UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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|X| Definitive Proxy Statement
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|_| Soliciting Material Pursuant to ss.240.14a-12
WESTFIELD FINANCIAL, INC.
(Name of Registrant as Specified In Its Charter)
_______________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined.):
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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WESTFIELD FINANCIAL, INC. [LOGO]
June 18, 2007
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 July 19, 2007 at 10:00 a.m., Eastern Time, at the Sheraton
Springfield Monarch Place Hotel, located at 1 Monarch Place, Springfield,
Massachusetts 01144.
The attached Notice of Annual Meeting of Shareholders 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 matters to be considered at the annual meeting is in
the best interests of Westfield Financial and its shareholders and unanimously
recommends a vote "FOR" these matters.
Please complete, sign and return the enclosed proxy card promptly,
whether or not you plan to attend the annual meeting. Your vote is important
regardless of the number of shares you own. Voting by proxy will not prevent
you from voting in person at the annual meeting but will assure that your vote
is counted if you cannot attend.
On behalf of the Board of Directors and the employees of Westfield
Financial and Westfield Bank, we thank you for your continued support and look
forward to seeing you at the annual meeting.
Sincerely yours,
/s/ Donald A. Williams
Donald A. Williams
Chairman and Chief Executive Officer
IF YOU HAVE ANY QUESTIONS, PLEASE CALL US AT (413) 568-1911
WESTFIELD FINANCIAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: Thursday, July 19, 2007
Time: 10:00 a.m., Eastern Time
Place: Sheraton Springfield Monarch Place Hotel
1 Monarch Place
Springfield, Massachusetts 01144
At our 2007 Annual Meeting of Shareholders, 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
------------------- --------------
Victor J. Carra 2010
Richard C. Placek 2010
Charles E. Sullivan 2010
2. Approve the Westfield Financial, Inc. 2007 Stock Option Plan;
3. Approve the Westfield Financial, Inc. 2007 Recognition and
Retention Plan; and
4. Transact such other business as may properly come before the annual
meeting, and any adjournment or postponement thereof. Please note
that at this time we are not aware of any such business.
The Board of Directors has fixed May 31, 2007 as the record date for the
determination of shareholders entitled to notice of and to vote at the annual
meeting and any adjournment or postponement thereof. Only shareholders of
record at the close of business on that date will be entitled to notice of and
to vote at the annual meeting and any adjournment or postponement thereof.
By Order of the Board of Directors,
/s/ Donald A. Williams
Donald A. Williams
Chairman and Chief Executive Officer
Westfield, Massachusetts
June 18, 2007
===============================================================================
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.
===============================================================================
WESTFIELD FINANCIAL, INC.
141 Elm Street
Westfield, Massachusetts 01085
(413) 568-1911
PROXY STATEMENT FOR THE
2007 ANNUAL MEETING OF SHAREHOLDERS
To Be Held on July 19, 2007
INFORMATION ABOUT THE ANNUAL MEETING
General
Westfield Financial, Inc., a Massachusetts-chartered stock holding
company, 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 Financial's common stock 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 of
Shareholders and the enclosed proxy card on or about June 18, 2007 to all
shareholders entitled to vote. If you owned common stock of Westfield Financial
at the close of business on May 31, 2007, the record date, you are entitled to
vote at the annual meeting. On the record date, there were 31,926,587 shares of
common stock outstanding.
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 at the close of business on
May 31, 2007. 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 of Shareholders.
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 of Shareholders.
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.
Vote Required
Proposal 1: Election of Directors. The nominees for director who receive
the most votes will be elected. So, if you do not vote for a nominee, or you
indicate "withhold authority" for any nominee on your proxy card, your vote
will not count "for" or "against" the nominee. You may not vote your shares
cumulatively for the election of directors.
Proposal 2: Adoption of the Westfield Financial, Inc. 2007 Stock Option
Plan. The affirmative vote of the holders of a majority of the shares eligible
to be cast in person or by proxy at the annual meeting is required to pass this
proposal. If you "abstain" from voting or do not cast your vote, it will have
the same effect as a vote "against" this proposal.
Proposal 3: Adoption of the Westfield Financial, Inc. 2007 Recognition
and Retention Plan. The affirmative vote of the holders of a majority of the
shares eligible to be cast in person or by proxy at the annual meeting is
required to pass this proposal. If you "abstain" from voting or do not cast
your vote, it will have the same effect as a vote against this proposal.
Effect of Broker Non-Votes
If your broker holds shares that you own in "street name," the broker may
vote your shares on the 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 Proposal 1 because only a plurality of votes cast is
required to elect a director. However, a broker non-vote would have the same
effect as a vote "against" Proposals 2 and 3.
Confidential Voting Policy
Westfield Financial maintains a policy of keeping shareholder votes
confidential. Only 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:
o filing a written revocation of the proxy with the Secretary;
o submitting a signed proxy card bearing a later date; or
2
o 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. We will also reimburse banks, brokers, nominees and other
fiduciaries for the expenses they incur in forwarding the proxy materials to
you.
We have retained Georgeson Inc. to solicit proxies in connection with the
annual meeting . We have agreed to pay Georgeson Inc. a base fee of $6,500 plus
out of pocket expenses. The aggregate fee will vary considerably based on the
number and length of telephone solicitations made. We have also agreed to
reimburse Georgeson Inc. for its expenses for such solicitation services. We
will request persons, firms and corporations holding shares in their names or
in the name of their nominees, which are beneficially owned by others, to send
proxy materials to and obtain proxies from such beneficial owners, and will
reimburse such firms for reasonable expenses incurred in connection therewith.
We will bear all costs of solicitation.
Interests of Persons in Matters to be Acted Upon
Our directors, officers and employees may be granted restricted stock
awards, stock options or other award under the Westfield Financial, Inc. 2007
Stock Option Plan and the Westfield Financial, Inc. 2007 Recognition and
Retention Plan, both of which are being presented for shareholder approval at
the annual meeting. As a result, our directors, officers and employees have a
personal interest in the outcome of the vote.
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, 2006, 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. The Annual
Report on Form 10-K is also available on the SEC's website at www.sec.gov.
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders of Westfield Financial
The following table contains common stock ownership information for
persons known to Westfield Financial to "beneficially own" 5% or more of
Westfield Financial's common stock as of May 31, 2007. 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 May 31, 2007. 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
- ------------------ ----------------------------------- -------------------- -------
<c>
Common Stock, Employee Stock Option Plan Trust of 2,027,029(1) 6.3%
par value $0.01 Westfield Financial, Inc.
per share 141 Elm Street
Westfield, MA 01085
- --------------------
(1) The Employee Stock Ownership Plan of Westfield Financial, Inc. (the
"ESOP") is a tax qualified employee stock ownership plan under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
with individual accounts for the accrued benefits of participating
employees and their beneficiaries. The ESOP is administered by an ESOP
Committee ("ESOP Committee"). The ESOP's assets are held in trust by
First Bankers Trust Services, Inc., as plan trustee (the "Plan Trustee").
