and shall not be considered. For additional information
about Westfield Financial's director nomination requirements, please see
Westfield Financial's bylaws.
It is the policy of the Committee to select individuals as director
nominees who shall have the highest personal and professional integrity,
who shall have demonstrated exceptional ability and judgment and who shall
be most effective, in conjunction with the other nominees to the Board, in
collectively serving the long-term interests of the shareholders.
Shareholder nominees are analyzed by the Committee in the same manner as
nominees that are identified by the Committee. Westfield Financial does not
pay a fee to any third party to identify or evaluate nominees.
David C. Colton, Jr., Mary C. O'Neil and Donald A. Williams were each
nominated by the Nominating Committee. As of December 6, 2005, the
Nominating and Corporate Governance Committee had not received any
shareholder recommendations for nominees in connection with the 2006 Annual
Meeting.
10
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.
Westfield Financial's Audit Committee has reviewed and discussed the
audited financial statements of Westfield Financial for the fiscal year
ended December 31, 2005 with management and its independent auditor, Wolf &
Company, P.C., a registered public accounting firm. Westfield Financial's
Audit Committee has discussed the matters required by Statement on Auditing
Standards No. 61, Communication with Audit Committee, as may be modified or
supplemented, with Wolf & Company, P.C.
Westfield Financial's Audit Committee has also received the written
disclosures and the letter from Wolf & Company, P.C. required by
Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees, has discussed the independence of Wolf & Company, P.C.
and considered whether the provision of non-audit services by Wolf &
Company, P.C. is compatible with maintaining the auditor's independence.
Based on the review and discussions noted above, Westfield
Financial's Audit Committee recommended to the Board that Westfield
Financial's audited financial statements be included in the company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2005 to
be filed with the Securities and Exchange Commission.
A representative of Wolf & Company, P.C. is expected to be present at
the annual meeting to respond to appropriate questions and will have the
opportunity to make a statement if he or she so desires.
Westfield Financial, Inc.
Audit Committee
Richard C. Placek, Chairperson
Robert T. Crowley, Jr.
William H. McClure
11
PRINCIPAL ACCOUNTING FEES AND SERVICES
During the fiscal years ended December 31, 2004 and December 31,
2005, respectively, Westfield Financial retained and paid Deloitte & Touche
LLP, the member firms of Deloitte Touche Tohmatsu, and their respective
affiliates, and Wolf & Company, P.C. to provide audit and other services as
follows:
AUDIT FEES
Wolf & Company, P.C. Deloitte & Touche LLP
-------------------- ---------------------
2005 2004 2004
-------- ------- ---------------------
<s> <c> <c> <c>
Audit(1) $249,000 $35,000 $71,000
Audit-Related Fees - - -
Tax Fees(2) $ 58,000 25,000 -
All Other Fees - - -
Total $307,000 $60,000 $71,000
<FN>
- --------------------
<F1> Audit fees consisted of audit work performed in the preparation of
financial statements as well as work generally only the independent
auditors can reasonably be expected to provide, such as statutory
audits.
<F2> Tax fees consisted of assistance with matters related to tax
compliance and counseling.
</FN>
PREAPPROVAL POLICIES AND PROCEDURES
Preapproval of Services. The Audit Committee shall preapprove all
auditing services and permitted non-audit services (including the fees and
terms) to be performed for Westfield Financial by its independent
registered public accounting firm, subject to the de minimis exception for
non-audit services described below which are approved by the Committee
prior to completion of the audit.
Exception. The preapproval requirement set forth above shall not be
applicable with respect to non-audit services if:
(i) The aggregate amount of all such services provided constitutes
no more than five percent of the total amount of revenues paid
by Westfield Financial to its auditor during the fiscal year in
which the services are provided;
(ii) Such services were not recognized by Westfield Financial at the
time of the engagement to be non-audit services; and
(iii) Such services are promptly brought to the attention of the
Committee and approved prior to the completion of the audit by
the Committee or by one or more members of the Committee who
are members of the Board of Directors to whom authority to
grant such approvals has been delegated by the Committee.
12
Delegation. The Committee may delegate to one or more designated
members of the Committee the authority to grant required preapprovals. The
decisions of any member to whom authority is delegated under this paragraph
to preapprove activities under this subsection shall be presented to the
full Committee at its next scheduled meeting.
The Audit Committee preapproved 100% of the services performed by the
independent registered public accounting firm pursuant to the policies
outlined above.
DIRECTOR COMPENSATION
Meeting Fees. The members of the board of directors of Westfield
Financial are identical to those of Westfield Bank. To date, Westfield Bank
has compensated its directors for their services to the Bank. Westfield
Financial has not paid any additional compensation to its directors for
their additional services to the holding company. Westfield Financial
expects to continue this practice until there is a business reason to
establish separate compensation fees.
Westfield Bank's practice has been to pay a fee of $800 to each of
its non-employee directors for attendance at each Board meeting. In
addition, each member of the Executive Committee received $1,733 per month
for meetings, each member of the Audit Committee received $500 for each
meeting the member attended, each member of the Compensation Committee
received $250 for each meeting the member attended, and each member of the
Nominating Committee received $250 for each meeting the member attended.
Westfield Bank paid fees totaling $199,000 to its non-employee directors
for the year ended December 31, 2005.
Directors' Deferred Compensation Plan. Westfield Bank has established
the Westfield Bank Directors' Deferred Compensation Plan for the benefit of
non-employee directors. Under the Deferred Compensation Plan, each non-
employee director may make an annual election to defer receipt of all or a
portion of his or her director fees received from Westfield Financial and
Westfield Bank. The deferred amounts are allocated to a deferral account
and credited with interest at an annual rate equal to the rate on the
highest yielding certificate of deposit issued by Westfield Bank during the
year or according to the investment return of other assets as may be
selected by the Compensation Committee of Westfield Bank. The Deferred
Compensation Plan is an unfunded, non-qualified plan that provides for
distribution of the amounts deferred to participants or their designated
beneficiaries upon the occurrence of certain events such as death,
retirement, disability or a change in control of Westfield Financial or
Westfield Bank (as those terms are defined in the Deferred Compensation
Plan).
EXECUTIVE OFFICER COMPENSATION
Compensation Committee Report on Executive Compensation
The Compensation Committee is composed of Directors Lane, Pohl and T.
Sullivan with Director Lane serving as the Chairperson of the Committee.
None of the members of the Compensation Committee were officers or
employees of Westfield Financial or its subsidiaries during 2005 or in
prior years.
The following Report of Westfield Financial's Compensation Committee
is provided in accordance with the rules and regulations of the SEC.
Pursuant to such rules and regulations, this Report shall not be deemed
"soliciting material," filed with the SEC subject to Regulation 14A or 14C
of the SEC or subject to the liabilities of Section 18 of the Exchange Act.
13
On December 27, 2001, Westfield Financial, Inc. became the holding
company for Westfield Bank upon completion of a corporate reorganization of
Westfield Mutual Holding Company and related initial stock offering by
Westfield Financial.
The Compensation Committee provides advice and recommendations to the
Board of Directors in the areas of employee salaries and benefit programs.
Compensation of the President and Chief Executive Officer and other
executive officers of Westfield Bank for the fiscal year ended 2005 was
paid by Westfield Bank and determined by the Board of Directors.
The Committee reviews the compensation and benefits programs for all
executive officers on an annual basis. Mr. Williams did not participate in
the committee's decisions regarding his own compensation review and
recommendation in 2005 or in prior years.
The Committee strives to provide a compensation program that assures
both the motivation and retention of the executive officers, proper
alignment with the financial interests of Westfield Financial's
shareholders, and competitiveness with the external marketplace. To this
end, the committee reviewed the compensation practices of a peer group of
companies with similar size and business mix to that of Westfield Bank in
order to develop recommendations for Westfield Bank's executive officers.
Westfield Bank's compensation program for executive officers consists
of: base salary, annual bonuses and long-term incentive awards. These
elements are intended to provide an overall compensation package that is
commensurate with Westfield Bank's financial resources, that is appropriate
to assure the retention of experienced management personnel, and that
aligns their financial interests with those of Westfield Financial's
shareholders.
Base Salaries
Salary levels recommended by the Committee are intended to be
competitive with salary levels of the companies in Westfield Bank's peer
group, commensurate with the executive officers' respective duties and
responsibilities, and reflect the financial performance of Westfield Bank.
Stock Options
Westfield Financial has implemented the 2002 Stock Option Plan under
which executive officers, employees, and directors are eligible to receive
awards. The Compensation Committee has determined stock option grants based
on the financial performance achieved by Westfield Bank, and the level of
long-term incentive awards made by companies in the peer group.
Recognition and Retention Plan
Westfield Financial has implemented the 2002 Recognition and
Retention Plan under which executive officers, employees, and directors are
eligible to receive restricted stock awards. The Compensation Committee has
determined restricted stock awards based on the financial performance
achieved by Westfield Bank, and the level of long-term incentive awards
made by companies in the peer group.
14
Chief Executive Officer
For the fiscal year ended December 31, 2005, Mr. Williams' base
salary was $363,735 and he was awarded a bonus of $45,467. He was also
eligible to participate in the 2002 Stock Option Plan and the 2002
Recognition and Retention Plan. During fiscal year 2005, Mr. Williams was
not awarded any options under the 2002 Stock Option Plan and was not
awarded any shares under the 2002 Recognition and Retention Plan.
Westfield Financial, Inc.
Compensation Committee
Harry C. Lane, Chairperson
Paul R. Pohl
Thomas C. Sullivan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the executive officers of Westfield Financial served as a
member of another entity's Board of Directors or as a member of the
Compensation Committee (or other board committee performing equivalent
functions) during 2005, which entity had an executive officer serving on
the Board of Directors or as a member of the Compensation Committee of
Westfield Financial. There are no interlocking relationships between
Westfield Financial and other entities that might affect the determination
of the compensation of our executive officers.
15
PERFORMANCE GRAPH
The following graph compares Westfield Financial, Inc.'s total
cumulative shareholder return by an investor who invested $100.00 on
December 28, 2001, the date following Westfield Financial, Inc.'s
conversion, to December 31, 2005, to the total return by an investor who
invested $100.00 in each of the Russell 2000 Index and the Nasdaq Bank
Index for the same period.