The number of shares listed as beneficially owned represents the entire
number of shares of Westfield Financial common stock held by the Plan
Trustee as of May 31, 2007. As of May 31, 2007, 285,455 of such shares of
Westfield Financial common stock had been allocated to individual
accounts established for participating employees and their beneficiaries,
and 1,741,574 of such shares were held, unallocated, for allocation in
future years. In general, participating employees and their beneficiaries
have the power and authority to direct the voting of shares of Westfield
Financial common stock allocated to their individual accounts. The ESOP,
through the Plan Trustee, has shared voting power over unallocated
Westfield Financial common stock. Any unallocated Westfield Financial
common stock is generally required to be voted by the Plan Trustee in the
same proportion as Westfield Financial common stock which has been
allocated to Participants is directed to be voted. The reporting person,
through the Plan Trustee (who is instructed by the ESOP Committee) shares
dispositive power over all unallocated Westfield Financial common stock
held by the ESOP. The ESOP, acting through the Plan Trustee (who is
instructed by the ESOP Committee) shares dispositive power over allocated
Westfield Financial common stock with participating employees and their
beneficiaries, who have the right to determine whether Westfield
Financial common stock allocated to their respective accounts will be
tendered in response to a tender offer but otherwise have no dispositive
power. Any unallocated Westfield Financial common stock is generally
required to be tendered by the Plan Trustee in the same proportion as
Westfield Financial common stock which has been allocated to Participants
is directed to be tendered. In limited circumstances, ERISA may confer
upon the Plan Trustee the power and duty to control the voting and
tendering of Westfield Financial common stock allocated to the accounts
of participating employees and beneficiaries who fail to exercise their
voting and/or tender rights. The ESOP disclaims voting power with respect
to such allocated Westfield Financial common stock.
4
Security Ownership of Management
The following table shows the number of shares of Westfield Financial's
common stock beneficially owned by each director, each executive officer
appearing in the "Summary Compensation Table," and all directors and executive
officers of Westfield Financial as a group, as of May 31, 2007. The information
disclosed in the following table and the accompanying footnotes has been
adjusted to reflect the exchange of all shares of common stock in the
second-step conversion pursuant to an exchange ratio of 3.28138 per share.
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
Name of Beneficial Position with Beneficial Common
Owner Westfield Financial Ownership(1)(2)(3)(4)(5) Stock Outstanding
- ------------------------- ----------------------- ------------------------ -----------------
Victor J. Carra Director 108,106(6) *
David C. Colton, Jr. Director 78,474(7) *
Robert T. Crowley, Jr. Director 72,266(8) *
James C. Hagan President and Chief 96,844 *
Operating Officer
Michael J. Janosco, Jr. Chief Financial Officer 421,284(9) 1.3%
and Treasurer
Rebecca A. Kozaczka Vice President 62,656 *
Harry C. Lane Director 64,062 *
William H. McClure Director 77,907(10) *
Alan J. Miles, III Senior Vice President 19,043 *
and Chief Lending
Officer
Mary C. O'Neil Director 61,875(11) *
Richard C. Placek Director 80,472(12) *
Paul R. Pohl Director 91,857(13) *
Charles E. Sullivan Director 90,032(14) *
Thomas C. Sullivan Director 146,097 *
Donald A. Williams Chairman and Chief 710,402(15) 2.2%
Executive Officer
Other Executive Officers 1,832,996(16) 5.7%
and ESOP
All Executive Officers 3,957,591 12.0%
and Directors as a Group
(18 Persons)
- --------------------
* Less than 1.0% of the total outstanding shares of common stock.
(1) See "Principal Shareholders of Westfield Financial" for definition of
"beneficial ownership."
(2) Based on a total of 32,863,053 shares of Westfield Financial's Common
Stock outstanding as of May 31, 2007.
5
(3) 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 -- 3,281
shares; Mr. Hagan -- 6,563 shares; Mr. Janosco -- 19,294 shares; Ms.
Kozaczka -- 5,578 shares; Mr. Miles -- 656 shares and Mr. Williams --
32,157 shares.
(4) 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. Carra -- 6,634 shares; Mr. Janosco -- 8,154 shares; Mr.
Hagan -- 6,526 shares; Ms. Kozaczka -- 4,561 shares; Mr. Miles -- 4,931
shares and Mr. Williams -- 8,861 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 -- 44,423 shares; Mr. Hagan
-- 6,764 shares; Mr. Janosco -- 17,000 shares; Ms. Kozaczka -- 5,252
shares; Mr. Miles -- 5,909 shares and Mr. Williams -- 34,756 shares.
(5) Includes 42,656 shares of common stock which may be acquired by each of
Messrs. Colton, Crowley, Lane, McClure, Pohl, C. Sullivan, T. Sullivan
and Ms. O'Neil and 34,127 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. Hagan -- 39,375 shares; Mr.
Janosco -- 236,256 shares; Ms. Kozaczka -- 29,530 shares; Mr. Miles --
4,922 shares and Mr. Williams -- 393,765 shares.
(6) Includes 2,263 shares held in an individual retirement account ("IRA")
for the benefit of Mr. Carra's spouse, 2,723 shares held in an IRA for
the benefit of Mr. Carra, and 24,935 shares held jointly with Mr. Carra's
spouse.
(7) Includes 4,698 shares held in an IRA for the benefit for Mr. Colton's
spouse, 3,071 shares held in an IRA for the benefit of Mr. Colton, and
1,640 shares held jointly with Mr. Colton's spouse.
(8) Includes 8,203 shares held jointly with Mr. Crowley's spouse.
(9) Includes 66,543 shares held jointly with Mr. Janosco's spouse and 54,742
shares held in an IRA for the benefit of Mr. Janosco.
(10) Includes 9,844 shares held jointly with Mr. McClure's spouse.
(11) Includes 1,500 shares held jointly by Ms. O'Neil's spouse and 1,312
shares held jointly with Ms. O'Neil's spouse.
(12) Includes 19,235 shares held by Mr. Placek's spouse.
(13) Includes 32,796 shares held jointly with Mr. Pohl's spouse.
(14) Includes 13,844 shares held in an IRA for the benefit of Mr. Sullivan.
(15) Includes 67,924 shares held jointly with Mr. Williams' spouse, 18,539
shares held in an IRA for the benefit of Mr. Williams, 18,769 shares held
in an IRA for the benefit of Mr. Williams' spouse and 7,000 shares held
by the Karen F. Williams Family Trust.
(16) The figures shown for each of the executive officers named in the table
do not include 1,741,574 shares held in trust pursuant to the ESOP that
have not been allocated as of May 31, 2007 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 1,741,574 shares as
to which members of Westfield Financial's Compensation Committee
(consisting of Messrs. Carra, 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."
6
_____________________________
PROPOSAL 1
ELECTION OF DIRECTORS
_____________________________
Upon the recommendation of the Nominating and Corporate Governance
Committee, our Board of Directors has nominated the three individuals listed in
the table below for election as directors at the annual meeting. All three
nominees are currently serving on the Westfield Financial Board of Directors.
If you elect all the nominees listed below, they will hold office until the
annual meeting in 2010 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.
Nominees Term to Expire
------------------- --------------
Victor J. Carra 2010
Richard C. Placek 2010
Charles E. Sullivan 2010
INFORMATION ABOUT OUR BOARD OF DIRECTORS
General
Westfield Financial's Board of Directors currently consists of eleven
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).
7
The name, age and length of service of each of our nominees and
continuing members of the Westfield Financial Board of Directors is set forth
below.
Term Position(s) Held with Director
Nominees Age(1) Expires Westfield Financial Since(2)
- ---------------------- ------ ------- ------------------------------------ --------
Victor J. Carra 66 2010 Director 1995
Richard C. Placek 67 2010 Director 1979
Charles E. Sullivan 63 2010 Director 1992
Term Position(s) Held with Director
Continuing Directors Age(1) Expires Westfield Financial Since(2)
- ---------------------- ------ ------- ------------------------------------ --------
Robert T. Crowley, Jr. 58 2008 Director 1999
Harry C. Lane 68 2008 Director 1978
William H. McClure 71 2008 Director 1996
Paul R. Pohl 65 2008 Director 1999
David C. Colton, Jr. 63 2009 Director 1980
Mary C. O'Neil 71 2009 Director 1994
Donald A. Williams 62 2009 Chairman and Chief Executive Officer 1983
Term Position(s) Held with Director
Retiring Director Age(1) Expires Westfield Financial Since(2)
- ---------------------- ------ ------- ------------------------------------ --------
Thomas C. Sullivan 73 2007 Director 1989
- --------------------
(1) At December 31, 2006.