COMPARISON OF 4 YEAR CUMULATIVE TOTAL RETURN*
AMONG WESTFIELD FINANCIAL, INC., THE RUSSELL 2000 INDEX
AND THE NASDAQ BANK INDEX
[GRAPH]
Cumulative Total Return
----------------------------------------------------------
12/28/01 12/01 12/02 12/03 12/04 12/05
-------- ------ ------ ------ ------ ------
<s> <c> <c> <c> <c> <c> <c>
WESTFIELD FINANCIAL, INC. 100.00 100.22 117.35 181.85 200.32 193.29
RUSSELL 2000 100.00 106.17 84.42 124.32 147.11 153.80
NASDAQ BANK 100.00 103.89 104.98 133.83 150.67 146.48
16
SUMMARY COMPENSATION TABLE
Summary Compensation Table. The following table provides information
about the compensation paid for 2005 to Westfield Financial's and Westfield
Bank's Chairman and Chief Executive Officer and to the four other most
highly compensated executive officers whose salary and bonus for 2005 was
at least $100,000.
Long Term
Compensation
Annual Compensation Awards
------------------------------------- ---------------------
Other Restricted
Name and Principal Annual Stock All Other
Positions with Westfield Compensation Awards Options Compensation
Financial Year Salary($) Bonus($) ($)(1) ($) (#) ($)(2)
- --------------------------- ---- --------- -------- ------------ ---------- ------- ------------
<s> <c> <c> <c> <c> <c> <c> <c>
Donald A. Williams, 2005 $363,735 $45,467 - - - $288,340
Chairman and Chief 2004 346,614 51,992 - - - 204,524
Executive Officer 2003 326,482 33,904 - - - 190,042
Michael J. Janosco, Jr., 2005 $195,700 $24,463 - - - $ 23,319
Chief Financial Officer 2004 186,405 27,961 - - - 23,675
and Treasurer 2003 179,036 18,592 - - - 24,242
James C. Hagan, 2005 $180,189 $22,524 - - - $ 19,991
President and Chief 2004 145,614 21,842 - - - 18,074
Operating Officer 2003 137,150 14,242 - - - 18,285
Alan J. Miles, III 2005 $128,497 $16,062 - - - $ 12,401
Senior Vice President and 2004 $110,250 $16,538 10,663
Chief Lending Officer 2003 $109,971 $10,997 13,935
Gerald P. Ciejka, 2005 $118,638 $14,830 - $24,660 2,500 $ 454
Vice President
<FN>
- --------------------
<F1> Westfield Bank provides its executive officers with non-cash benefits
and perquisites, such as the use of employer-owned or leased
automobiles. Management of the Bank believes that the aggregate value
of these benefits for 2005 did not, in the case of any executive
officer, exceed $50,000 or 10% of the aggregate salary and annual
bonus reported for him or her in the Summary Compensation Table.
<F2> Includes the following components for fiscal 2005: (1) employer
matching contributions to the Westfield Bank 401(k) Plan: Mr.
Williams - $6,300; Mr. Janosco - $5,871; Mr. Hagan - $5,406; Mr.
Ciejka - $0; and Mr. Miles - $2,008; (2) the dollar value of premium
payments for life insurance coverage provided by Westfield Bank: Mr.
Williams - $2,728; Mr. Janosco - $2,328; Mr. Hagan - $664; Mr. Ciejka -
$454; and Mr. Miles - $465; (3) amounts accrued under deferred
compensation agreements: Mr. Williams - $240,579; (4) the value of
allocations under the ESOP: Mr. Williams - $16,224; Mr. Janosco -
$15,120; Mr. Hagan - $13,921; Mr. Ciejka - $0; and Mr. Miles - $9,928
and (5) the value accrued under the Benefit Restoration Plan: Mr.
Williams - $22,509.
</FN>
17
EMPLOYMENT AGREEMENTS
Westfield Financial and Westfield Bank have jointly entered into
employment agreements with Mr. Donald A. Williams to secure his services as
Chief Executive Officer and Mr. Michael J. Janosco, Jr. to secure his
services as Chief Financial Officer. For purposes of Westfield Financial's
obligations, the employment agreements have rolling three-year terms
beginning on January 1, 2002, which by decision of the executive or joint
decision of Westfield Financial and Westfield Bank may be converted to a
fixed three-year term. For purposes of Westfield Bank's obligations, the
employment agreements have fixed terms of three years beginning on January
1, 2005, and may be renewed annually after a review of the executive's
performance. These agreements provide for minimum annual salaries of
$377,962 and $203,346, respectively, discretionary cash bonuses, and
participation on generally applicable terms and conditions in other
compensation and fringe benefit plans. They also guarantee customary
corporate indemnification and errors and omissions insurance coverage
throughout the employment term and for six years after termination.