(2) 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.
Meetings of the Board of Directors
The Board of Directors of Westfield Financial held four regular meetings
and one special meeting during the fiscal year ended December 31, 2006. The
Board of Directors of Westfield Bank held thirteen meetings during the fiscal
year ended December 31, 2006. 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.
It is Westfield Financial's policy that all directors and nominees should
attend the annual meeting. At the 2006 Annual Meeting, six members of the Board
of Directors were in attendance.
8
BIOGRAPHICAL INFORMATION
The principal occupation and business experience of each nominee for
election as director and each continuing director of Westfield Financial are
set forth below.
Nominees
Victor J. Carra served as Executive Vice President of Westfield Bank from
1998 until 2005, and as Executive Vice President of Westfield Financial from
its inception in 2001 until 2005. Since 1975, Mr. Carra served in various
capacities during his employment with Westfield Bank.
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.
Continuing Directors
The business experience of each director for at least the past five years
is set forth below.
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.
Robert T. Crowley, Jr. is a Certified Public Accountant and the Managing
Partner of 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.
Mary C. O'Neil is the former 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.
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.
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.
9
Retiring Director
Thomas C. Sullivan is retiring from the Board of Directors of Westfield
Financial and Westfield Bank in 2007. Mr. Sullivan has served as a director of
Westfield Bank since 1989 and as a director of Westfield Financial since 2001.
Mr. 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
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.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Business Experience of Executive Officers
James C. Hagan, age 45, 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 46, was appointed Vice President of Westfield
Financial and Westfield Bank on February 22, 2005. Mr. Ciejka also serves as
General Counsel and Director of Human Resources of Westfield Financial and
Westfield Bank. 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 60, 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 56, has served as Vice President and Residential
Loan Officer at Westfield Financial and Westfield Bank since 1989. She worked
as a Mortgage Loan Officer and Assistant Vice President from 1985 until 1989.
Deborah J. McCarthy, age 47, has served as Vice President of Westfield
Financial and Westfield Bank since 2000. She is the Manager of the Operations
and Information Systems Departments. She has worked for Westfield Bank in
numerous capacities since 1979.
Allen J. Miles, III, age 44, has served as Senior Vice President and
Chief Lending Officer of Westfield Financial and Westfield Bank since August
2005. From 1998 to 2005 he served as Vice President and Commercial Loan
Officer.
Leo R. Sagan, Jr., age 44, has served as the Vice President and
Controller of Westfield Financial and Westfield Bank since 2003. Prior to that
he served as Controller of Westfield Financial and Westfield Bank from 2002 to
2003 and as Assistant Treasurer of Westfield Financial and Westfield Bank from
1999 to 2002.
10
CORPORATE GOVERNANCE
Our Board of Directors has adopted corporate governance guidelines that
contain a number of corporate governance initiatives designed to comply with
American Stock Exchange listing standards, the Sarbanes-Oxley Act of 2002 and
the rules and regulations of the Securities and Exchange Commission.
Board of Directors Independence
Westfield Financial has determined that Directors Crowley, Colton, Lane,
McClure, O'Neil, Placek, Pohl, C. Sullivan and T. Sullivan are independent as
defined under the American Stock Exchange listing standards. All members of the
Audit Committee and Nominating and Corporate Governance Committee are
independent as defined under the American Stock Exchange listing standards.
Except for Director Carra, all members of the Compensation Committee are also
independent as defined under the American Stock Exchange listing standards.
Annually, the Board of Directors reviews the relationships that each
director has with us and our affiliates, as well as the criteria and standards
for determining independence. Upon review, the Board of Directors affirmatively
determines which directors are independent.
Code of Ethics
Westfield Financial has adopted a Conflict of Interest Policy and Code of
Conduct, which applies to all employees and officers of Westfield Financial and
Westfield Bank. Westfield Financial has also adopted a Code of Ethics for
Senior Financial Officers of Westfield Financial, Inc., which applies to
Westfield Financial's principal executive officer, principal financial officer,
principal accounting officer or controller or person performing similar
functions for Westfield Financial and Westfield Bank, and which requires
compliance with the Conflict of Interest Policy and Code of Conduct. The Code
of Ethics for Senior Financial Officers of Westfield Financial meets the
requirements of a "code of ethics" as defined by Item 406 of Regulation S-K.
The Code of Ethics for Senior Financial Officers was filed as Exhibit 14.1 to
the Form 10-K filed with the SEC on March 15, 2003. There have been no
amendments to the Code of Ethics since that time.
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 2006 fiscal year;
however, the Executive Committee of Westfield Bank, which serves the same
functions and has the identical make-up, met forty-two times during the year
ended December 31, 2006.
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
11
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 Securities and Exchange Commission 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.
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 Carra, Pohl
and T. Sullivan with Director Sullivan serving as Chairperson of the Committee.
Directors Pohl and Sullivan are independent as defined in the American Stock
Exchange listing standards. Director. Carra served as Executive Vice President
of Westfield Financial from 2001 until his retirement in July 2005, and as a
result does not currently qualify as an independent director under American
Stock Exchange standards. Under the exception set forth in the American Stock
Exchange listing standard for Compensation Committee members, the Board of
Directors of Westfield Financial determined that Director Carra's appointment
to the Compensation Committee is in the best interests of Westfield Financial
and its stockholders, based on his longstanding commitment to Westfield
Financial and his extensive knowledge of its compensation and benefits program.
Under the rules of the American Stock Exchange, Director Carra may not serve on
the Compensation Committee for more than two years.
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 O'Neil, Pohl and T.
Sullivan 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
was attached as Appendix A to the proxy statement filed with the SEC on April
14, 2006.
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.
Victor J. Carra, Richard C. Placek and Charles E. Sullivan were each
nominated by the Nominating Committee. As of the date of this proxy statement,
the Nominating and Corporate
12
Governance Committee had not received any shareholder recommendations for
nominees in connection with the 2007 Annual Meeting.
Compensation Committee Interlocks
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
2006, 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. 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.
COMPENSATION DISCUSSION AND ANALYSIS
General Philosophy and Overall Program Objectives
Westfield Financial strives to attract, retain and motivate qualified
executives crucial to Westfield Financial's success. Westfield Financial's
approach is to compensate executives commensurate with their experience,
expertise and performance and to be competitive with the other comparative
financial companies of similar size, complexities and business. Westfield
Financial designs its compensation program to:
o support its strategic plan by communicating what is expected of
executives with respect to results and achievement;
o retain and recruit executive talent; and
o create financial strength and shareholder value.
Westfield Financial seeks to achieve these objectives through the use of
a base salary, annual bonus (short-term incentive) and grants of long-term,
equity-based compensation such as stock options and restricted stock, deferred
compensation and fringe benefits.
Westfield Financial uses market comparisons for comparative financial
companies of similar size, complexities and business as one factor in making
compensation decisions along with individual contribution and performance, and
importance of role and responsibilities as well as leadership and growth
potential.
Compensation Components
Base Salaries and Annual Bonuses for Named Executive Officers. The
minimum salaries for two of the five executives officers named in the "Summary
Compensation Table" are determined by employment agreements for the Chief
Executive and Chief Financial Officers and any increase over these minimums,
and salaries of the other executive officers are determined by the Compensation
Committee based on a variety of factors, including:
13
o the nature and responsibility of the position and, to the extent
available, salary norms for persons in comparable positions at
other financial institutions; and
o the expertise of the individual executive and (except for their own
compensation) the recommendations of the Chief Executive Officer
and the President and Chief Operating Officer.
Where not specified by contract, salaries are generally reviewed
annually. In setting salaries, the Compensation Committee considers Westfield
Financial's financial and market performance and individual performances and
responsibilities.
As in prior years, the compensation program provided for an annual cash
bonus based on the company's performance as compared to its operating budget,
which was prepared by company management and approved by the Board of Directors
at the beginning of the fiscal year. Based on the degree of success, cash bonus
percentage of base salary is created by the Compensation Committee at the end
of the fiscal year and applied to each executive officer, as well as all other
employees of Westfield Financial, on a uniform basis. In 2006, this bonus
percentage was 10% of base salary.
Stock-Based Incentives. The stock-based incentive program provides a
periodic award that is both performance and retention based. The objective of
the program is to align compensation for named executive officers over a
multi-year period directly with the interests of shareholders of Westfield
Financial by motivating and rewarding creation and preservation of long term
shareholder value and relative shareholder return. The level of long-term
incentive compensation is determined based on an evaluation of competitive
market factors in conjunction with total compensation provided to named
executive officers and the goals of the compensation program. Westfield
Financial's long-term incentive compensation generally takes the form of a
combination of restricted stock unit grants and option rewards. These two
vehicles reward shareholder value creation in slightly different ways. Stock
options (which have exercise prices equal to the market price at date of grant)
reward named executive officers only if Westfield Financial's stock price
increases. Restricted stock units are impacted by all stock price changes, so
the value to named executive officers is affected by both increases and
decreases in Company's stock price.
It is the policy and part of the Compensation Committee's charter that
neither the Compensation Committee, nor any member of Westfield Financial's
management, shall backdate an equity grant under Westfield Financial's
stock-based incentive program or manipulate the timing of a public release of
material information with the intent of benefiting a grantee under an equity
award. In furtherance of this policy the Compensation Committee, in order to
ensure the integrity of awards granted under its stock-based incentive program,
has adopted the June Board of Directors meeting as the annual grant date for
such awards. Grants made outside of this annual grant date must be approved in
writing by Westfield Financial's Chief Executive Officer and must be presented
and approved at the next subsequent Board of Director's meeting and will be
deemed granted on the first business day following approval by Westfield
Financial's Board of Directors.
Restricted Stock. Restricted stock units granted as long-term incentive
compensation to named executive officers vest over a period of five years at
20% per year at the anniversary date.
Stock Options. Stock options granted to named officers have exercise
prices of not less than fair market value of Westfield Financial's stock on the
date of grant and vest over five years conditioned on continued employment. The
Compensation Committee has never granted stock options with exercise prices
below the market price of Westfield Financial's stock on the date of grant and
has never reduced the exercise price of stock options except to reflect the
exchange value in connection with the second step conversion closed on January
3, 2007.
14
Benefit Restoration. Westfield Financial has established the Benefit
Restoration Plan of Westfield Financial, Inc. in order to provide restorative
payments of executives who are prevented from receiving full benefits
contemplated by Westfield Financial's employee stock ownership plan'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
due to legal limitations imposed on tax-qualified plans. Currently, only the
Chief Executive Officer is a participant in the plan. The Compensation
Committee considers the remuneration received under this plan when annually
determining the executives' total compensation.
Periodic Review. The Compensation Committee has previously and will
continue to review both the annual bonus program and the long-term incentive
program annually to ensure that their respective key elements continue to meet
objectives described above.
Benefits and Perquisites. The Compensation Committee supports providing
benefits and perquisites to the named executive officers that are substantially
the same as those offered to other officers of Westfield Financial. In
addition, Westfield Financial may also make available to certain named officers
the use of a company automobile, as was the case in 2006 for the Chief
Executive Officer, the President and Chief Operating Officer and the Chief
Financial Officer.
Westfield Financial entered into a deferred compensation agreement with
the Chief Executive Officer in June of 1991. Under the deferred compensation
agreement, the Chief Executive Officer 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 by the executive from Westfield Financial's
defined benefit pension plan and trust, as amended, sponsored by the Savings
Bank Employee Retirement Association and are also reduced by social security
payments received by the executive. The purpose of this Agreement is to provide
the executive with benefits otherwise limited to certain provisions of the
Internal Revenue Code. The Compensation Committee considers the recommendation
received under the deferred compensation agreement when annually determining
the executive's total compensation received from Westfield Financial.
Employment Agreements and Change of Control Agreements. The Compensation
Committee believes that Westfield Financial's continued success depends, to a
significant degree, on the skills and competence of certain senior officers.
The employment agreements are intended to ensure that Westfield Financial
continues to maintain and retain experienced senior management.
Westfield Financial presently has employment agreements with its Chief
Executive, Chief Operating and Chief Financial Officers. Each agreement
provides for three-year rolling terms with minimum annual salaries,
discretionary cash bonuses and other fringe benefits. The agreements also
include protection for the executives if Westfield Financial experiences a
change in ownership or control. If such a change in control occurs, a portion
of the severance payments might constitute an "excess parachute payment" under
current federal tax laws. Under the agreements, Westfield Financial would
reimburse the executives for the amount of this excise tax and would have an
additional payment so that, after payment the excise tax and all income and
excise imposed on the reimbursement and gross-up payments, the executives will
retain approximately the same net after tax amounts under the employment
agreement that they would have retained if there were no 20% excise tax. The
effect of this provision is that Westfield Financial, rather than the
executives, bears the financial cost of the excise tax.
Westfield Financial has entered into one-year change of control
agreements with six officers: Gerald P. Ciejka, James C. Hagan, Rebecca S.
Kozaczka, Deborah J. McCarthy, Allen J. Miles, III, and Leo Sagan. The term of
these agreements is perpetual until Westfield Financial gives notice of
non-extension, at which time the term is fixed for one year. Generally,
Westfield Financial may terminate the employment of any officer covered under
these agreements, with or without cause, at any time prior to a change of
control
15
without obligation for severance benefits. However, if Westfield Financial
signs a merger or other business combination agreement, or if a third party
makes a tender offer or initiates a proxy contest, Westfield Financial could
not terminate an officer's employment without cause without liability for
severance benefits. The severance benefits would generally be equal to the
value of the cash compensation and fringe benefits that the officer would have
received if he or she had continued working for one additional year. Westfield
Financial 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 other 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 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 Financial for federal
income tax purposes. The change of control agreements do not provide a tax
indemnity.
Total Compensation. In making decisions with respect to any element of a
named executive officer's compensation, the Compensation Committee considers
the total compensation that may be awarded to the officer, including salary,
annual bonus and long-term incentive compensation. In addition, in reviewing
and approving employment agreements for named executive officers, the
Compensation Committee considers the other benefits to which the officer is
entitled by the agreement, including compensation payable upon termination of
the agreement under variety of circumstances. The Compensation Committee's goal
is to award compensation that is reasonable when all elements of potential
compensation are considered. The Compensation Committee is provided, prior to
the end of each fiscal year, a summary compensation schedule for each executive
officer, containing the amount of all forms of compensation. This schedule is
used as a tool by the Compensation Committee when considering the total
compensation of each executive officer.
Compensation Decision-Making Policies and Procedures
Decision-Making and Policy-Making. Westfield Financial's bylaws require
that the business and affairs of Westfield Financial be under the direction of
the Board of Directors. This includes executive officer compensation. Executive
compensation is set by the Board of Directors or a board committee to which
decision-making authority has been delegated. As a company listed on the
American Stock Exchange, Westfield Financial must observe governance standards
and listing requirements that require executive officer compensation decisions
to be made by a majority of independent director members of our board, by a
committee of independent directors or in exceptional and limited circumstances,
a compensation committee comprised of at least three members where only one
member is not independent. Consistent with these requirements, Westfield
Financial's Board of Directors has established a Compensation Committee which
is comprised of Directors Carra, Pohl and T. Sullivan with Director Sullivan
serving as Chairperson of the Committee. Directors Pohl and T. Sullivan are
independent under the American Stock Exchange listing standards. Mr. Carra
served as executive Vice President of Westfield Financial, Inc. from 2001 until
his retirement in July 2005, and as a result does not qualify as an independent
director under the American Stock Exchange listing requirements.