Westfield Financial and Westfield Bank may terminate each executive's
employment, and each executive may resign, at any time with or without
cause. However, in the event of termination during the term without cause,
they will owe the executive severance benefits generally equal to the value
of the cash compensation and fringe benefits that the executive would have
received if he had continued working for an additional three years. The
same severance benefits would be payable if the executive resigns during
the term following: a loss of title, office or membership on the board of
directors; material reduction in duties, functions or responsibilities;
involuntary relocation of the executive's principal place of employment to
a location over 25 miles in distance from Westfield Bank's principal office
in Westfield, Massachusetts and over 25 miles from the executive's
principal residence; or other material breach of contract by Westfield
Financial or Westfield Bank which is not cured within 30 days. For 60 days
after a change in control, each executive may resign for any reason and
collect severance benefits as if he or she had been discharged without
cause. The employment agreements also provide uninsured death and
disability benefits. If Westfield Financial or Westfield Bank experiences a
change in ownership, a change in effective ownership or control or a change
in the ownership of a substantial portion of their assets as contemplated
by section 280G of the Internal Revenue Code, a portion of any severance
payments under the employment agreements might constitute an "excess
parachute payment" under current federal tax laws. Federal tax laws impose
a 20% excise tax, payable by the executive, on excess parachute payments.
Under the employment agreements, Westfield Financial would reimburse the
executive for the amount of this excise tax and would make an additional
gross-up payment so that, after payment of the excise tax and all income
and excise taxes imposed on the reimbursement and gross-up payments, the
executive will retain approximately the same net-after tax amounts under
the employment agreement that he or she would have retained if there were
no 20% excise tax. The effect of this provision is that Westfield
Financial, rather than the executive, bears the financial cost of the
excise tax. Neither Westfield Financial nor Westfield Bank could claim a
federal income tax deduction for an excess parachute payment, excise tax
reimbursement payment or gross-up payment.
CHANGE OF CONTROL AGREEMENTS
Westfield Bank and Westfield Financial have jointly entered into one-
year change of control agreements with three vice presidents: James C.
Hagan, Rebecca S. Kozaczka and Deborah J. McCarthy. The term of these
agreements is perpetual until Westfield Bank gives notice of non-extension,
at which time the term is fixed for one year. Generally, Westfield Bank may
terminate the employment of any officer covered by these agreements, with
or without cause, at any time prior to a change of control without
obligation for severance benefits. However, if Westfield Bank or Westfield
Financial signs a merger or other business combination agreement, or if a
third party makes a tender offer or initiates a proxy contest, it could not
terminate an officer's employment without cause without liability for
severance benefits. The severance benefits would generally be equal to the
value of the cash compensation and fringe benefits that the officer would
have received if he or she had continued working
18
for an additional one year. Westfield Bank would pay the same severance
benefits if the officer resigns after a change of control following a loss
of title, office or membership on the Board of Directors, material
reduction in duties, functions or responsibilities, involuntary relocation
of his or her principal place of employment to a location over 25 miles
from Westfield Bank's principal office on the day before the change of
control and over 25 miles from the officer's principal residence or other
material breach of contract which is not cured within 30 days. These
agreements also provide uninsured death and disability benefits. If
Westfield Bank or Westfield Financial experiences a change in ownership, a
change in effective ownership or control or a change in the ownership of a
substantial portion of their assets as contemplated by section 280G of the
Internal Revenue Code, a portion of any severance payments under the change
of control agreements might constitute an "excess parachute payment" under
current federal tax laws. Any excess parachute payment would be subject to
a federal excise tax payable by the officer and would be non-deductible by
Westfield Bank and Westfield Financial for federal income tax purposes. The
change of control agreements do not provide a tax indemnity.
BENEFIT PLANS
Pension Plan. Westfield Bank maintains a pension plan for its
eligible employees. Generally, employees of Westfield Bank begin
participation in the pension plan once they reach age 21 and complete 1,000
hours of service in a consecutive 12-month period. Participants in the
pension plan become vested in their accrued benefit under the pension plan
upon the earlier of the: (1) attainment of their "normal retirement age"
(as described in the pension plan) while employed at Westfield Bank; (2)
completion of five vesting years of service with Westfield Bank; or (3)
death or disability of the participant. Participants are generally credited
with a vesting year of service for each year in which they complete at
least 1,000 hours of service. A participant's normal benefit under the
pension plan equals the sum of (1) 1.25% of the participant's average
compensation (generally defined as the average taxable compensation for the
three consecutive limitation years that produce the highest average) by the
number of years of service the participant has under the plan up to 25
years of service, plus (2) 0.6% of the excess of the participant's average
compensation over the participant's covered compensation (the social
security taxable wage base for the 35 years ending in the year the
participant becomes eligible for non-reduced social security benefits) for
each year of service under the plan up to 25 years of service. Participants
may retire at or after age 65 and receive their full benefit under the
plan. Participants may also retire early at age 62 or at age 55 with ten
years of service or at age 50 with 15 years of service under the plan and
receive a reduced retirement benefit. Pension benefits are payable in equal
monthly installments for life, or for married persons, as a joint survivor
annuity over the lives of the participant and spouse. Participants may also
elect a lump sum payment with the consent of their spouse. If a participant
dies while employed by Westfield Bank, a death benefit will be payable to
either his or her spouse or estate, or named beneficiary, equal to the
entire amount of the participant's accrued benefit in the plan.