The Compensation Committee has been delegated authority from Westfield
Financial's Board of Directors to oversee executive compensation by approving
salary increases for Vice Presidents and above
16
and by reviewing general personnel matters such as staff performance
evaluations for Vice Presidents and above. The Compensation Committee has
established a compensation program and has a formal charter which was adopted
in December of 2006 and advises senior management on the average salary
increases for all employees under the compensation program. The compensation
program consists of three components: (1) base salary; (2) bonuses (short-term
incentives); and (3) long-term incentives (e.g., stock options, restricted
stock, deferred compensation, and fringe benefits).
The Compensation Committee meets four times a year. It considers the
expectations of the Chief Executive Officer with respect to their own
compensation and their recommendations with respect to the compensation of more
junior executive officers, as well as empirical data and the recommendations of
advisors both internal and external. The Compensation Committee does not
delegate its' duties to others. The Compensation Committee also confirms and
approves the Summary Compensation Tables included in this proxy statement in
accordance with the rules and regulations of the Securities and Exchange
Commission.
Use of Outside Advisors and Survey Data. The Compensation Committee uses
its own criteria coupled with a peer comparison based on similar companies to
establish the Chief Executive Officer's base salary along with essentially the
same process, compiled by the same independent outside consultant Westfield
Financial uses to determine the compensation of all other employees. The above
process is repeated for determining a fair compensation for all members of the
Board of Directors and their committees. The Compensation Committee employs an
outside compensation consultant, Thomas Warren of Thomas Warren & Associates,
Inc., Sherborn, Massachusetts to assist in the evaluation of Westfield
Financial's CEO and other selected officers. The Compensation Committee
maintains the authority to approve fees and other retention terms with respect
to such compensation consultant.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed the Compensation Discussion and
Analysis included in this proxy statement and has discussed it with management.
Based on such review and discussion, the Compensation Committee recommended to
the Board of Directors that the Compensation Discussion and Analysis be
included in this proxy statement.
Westfield Financial, Inc. Compensation Committee
Thomas C. Sullivan, Chairperson
Victor J. Carra
Paul R. Pohl
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
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
17
member attended, and each member of the Nominating Committee received $250 for
each meeting the member attended. Westfield Bank paid fees totaling $203,284 to
its non-employee directors for the year ended December 31, 2006.
Directors' Deferred Compensation Plan. Westfield Bank has established the
Westfield Bank Directors' Deferred Compensation Plan for the benefit of
non-employee directors. Under the Deferred Compensation Plan, each non-employee
director may make an annual election to defer receipt of all or a portion of
his or her director fees received from Westfield Financial and Westfield Bank.
The deferred amounts are allocated to a deferral account and credited with
interest at an annual rate equal to the rate on the highest yielding
certificate of deposit issued by Westfield Bank during the year or according to
the investment return of other assets as may be selected by the Compensation
Committee of Westfield Bank. The Deferred Compensation Plan is an unfunded,
non-qualified plan that provides for distribution of the amounts deferred to
participants or their designated beneficiaries upon the occurrence of certain
events such as death, retirement, disability or a change in control of
Westfield Financial or Westfield Bank (as those terms are defined in the
Deferred Compensation Plan).
The following table sets forth information regarding compensation earned
by the non-employee directors of Westfield Financial, Inc. during the last
fiscal year. The information disclosed in the following table and the
accompanying footnotes has been adjusted to reflect the exchange of all shares
of common stock in the second-step conversion pursuant to an exchange ratio of
3.28138 per share.
Fees Earned or Option
Paid in Cash Stock Awards Awards Total
Name ($)(1) ($)(2) ($)(3) ($)
- ---------------------- -------------- ------------ ------ ------
Victor J. Carra 12,700 - - 12,700
David C. Colton, Jr. 31,196 14,390 10,192 55,778
Robert T. Crowley, Jr. 13,700 14,390 10,192 38,282
Harry C. Lane 31,446 14,390 10,192 56,028
William H. McClure 12,900 14,390 10,192 37,482
Mary C. O'Neil 30,396 14,390 10,192 54,978
Richard C. Placek 13,700 14,390 10,192 38,282
Paul R. Pohl 12,150 14,390 10,192 36,732
Charles E. Sullivan 32,496 14,390 10,192 57,078
Thomas C. Sullivan 12,150 14,390 10,192 36,732
- --------------------
(1) Includes retainer payments, meeting fees, and committee and/or
chairmanship fees earned during the fiscal year, whether such fees were
paid currently or deferred.
(2) Represents the compensation cost recognized for the fiscal year in
connection with restricted stock of Westfield Financial granted to the
named executive officer, regardless of the year in which granted and
calculated in accordance with FAS 123R for financial statement purposes.
Unvested shares of restricted stock awards held in trust for each
director as of December 31, 2006 are as follows: for each of Messrs.
Colton, Crowley, Lane, McClure, Placek, Pohl, C. Sullivan, T. Sullivan
and Ms. O'Neil - 3,281 shares. For more information concerning the
assumptions used for these calculations, please refer to the discussion
under Note 11 in the Notes to Consolidated Financial Statements attached
to the Annual Report on Form 10-K for the year ended December 31, 2006.
This amount does not reflect the value of dividends paid on unvested
restricted stock.
(3) Represents the compensation cost recognized for the fiscal year for
options to purchase shares of Westfield Financial common stock
outstanding to the named executive officer, regardless of the year in
which granted and calculated in accordance with FAS 123R for financial
statement purposes. Stock options outstanding for each director at
December 31, 2006 are as follows for each of Messrs. Colton, Crowley,
Lane, McClure, Placek, Pohl, C. Sullivan, T. Sullivan and Ms. O'Neil -
8,532 shares. For more information concerning the assumptions used for
these calculations, please refer to the discussion under Note 11 in the
Notes to Consolidated Financial Statement attached to the Annual Report
on Form 10-K for the year ended December 31, 2006.
18
Executive Officer Compensation
The table below sets forth for 2006 the compensation of each of our named
executive officers.
Summary Compensation Table
Change in
Pension Value
and
Non-Equity Nonqualified
Stock Option Incentive Plan Deferred All Other
Name and Principal Salary(1) Bonus(1) Awards(2) Awards(3) Compensation Compensation Compensation(5)
Positions Year ($) ($) ($) ($) ($) Earnings(4)($) ($) Total ($)
- ------------------------ ---- --------- -------- --------- --------- -------------- -------------- --------------- ---------
Donald A. Williams,
Chairman and Chief
Executive Officer 2006 382,706 38,271 141,022 94,080 - 277,897 87,584 1,021,560
Michael J. Janosco, Jr.,
Chief Financial
Officer and Treasurer 2006 199,586 19,959 84,613 52,560 - 44,295 39,438 440,451
James C. Hagan,
President and Chief
Operating Officer 2006 209,284 20,928 28,780 9,408 - 26,870 28,146 323,416
Allen J. Miles, III,
Senior Vice President
& Chief Lending 2006 148,524 14,852 4,980 1,960 - 13,556 19,834 203,706
Officer
Rebecca S. Kozaczka,
Vice President 2006 110,984 11,098 24,463 7,056 - 37,136 18,960 209,697
- --------------------
(1) The figures shown for salary and bonus represent amounts earned for the
fiscal year, whether or not actually paid during such year.
(2) Represents the compensation cost recognized for the fiscal year in
connection with restricted stock of Westfield Financial granted to the
named executive officer, regardless of the year in which granted and
calculated in accordance with FAS 123R for financial statement purposes.
For more information concerning the assumptions used for these
calculations, please refer to Note 11 in the Notes to Consolidated
Financial Statements attached to the Annual Report on Form 10-K for the
year ended December 31, 2006. This amount does not reflect the value of
dividends paid on unvested restricted stock, which are included in the
Summary Compensation Table under the caption "All Other Compensation."
(3) Represents the compensation cost recognized for the fiscal year for
options to purchase shares of Westfield Financial common stock
outstanding to the named executive officer, regardless of the year in
which granted and calculated in accordance with FAS 123R for financial
statement purposes. For more information concerning the assumptions used
for these calculations, please refer to Note 11 in the Notes to
Consolidated Financial Statements attached to the Annual Report on Form
10-K for the year ended December 31, 2006.
(4) Includes for each named executive officer (a) the increase (if any) for
the fiscal year in the present value of the individual's accrued benefit
(whether not vested) under each tax-qualified and non-qualified actuarial
or defined benefit plan calculated by comparing the present value of each
individual's accrued benefit under each such plan in accordance with
Statement of Financial Accounting Standards 87 ("FAS 87") as of the
plan's measurement date in such fiscal year to the present value of the
individual's accrued benefit as of the plan's measurement date in the
prior fiscal year plus.
19
(5) The named executive officers participate in certain group life, health,
disability insurance and medical reimbursement plans, not disclosed in
the Summary Compensation Table, that are generally available to salaried
employees and do not discriminate in scope, terms and operation. The
figure shown for each named executive officer includes: (i) life
insurance premiums as follows: Mr. Williams - $3,378, Mr. Janosco -
$2,504, Mr. Hagan - $776, Mr. Miles - $504, and Ms. Kozaczka - $1,026;
(ii) 401(k) matching contributions as follows: Mr. Williams - $4,151, Mr.
Janosco - $5,988, Mr. Hagan - $4,496, Mr. Miles - $4,456 and Ms. Kozaczka
- $3,330; (iii) ESOP contributions as follows: Mr. Williams - $22,801,
Mr. Janosco - $21,244, Mr. Hagan - $19,574, Mr. Miles - $13,944 and Ms.
Kozaczka - $11,799: (iv) dividends on unvested restricted stock as
follows: Mr. Williams - $16,170, Mr. Janosco - $9,702, Mr. Hagan- $3,300,
Mr. Miles - $930, and Ms. Kozaczka - $2,805; and (v) contributions under
the benefit restoration plan of $41,084 for the benefit of Mr. Williams.
In addition, we provide certain non-cash perquisites and personal
benefits to each named executive officer that do not exceed $10,000 in
the aggregate for any individual, and are not included in the reported
figures.
Employment Agreements. Westfield Financial and Westfield Bank have
jointly entered into employment agreements with Donald A. Williams, Michael J.
Janosco, Jr. and, on January 31, 2007, James C. Hagan. For purposes of
Westfield Financial's obligations, the employment agreements of Mr. Williams
and Mr. Janosco have rolling three-year terms beginning on January 1, 2007, and
the employment agreement of Mr. Hagan has a rolling three-year term beginning
on January 30, 2007, 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 the same dates as above, and may
be renewed annually after a review of the executive's performance. These
agreements provide for minimum annual salaries of $416,078, $211,484 and
$221,780, 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 each of Messrs. Williams and Janosco 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
20
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 the following
executives: Gerald P. Ciejka, Rebecca S. Kozaczka, Deborah J. McCarthy, Allen
J. Miles, III, and Leo R. Sagan, Jr. The term of these agreements is perpetual
until Westfield Bank gives notice of non-extension, at which time the term is
fixed for one year. Generally, Westfield Bank may terminate the employment of
any officer covered by these agreements, with or without cause, at any time
prior to a change of control without obligation for severance benefits.
However, if Westfield Bank or Westfield Financial signs a merger or other
business combination agreement, or if a third party makes a tender offer or
initiates a proxy contest, it could not terminate an officer's employment
without cause without liability for severance benefits. The severance benefits
would generally be equal to the value of the cash compensation and fringe
benefits that the officer would have received if he or she had continued
working for an additional one year. Westfield Bank would pay the same severance
benefits if the officer resigns after a change of control following a loss of
title, office or membership on the Board of Directors, material reduction in
duties, functions or responsibilities, involuntary relocation of his or her
principal place of employment to a location over 25 miles from Westfield Bank's
principal office on the day before the change of control and over 25 miles from
the officer's principal residence or other material breach of contract which is
not cured within 30 days.
These agreements also provide uninsured death and disability benefits. If
Westfield Bank or Westfield Financial experiences a change in ownership, a
change in effective ownership or control or a change in the ownership of a
substantial portion of their assets as contemplated by section 280G of the
Internal Revenue Code, a portion of any severance payments under the change of
control agreements might constitute an "excess parachute payment" under current
federal tax laws. Any excess parachute payment would be subject to a federal
excise tax payable by the officer and would be non-deductible by Westfield Bank
and Westfield Financial for federal income tax purposes. The change of control
agreements do not provide a tax indemnity.
Compensation Plans and Compensation Plan Tables
2002 Stock Option Plan. Westfield Financial has a Stock Option Plan in
effect that 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 1,631,699
shares of common stock for issuance upon the exercise of stock options granted
under the Plan.
2002 Recognition and Retention Plan. Westfield Financial's Recognition
and Retention Plan was approved by shareholders and became effective on July
26, 2002. Like the Stock Option Plan, the Recognition and Retention Plan
functions as a long-term incentive compensation program for eligible officers,
employees and outside directors of Westfield Financial and Westfield Bank. The
Recognition and Retention Plan is not subject to ERISA and is not a
tax-qualified plan. The members of the Board's Compensation Committee who are
disinterested directors (the "RRP Committee") administer the Recognition and
Retention Plan. Westfield Financial pays all costs and expenses of
administering the Recognition and Retention Plan.
As required by the terms of the Recognition and Retention Plan, Westfield
Financial has established a trust and has contributed to the trust in order to
fund the purchase of 652,679 shares of common stock, the maximum number of
restricted stock 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
21
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
Recognition and Retention Plan on a discretionary basis to eligible officers,
executives and outside directors selected by the RRP Committee. Westfield
Financial may amend or terminate the Recognition and Retention Plan, in whole
or in part, at any time, subject to the requirements of all applicable laws.
The following table sets for information regarding plan-based awards
granted to the named executive officers of Westfield Financial during the last
fiscal year. The information disclosed in the following table has been adjusted
to reflect the exchange of all shares of common stock in the second-step
conversion pursuant to an exchange ratio of 3.28138 per share.
Grants of Plan-Based Awards Table
All Other
All Other Option
Stock Awards: Awards: Exercise or Closing Sale
Number of Number of Base Price of Price of
Shares of Securities Option Common Stock
Stock or Underlying Awards on the Grant
Name Grant Date Units(#) Options (#) ($/Sh) Date ($/Sh)
---- ---------- ------------- ----------- ------------- -----------
Donald A. Williams - - - - -
Michael J. Janosco, Jr. - - - - -
James C. Hagan - - - - -
Allen J. Miles, III 1/23/06 $3,281 - - 7.50
Rebecca S. Kozaczka - - - - -
22
The following table sets forth information regarding stock awards, stock
options and similar equity compensation outstanding at January 1, 2007, whether
granted in 2006 or earlier, including awards that have been transferred other
than for value. The information disclosed in the following table and the
accompanying footnotes has been adjusted to reflect the exchange of all shares
of common stock in the second-step conversion pursuant to an exchange ratio of
3.28138 per share.