19
The following table indicates the annual employer-provided retirement
benefits that would be payable under the pension plan upon retirement at
age 65 to a participant electing to receive his pension benefit in the
standard form of benefit, assuming various specified levels of plan
compensation and various specified years of credited service. Under the
Internal Revenue Code, maximum annual benefits under the pension plan are
limited to $170,000 per year and annual compensation for benefit
calculation purposes is limited to $210,000 per year for the 2005 calendar
year.
Years of Service
Average Annual ----------------------------------------
Compensation 10 15 20 25
- -------------- ------- ------- ------- -------
<s> <c> <c> <c> <c>
$ 20,000 $ 2,500 $ 3,750 $ 5,000 $ 6,250
40,000 5,033 7,500 10,000 12,500
60,000 8,323 12,484 16,646 20,807
80,000 12,023 18,034 24,046 30,057
100,000 15,723 23,584 31,446 39,307
120,000 19,423 29,134 38,846 48,557
125,000 20,348 30,522 40,696 50,870
140,000 23,123 34,684 46,246 57,807
150,000 24,973 37,459 49,946 62,432
175,000 29,598 44,397 59,196 73,995
200,000 34,223 51,334 68,446 85,557
210,000 35,148 52,722 70,296 87,870
The benefits listed on the table above for the pension plan are not
subject to a reduction for Social Security benefits or any other offset
amount. As of December 31, 2005, Messrs. Williams, Janosco, Hagan and Miles
had 26, 6, 11 and 7 years of service, respectively, for purposes of the
pension plan (benefit service is recognized up to a maximum of 25 years
under the terms of this plan).
401(k) Plan. Westfield Bank has adopted the SBERA 401(k) Plan, a tax-
qualified defined contribution plan, for substantially all employees of
Westfield Bank who have attained age 21 and completed at least three months
of service, which was in place during calendar 2005. Eligible employees may
contribute from 1% to 15% of annual compensation to the plan on a pre-tax
basis each year, subject to limitations of the Internal Revenue Code (for
2005 the limit was $14,000). Westfield Bank makes a matching contribution
to the plan equal to 50% of the first six percent of annual compensation
contributed to the plan on a pre-tax basis by a participant after such
participant has completed one year of service. This plan has an individual
account for each participant's contributions and allows each participant to
direct the investment of his or her account. One permitted investment is
the common stock of Westfield Financial.
Employee Stock Ownership Plan ("ESOP"). This plan is a tax-qualified
plan that covers substantially all employees who have completed 1,000 hours
of service in a 12 month period and attained age 21. The ESOP took effect
at the completion of the reorganization. Westfield Financial has lent this
plan enough money to purchase up to 8% of the shares of the total number of
shares held by persons other than Westfield Mutual Holding Company.
Although contributions to this plan will be discretionary, Westfield Bank
intends to contribute enough money each year to make the required principal
and interest payments on the loan from Westfield Financial. This loan is
for a term of 30 years and calls for level annual payments of principal and
interest. The plan pledges the shares it purchases as collateral for the
loan and holds them in a suspense account. The plan will not distribute the
pledged shares right away.
20
Instead, it will release a portion of the pledged shares annually. Assuming
the plan repays its loan as scheduled over a 30-year term, we expect that
1/30th of the shares will be released annually in years 2002 through 2032.
The plan will allocate the shares released each year among the accounts of
participants in proportion to their compensation for the year. For example,
if a participant's compensation for a year represents 1% of the total
compensation of all participants for the year, the plan would allocate to
that participant 1% of the shares released for the year, subject to certain
legal limitations imposed on tax-qualified plans. Participants direct the
voting of shares allocated to their accounts. Shares in the suspense
account will usually be voted by the plan trustee in a way that mirrors the
votes which participants cast for shares in their individual accounts. This
plan may purchase additional shares in the future, and may do so using
borrowed funds, cash dividends, periodic employer contributions or other
cash flow.
Benefit Restoration Plan. Westfield Financial has also established
the Benefit Restoration Plan of Westfield Financial in order to provide
restorative payments to executives who are prevented from receiving the
full benefits contemplated by the ESOP's benefit formula as well as the
401(k) Plan's benefit formula. The restorative payments consist of payments
in lieu of shares that cannot be allocated to participants under the ESOP
due to the legal limitations imposed on tax-qualified plans and, in the
case of participants who retire before the repayment in full of the ESOP's
loan, payments in lieu of the shares that would have been allocated if
employment had continued through the full term of the loan. The restorative
payments also consist of amounts unable to be provided under the 401(k)
Plan due to certain legal limitations imposed on tax-qualified plans.
Deferred Compensation Agreement. Westfield Bank has also entered into
a deferred compensation agreement with Donald A. Williams. Under this
agreement, the executive is guaranteed monthly payments equal to 70% of his
monthly salary after retirement for the remainder of the executive's life
or 240 months, whichever is greater. The amount of these payments is
reduced by any payments received from the pension plan and are also reduced
by Social Security payments attributable to contributions made by Westfield
Bank. This agreement also provides for payments upon the death or
disability of the executive that are equal in amount to the payments that
would have been payable to the executive upon retirement with such payments
being made for a period of 120 months.