Outstanding Equity Awards at Fiscal Year-End Table
Market
Number of Number of Number of Value of
Securities Securities Shares or Shares or
Underlying Underlying Units of Units of
Unexercised Unexercised Option Stock That Stock That
Options Options Exercise Option Have Not Have Not
(1) (1) Price Expiration Vested Vested ($)
Name Exercisable Unexercisable ($) Date (2) (3)
- ---- ----------- ------------- -------- ---------- ---------- ----------
Donald A. Williams 315,012 78,753 4.39 7/26/12 32,158 339,080
Michael J. Janosco, Jr. 189,007 47,252 4.39 7/26/12 19,295 203,448
James C. Hagan 31,501 7,875 4.39 7/26/12 6,563 69,200
Allen J. Miles, III 3,281 1,641 4.39 7/26/12 2,625 27,680
Rebecca S. Kozaczka 23,626 5,906 4.39 7/26/12 5,578 58,820
- --------------------
(1) The stock option awards were granted in July 2002 and vest annually over
a five-year period, the last year being July 2007.
(2) The Recognition and Retention Plan shares were granted in October 2002
and vest annually over a five-year period, the last being October 2007,
except for that awarded to Mr. Miles which vests over a similar five-year
period with the final installment vesting in October 2009.
(3) Market value is calculated on the basis of $10.54 per share, which is the
closing sales price for our common stock on December 29, 2006.
23
The following table sets forth the stock awards that vested and the
option awards that were exercised for the named executive officers during the
last fiscal year. The information disclosed in the following table and the
accompanying footnotes has been adjusted to reflect the exchange of all shares
of common stock in the second-step conversion pursuant to an exchange ratio of
3.28138 per share.
Option Exercises and Stock Vested Table
Option Awards Stock Awards
Number of Number of
Shares Value Shares Value
Acquired on Realized on Acquired on Realized on
Name Exercise(#) Exercise($)(1) Vesting(#) Vesting($)(1)
- ----------------------- ----------- -------------- ----------- -------------
Donald A. Williams - - 32,158 334,278
Michael J. Janosco, Jr. - - 19,295 200,567
James C. Hagan - - 6,563 68,220
Allen J. Miles, III - - 656 6,822
Rebecca S. Kozaczka - - 5,578 57,987
- --------------------
(1) The figures shown include the amount realized during the fiscal year upon
exercise of vested stock options by the named individual and the vesting
of restricted stock, based on the closing sales price for a share of our
common stock on the on the exercise date or vesting date, as applicable.
Unexercised stock options and unvested restricted stock may not be
transferred for value.
The following table sets forth the aggregate information of our equity
compensation plans in effect as of December 31, 2006.
Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights warrants and rights reflected in column (a))(1)
- ----------------------------- -------------------- -------------------- ---------------------------
(a) (b) (c)
Equity compensation plans
approved by security holders 1,324,936 4.43 170,184
Equity compensation plans not
approved by security holders - - -
Total 1,324,936 4.43 170,184
- --------------------
(1) The number of securities remaining for future issuance as of December 31,
2006 under equity compensation plans includes: 150,155 shares available
for issuance under the 2002 Stock Option Plan and 20,029 shares available
for issuance under the 2002 Recognition and Retention Plan; however, at
May 31, 2007, these shares were fully allocated and no shares are
currently available for future grants.
24
Pension Benefits
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: (1) the
attainment of their "normal retirement age" (as described in the pension plan)
while employed at Westfield Bank; (2) the completion of five vesting years of
service with Westfield Bank; or (3) the 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 (i) 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 (ii) 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.
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.
25
The following table sets forth information regarding pension benefits
accrued by the named executive officers during the last fiscal year.
Pension Benefits Table
Number of Present Value
Years of of
Credited Accumulated Payments During Last
Service Benefit Fiscal Year
Name Plan Name (#)(1) ($)(1) ($)
- ----------------------- --------------------- --------- ------------- --------------------
Donald A. Williams Pension Plan for 34.83 793,488 -
Employees
Deferred Compensation - 1,654,518 -
Agreement
Michael J. Janosco, Jr. Pension Plan for 7.58 210,467 -
Employees
James C. Hagan Pension Plan for 12.33 101,133 -
Employees
Allen J. Miles, III Pension Plan for 8.33 44,627 -
Employees
Rebecca S. Kozaczka Pension Plan for 21.08 225,747 -
Employees
- --------------------
(1) The figures shown are determined as of the plan's measurement date during
2006 under FAS 87 for purposes of Westfield Financial's audited financial
statements. For the mortality, discount rate and other assumptions used
for this purpose, please refer to Note 12 in the Notes to Consolidated
Financial Statements attached to the Annual Report on Form 10-K for the
year ended December 31, 2006.
Non-qualified Deferred Compensation
401(k) Plan. Westfield Bank maintains a 401(k) Plan, a tax-qualified
defined contribution plan, for substantially all employees of Westfield Bank
who have attained age 21 and completed at least three months of service.
Eligible employees may contribute from 1% to 75% of annual compensation to the
plan on a pre-tax basis each year, subject to limitations of the Internal
Revenue Code (for 2006 the limit was $15,000). 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. The employee stock ownership 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. 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 made in the initial public
offering as well as the second-step conversion. Each loan is for a term of 30
years and calls for level annual payments of principal and interest. The plan
pledges the shares it purchases as collateral for the loan and holds them in a
suspense account. The plan will not distribute the pledged shares right away.
Instead, it will release a portion of the pledged shares annually.
26
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 in order to provide restorative payments to executives
who are prevented from receiving the full benefits contemplated by the employee
stock ownership plan'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 employee stock ownership plan 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 employee stock
ownership plan'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.
The following table sets forth information regarding nonqualified
deferred compensation earned by our named executive officers during the last
fiscal year under non-qualified defined contribution plans.
Non-Qualified Deferred Compensation Table(1)
Executive Registrant Aggregate Aggregate
Contributions Contributions Earnings in Withdrawals/ Aggregate Balance
in Last FY in Last FY Last FY Distributions at Last FYE
Name ($)(2) ($)(3) ($)(4) ($) ($)
- ----------------------- ------------- ------------- ----------- ------------- -----------------
Donald A. Williams - 236,627 - - 1,654,518
Michael J. Janosco, Jr. - 44,295 - - 210,467
James C. Hagan - 26,870 - - 101,133
Allen J. Miles, III - 13,556 - - 44,627
Gerald P. Ciejka - 37,136 - - 225,747
- --------------------
(1) Non-qualified deferred compensation includes benefits provided under our
Benefit Restoration Plan.
(2) Executive contributions are included in the Summary Compensation Table
under the captions "Salary" and "Non-Equity Incentive Plan Compensation,"
as applicable.
(3) Registrant contributions are included under the caption "Change in
Pension Value and Nonqualified Deferred Compensation Earnings" in the
Summary Compensation Table.
(4) Earnings did not accrue at above-market or preferential rates and are not
reflected in the Summary Compensation Table.
27
Termination and Change in Control Benefits
Westfield Financial provides additional benefits, not included in the
previous tables, to the named executive officers in the event of retirement or
termination of employment in certain circumstances and in the event of a change
in control. The following table provides an estimate of the value of such
benefits, assuming termination of employment or a change in control occurred on
December 31, 2006.
Donald A. Michael J. James C. Allen J. Rebecca S.