2002 Stock Option Plan. Westfield Financial has a Stock Option Plan
in effect which was approved by the shareholders and became effective on
July 26, 2002. 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 Westfield Financial. The Stock Option Plan is not
subject to ERISA and is not a tax-qualified plan. Westfield Financial has
reserved an aggregate of 497,260 shares of common stock for issuance upon
the exercise of stock options granted under the Plan.
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 December 30, 2005, the last trading day of Westfield Financial's 2005
fiscal year, which was $24.01 per share.
21
2005 Fiscal Year End Option/SAR Values
- ------------------------------------------------------------------------------------------------------------
Number of Securities
Shares Value Underlying Unexercised Value of Unexercised In-the-
Acquired Realized Options/SAR Money Options/SARs
on on at Fiscal Year-end at Fiscal Year-end
Exercise Exercise (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ----------------------- -------- -------- ------------------------- ----------------------------
<s> <c> <c> <c> <c>
Donald A. Williams - - 72,000/48,000 692,640/461,760
Michael J. Janosco, Jr. - - 43,200/28,800 415,584/277,056
James C. Hagan - - 7,200/4,800 69,264/46,176
Gerald P. Ciejka - - 500/2,000 -0-/-0-
Alan J. Miles, III - - 500/1,000 4,810/9,620
<FN>
- --------------------
<F1> Based on the following information with respect to options: the
closing price per share of common stock on December 31, 2005 was
$24.01 per share and options have an exercise price of $14.39 per
share, which equals a spread of $9.62 per share, with the exception
of options granted to Mr. Ceijka, which have an exercise price of
$24.66.
</FN>
2002 Recognition and Retention Plan ("RRP"). The RRP was adopted by
the Board of Directors of Westfield Financial, approved by its shareholders
and became effective on July 26, 2002. Similar to the Stock Option Plan,
the RRP functions as a long-term incentive compensation program for
eligible officers, employees and outside directors of Westfield Financial
and Westfield Bank. The RRP is not subject to ERISA and is not a tax-
qualified plan. The members of the Board's Compensation Committee who are
disinterested directors ("RRP Committee") administer the RRP. Westfield
Financial pays all costs and expenses of administering the RRP.
As required by the terms of the RRP, Westfield Financial has
established a trust ("Trust") and has contributed to the Trust in order to
fund the purchase of 198,904 shares of common stock, the maximum number of
restricted stock awards ("Restricted Stock Awards" or "Awards") that may be
granted under the RRP. Shares of common stock subject to a Restricted Stock
Award are held in the 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 or her Award, whether or not the
underlying shares have vested.
Restricted Stock Awards are granted under the RRP on a discretionary
basis to eligible officers, executives and outside directors selected by
the RRP Committee.
Westfield Financial may amend or terminate the RRP, in whole or in
part, at any time, subject to the requirements of all applicable laws.
22
LIMITATIONS ON FEDERAL TAX DEDUCTIONS FOR EXECUTIVE OFFICER COMPENSATION
Federal tax laws may limit the federal income tax deduction for
salaries paid or for other compensation paid for personal services actually
rendered to $1 million each tax year for each executive officer named in
the summary compensation table in Westfield Financial's proxy statement for
that year. This limit will not apply to non-taxable compensation under
various broad-based retirement and fringe benefit plans or to compensation
that is "qualified performance-based compensation" under applicable law.
Westfield Financial and Westfield Bank expect that the Compensation
Committee will take this deduction limitation into account with other
relevant factors in establishing future compensation levels of their
executive officers and in setting the terms of compensation programs.
Currently, none of our executive officers receive annual compensation
expected to exceed this limit. However, there is no assurance that all
compensation paid to our executive officers will be deductible for federal
income tax purposes. To the extent that compensation paid to any executive
officer is not deductible, the net after-tax cost of providing the
compensation will be higher and the net after-tax earnings of Westfield
Financial and Westfield Bank will be reduced.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Westfield Bank makes loans to its executive officers, employees and
directors. These loans are made in the ordinary course of business and on
the same terms and conditions as those of comparable transactions with the
general public prevailing at the time, in accordance with our underwriting
guidelines, and do not involve more than the normal risk of collectibility
or present other unfavorable features. At December 31, 2005, loans to non-
employee directors and their associates totaled $13.0 million.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Westfield Financial's directors and executive officers, and
persons who own more than 10% of Westfield Financial's common stock, to
report to the Securities and Exchange Commission their initial ownership of
Westfield Financial's common stock and any subsequent changes in that
ownership. Specific due dates for these reports have been established by
the Securities and Exchange Commission and Westfield Financial is required
to disclose in this proxy statement any late filings or failures to file.
Based solely on its review of the copies of such reports furnished to
Westfield Financial and written representations that no other reports were
required during the fiscal year ended December 31, 2005, all Section 16(a)
filing requirements applicable to Westfield Financial's executive officers
and directors during fiscal 2005 were met.
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Effective June 15, 2004, the Audit Committee of the Board of
Directors voted not to reengage Deloitte & Touche LLP as Westfield
Financial's independent registered public accountants, effective
immediately. On the same date, the Audit Committee of the Board of
Directors recommended, approved and appointed Wolf & Company, P.C. as
Westfield Financial's independent registered public accountants for the
purpose of auditing Westfield Financial's consolidated financial statements
for the years ended December 31, 2004 and December 31, 2005. Wolf &
Company, P.C. will continue to serve as Westfield Financial's independent
registered public accountants for the year ended December 31, 2006. A
representative of Wolf & Company, P.C. is expected to be present at the
annual meeting to answer questions concerning the financial statements
presented and will be permitted to make a statement at the meeting.
23
The audit reports of Deloitte & Touche LLP on the consolidated
financial statements of the Registrant as of and for the years ended
December 31, 2003 and 2002 did not contain an adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit
scope, or accounting principles. During 2003 and 2002 and any subsequent
interim periods through June 15, 2004, there were no disagreements with
Deloitte & Touche LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which
disagreements, if not resolved to Deloitte & Touche's satisfaction, would
have caused it to make reference in connection with its report to the
subject matter of the disagreement. We requested that Deloitte & Touche LLP
furnish a letter addressed to the SEC stating whether it agrees with these
statements made by us and, if not, stating the respects in which it does
not agree. A copy of this letter, dated March 31, 2004, was attached as an
exhibit to the Form 8-K filed with the SEC on June 21, 2004.
ADDITIONAL INFORMATION
INFORMATION ABOUT SHAREHOLDER PROPOSALS
If you wish to submit proposals to be included in our proxy statement
for the 2007 Annual Meeting of Westfield Financial shareholders, we must
receive them on or before December 16, 2006, pursuant to the proxy
soliciting regulations of the SEC. Nothing in this paragraph shall be
deemed to require Westfield Financial to include in its proxy statement and
proxy card for such meeting any shareholder proposal which does not meet
the requirements of the SEC in effect at the time. Any such proposal will
be subject to 17 C.F.R. [SECTION]240.14a-8 of the Rules and Regulations
promulgated by the SEC under the Exchange Act.
In addition, under Westfield Financial's Bylaws, if you wish to
nominate a director or bring other business before an annual meeting (which
is not included in the proxy statement for the 2007 Annual Meeting), the
following criteria must be met: (i) you must be a shareholder of record;
(ii) you must have given timely notice in writing to the Secretary of
Westfield Financial; and (iii) your notice must contain specific
information required in our Bylaws. To be considered timely for inclusion
in our proxy statement for the 2007 Annual Meeting, we must receive your
advance written notice of business or nominations to the Board of Directors
no later than 120 days preceding the anniversary date of the release of
Westfield Financial's proxy statement for this year's annual meeting. For
example, if we release this year's proxy statement on April 14, 2006, we
should receive your advance notice of business or nomination for next
year's meeting no later than December 15, 2006.
By Order of the Board of Directors,
/s/ Philip R. Smith
Philip R. Smith
Secretary
Westfield, Massachusetts
April 14, 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.
===========================================================================
24
Appendix A
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WESTFIELD FINANCIAL, INC.
NOMINATING AND CORPORATE
GOVERNANCE COMMITTEE CHARTER
Purpose
The purpose of the Nominating and Corporate Governance Committee (the
"Committee") shall be to assist the board of directors (the "Board") of
Westfield Financial, Inc. (the "Company") in identifying qualified
individuals to become Board members and officers of the Company, in
determining the composition of the Board and its committees, in developing
and implementing a process to asses Board effectiveness and in developing
and implementing the Company's corporate governance guidelines.
Membership and Appointment
The Committee shall consist of no fewer than three members, each of whom
shall meet the criteria for independence established by the rules and
regulations of the American Stock Exchange listing standards and who the
Board has affirmatively determined does not have a material relationship
which, in the opinion of the Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director.
Members of the Committee shall be appointed annually by the Board and shall
serve at the pleasure of the Board. Notwithstanding the foregoing, no
director shall serve on the Committee in any capacity in any year during
which such director's term as a director is scheduled to expire.
Meetings and Procedures
The Committee shall have a chairperson who must, and a secretary who may,
but need not be, a member of the Committee. The Board shall designate the
chairperson of the Committee and the Committee shall designate the
secretary for the Committee. If the Board does not designate a chairperson,
or if the chairperson shall not be present at a meeting, the Committee
shall select its own chairperson.
The Committee shall establish its own rules of procedure, which shall be
consistent with the Bylaws of the Company and this Charter. The Committee
shall meet at least two times annually at regularly scheduled times and
places determined by the Committee's chairperson, and may meet more
frequently, or take action by unanimous written consent, as circumstances
require. A meeting may be called by the chairperson of the Committee or by
a majority of the members of the Committee. Notice of any meeting shall be
given by the person or persons calling the meeting to each other member of
the Committee at least 48 hours prior to the meeting. Notice may be given
in the same fashion as permitted for notice of Board meetings pursuant to
the Company's Bylaws and applicable law. A meeting shall be deemed properly
called if each member of the Committee shall have received notice given as
aforesaid or, prior to the conclusion of the meeting, shall have signed a
written waiver of notice.
A quorum shall consist of at least a majority of the voting members of the
Committee. The vote of a majority of the voting members present at any
meeting at which a quorum exists, including the chairperson of the
committee who shall be eligible to vote, shall constitute the action of the
Committee.
A-1
The Committee may request that any directors, officers or employees of the
Company, or other persons whose advice and counsel are sought by the
Committee, attend any meeting of the Committee to provide such pertinent
information as the Committee requests.
Following each of its meetings, the Committee shall report its actions and
recommendations to the Board. The secretary of the Committee shall keep
written minutes of its meetings, which minutes shall be subject to approval
by the member of the Committee and once approved, shall be maintained with
the books and records of the Company.
The Committee shall have the authority to delegate any of its
responsibilities to subcommittees, as the committee may deem appropriate in
its sole discretion.
Nominations by Shareholders
Shareholders may recommend nominees for election to the Board, in a manner
consistent with the Company's Bylaws, as set forth under Article I, Section
6, thereof, this Charter and any guidelines established by the Committee.
Committee Authority and Responsibilities
The Committee shall have the following authority and responsibilities:
Identification and Evaluation of Board of Directors Candidates
- --------------------------------------------------------------
1. The Committee shall develop criteria, to be approved by the full
Board, for the selection of directors and, when appropriate, conduct
searches for individuals qualified to become members of the Board.
2. The Committee shall evaluate the validity of any shareholder nominees
for election as directors in accordance with the qualifications and
procedures set forth in Article I, Section 6, Article II, Section 1,
and Article III, Section 3 of the Company's Bylaws. The Committee
shall consider, obtain information regarding, interview and evaluate
any valid shareholder nominees for election as directors in
accordance with the criteria developed by the Board.
3. The Committee shall select, and recommend to the Board for its
approval, nominees for election as directors, taking into account the
criteria approved by the Board.
Evaluation of Board of Directors Effectiveness
- ----------------------------------------------
4. The Committee shall develop criteria for the evaluation of the Board
and its members and shall annually assess the performance of
incumbent Board members and the Board as a whole. Such assessment
shall be discussed with the full Board and, as appropriate, the
Committee shall recommend changes, including, but not limited to,
changes in Board size and composition and in Board policies and
procedures.
Corporate Governance Matters
- ----------------------------
5. The Committee shall review the Board's committee structure and
annually recommend to the Board, for its approval, directors to serve
as members of each committee. The Committee shall recommend to the
Board additional committee members to fill vacancies as needed,
taking into account the criteria approved by the Board. The Committee
shall recommend to the Board individual directors to be designated as
chairpersons of the Board committees. Notwithstanding the foregoing,
the members
A-2
of the Committee shall be appointed by the full Board, without
recommendation by the Committee. The Board shall also, without
recommendation by the Committee, be responsible for filling vacancies
in, and appointing chairpersons of, the Committee.
6. The Committee shall develop and recommend to the Board for its
approval a set of corporate governance guidelines. The Committee
shall review the guidelines on an annual basis, or more frequently if
appropriate, and recommend changes as necessary.
7. The Committee shall review and assess the adequacy of this charter at
least annually and, as appropriate, recommend changes to the Board
for its approval.
8. The Committee shall periodically review and assess the Company's
Articles of Organization and Bylaws and, as appropriate, recommend
changes to the Board for its approval.
9. The Committee shall consider any other corporate governance issues
that may arise from time to time, and to develop appropriate
recommendations for the Board.
10. In undertaking its responsibilities, the Committee may retain or
terminate, in its sole discretion, any search firm to be used to
identify director candidates and to approve the search firm's fees
and other retention terms. The Committee shall also have authority to
retain outside counsel and any other advisors as the Committee may
deem appropriate in its sole discretion.
A-3
Westfield Financial, Inc. REVOCABLE PROXY
This Proxy is solicited on behalf of the Board of Directors of
Westfield Financial, Inc. for the Annual Meeting of Shareholders
to be held on May 19, 2006.
The undersigned shareholder of Westfield Financial, Inc. hereby appoints
Victor J. Carra and Michael J. Janosco, Jr., and each of them, with full
powers of substitution, to represent and to vote as proxy, as designated,
all shares of common stock of Westfield Financial, Inc. held of record by
the undersigned on March 24, 2006, at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held at 10:00 a.m., Eastern Time, on May 19,
2006, or at any adjournment or postponement thereof, upon the matters
described in the accompanying Notice of the Annual Meeting of Shareholders
and Proxy Statement, dated April 15, 2006 and upon such other matters as may
properly come before the Annual Meeting. The undersigned hereby revokes all
prior proxies.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is given, this Proxy
will be voted FOR the election of all nominees listed in Item 1.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
The Board of Directors unanimously recommends a vote "FOR" all of the
nominees named in Item 1.
I Will Attend Annual Meeting. [ ]
Please Mark Your Choice Like This
in Blue or Black Ink. [X]
- ---------------------------------------------------------------------------
1. Election of three directors for terms of three years each. Nominees:
David C. Colton, Jr., Mary C. O'Neil, and Donald A. Williams.
For Withhold
for all nominees
[ ] [ ]
- ---------------------------------------------------------------------------
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
dated April 15, 2006.
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Signature(s)
Dated: , 2006
-----------------------
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.