Williams Janosco, Jr. Hagan Miles III Kozaczka
--------- ------------ -------- --------- ----------
Retirement
Retiree Life Insurance (1) 17,543 12,550 4,787 3,420 10,492
Disability
Salary Continuation (2) 191,353 99,793 - - -
Death
Stock Option Vesting (3) 485,040 291,024 48,504 40,844 36,378
Restricted Stock Vesting (4) 339,080 203,448 69,200 27,680 58,820
Discharge Without Cause
or Resignation With Good
Reason - No Change in
Control
Stock Option Vesting (3) - - - - -
Restricted Stock Vesting (4) - - - - -
Lump Sum Cash Payment (5) 1,480,274 597,583 - - -
Health Insurance (6) 21,315 26,976 - - -
Discharge Without Cause
Or Resignation With Good
Reason - Change in
Control-Related
Stock Option Vesting (3) 485,040 291,024 48,504 40,844 36,378
Restricted Stock Vesting (4) 339,080 203,448 69,200 27,680 58,820
Lump Sum Cash Payment (5) 1,480,274 597,583 209,431 145,466 108,091
Health Insurance (6) 21,315 26,976 10,008 10,008 10,008
ESOP Restoration Plan
Benefit (7) 359,148 195,200 169,835 121,394 102,461
Golden Parachute Excise
Tax Gross-up Payment (8) 754,555 325,648 - - -
Change in Control - No
Termination of
Employment
Stock Option Vesting (3) 485,040 291,024 48,504 40,844 36,378
Restricted Stock Vesting (4) 339,080 203,448 69,200 27,680 58,820
ESOP Restoration Plan
Benefit (7) 359,148 195,200 169,835 121,394 102,461
- --------------------
(Footnotes on following page)
28
(1) The reported figure reflects the estimated present value of the future
premium cost of such benefits for the named individual, calculated on the
basis of the assumptions used by Westfield Financial in measuring its
liability for such benefits for financial statement purposes under
Statement of Financial Account Standards No. 106 ("FAS 106"). For more
information concerning the assumptions used for these calculations,
please refer to Note 12 in the Notes to Consolidated Financial Statements
attached to the Form 10-K for the year ended December 31, 2006.
(2) The employment agreements in effect for Messrs. Williams and Janosco
provide for salary continuation payments following termination due to
disability for the remaining contract term or until group long-term
disability benefits begin. The figures shown assume payment of full
salary for 180 days, equal to the waiting period for benefits under our
group long-term disability program, without discount for present value.
(3) All stock options granted under the 2002 Stock Option Plan provide for
full vesting upon death, disability, retirement, or change in control.
The figures shown reflect the in-the-money value of those stock options
that would accelerate, calculated based on the positive difference
between the option exercise price and the closing sales price for a share
of our common stock on December 29, 2006.
(4) All restricted stock granted under the 2002 Recognition and Retention
Plan provide for full vesting upon death, disability, retirement or
change in control. The figures shown reflect the value of those
restricted stock awards that would accelerate, calculated based on the
closing sales price for a share of our common stock on December 29, 2006.
(5) The employment agreements in effect for Messrs. Williams and Janosco
provide for a lump sum cash payment equal to the present value of the
salary payments, estimated cash incentives (based on the prior
three-years' cash incentives, as a percentage of salary), and additional
qualified and non-qualified defined benefit and defined contribution plan
benefits that would be earned during the remaining contract term. The
figure shown reflects an assumed remaining contract term of three years
and a discount rate of 5.75%. Similarly, individuals with change of
control contracts are paid cash severance for a one year period.
(6) The employment agreements in effect for Messrs. Williams and Janosco
provide for continued health, life and other insurance benefits for the
remaining contract term, with an offset for benefits provided by a
subsequent employer. The change of control agreements with other officers
also provide continued health, life and other insurance benefits for a
maximum period of one year. The figure shown represents the present value
of continued insurance benefits for a fixed period of three years and
assumes no offset for benefits provided by a subsequent employer,
calculated on the basis of the assumptions used by Westfield Financial in
measuring its liability for retiree benefits other than pensions for
financial statement purposes under FAS 106. For more information
concerning the assumptions used for these calculations, please refer to
Note 12 in the Notes to Consolidated Financial Statements attached to the
Form 10-K for the year ended December 31, 2006.
(7) Westfield Financial's tax-qualified employee stock ownership plan
provides that, in the event of a change in control, a portion of the
proceeds from the sale of shares of our common stock held in a suspense
account for future allocation to employees would be applied to repay the
outstanding balance on the loan used to purchase the unallocated shares.
The remaining unallocated shares (or the proceeds from their sale) would
be distributed on a pro-rata basis among the accounts of plan
participants. Westfield Financial estimates this distribution to be
approximately $18.17 per allocated share, based on 91,353 allocated
shares, 306,454 unallocated shares, an outstanding loan balance of
$5,036,213 and stock price of $18.17 per share, which is the closing
sales price for a share on December 29, 2006. Under the terms of
Westfield Financial's Benefit Restoration Plan, a corresponding earnings
credit would be applied to accumulated share equivalents under this plan.
The figures shown represent an estimated earnings credit of $18.17 per
share equivalent credited to each of the named individuals who
participate in the Benefit Restoration Plan.
(8) The employment agreements in effect for Messrs. Williams and Janosco
provide that Westfield Financial will indemnify them, on a net after-tax
basis, against the effects of a 20% federal excise tax that is applied to
payments that are contingent on a change in control, where the aggregate
value of such payments equals or exceeds three times the individual's
average five-year W-2 earnings for the period of five consecutive
calendar years ending prior to the date of the change in control. The
figure shown reflects an estimate of the indemnification payment that
would be due to each named individual.
29
PERFORMANCE GRAPH
The following graph compares Westfield Financial, Inc.'s total cumulative
shareholder return by an investor who invested $100.00 on December 31, 2001
through December 31, 2006 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.
[GRAPHIC OMITTED]
12/01 12/02 12/03 12/04 12/05 12/06
------ ------ ------ ------ ------ ------
Westfield Financial, Inc. 100.00 117.09 181.44 199.87 192.85 288.17
Russell 2000 100.00 79.52 117.09 138.55 144.86 171.47
Nasdaq Bank 100.00 59.14 89.11 103.85 130.57 166.05
30
PRINCIPAL ACCOUNTING FEES AND SERVICES
The Audit Committee has appointed Wolf & Company, P.C. as our independent
registered public accounting firm for the fiscal year ending December 31, 2007.
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.
Audit Fees Incurred
During the fiscal years ended December 31, 2006 and December 31, 2005,
respectively, Westfield Financial retained and paid Wolf & Company, P.C. to
provide audit and other services as follows:
2006(3) 2005
-------- --------
Audit(1) $348,100 $249,000
Audit-Related Fees - -
Tax Fees(2) $28,100 $58,000
All Other Fees - -
Total $376,200 $307,000
- --------------------
(1) 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.
(2) Tax fees consisted of assistance with matters related to tax compliance
and counseling.
(3) Includes fees associated with second step stock conversion.
Audit Committee Pre-approval Policies and Procedures
Pre-approval of Services. The Audit Committee shall pre-approve 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 pre-approval requirement set forth above shall not be
applicable with respect to non-audit services if:
(1) 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;
(2) such services were not recognized by Westfield Financial at the
time of the engagement to be non-audit services; and
(3) 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.
31
Delegation. The Committee may delegate to one or more designated members
of the Committee the authority to grant required pre-approvals. The decisions
of any member to whom authority is delegated under this paragraph to
pre-approve activities under this subsection shall be presented to the full
Committee at its next scheduled meeting.
The Audit Committee pre-approved 100% of the services performed by the
independent registered public accounting firm pursuant to the policies outlined
above.
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, 2006 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, 2006 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
32
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE AND
TRANSACTIONS WITH RELATED PERSONS
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, 2006, all Section 16(a)
filing requirements applicable to Westfield Financial's executive officers and
directors during fiscal 2006 were met.
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 May 31, 2007, loans to non-employee directors and
their associates totaled $ 17.9 million.
===============================================================================
The Board of Directors unanimously recommends a vote "FOR" all of the nominees
for election as directors.
===============================================================================
33
-----------------------------------------------------------------
PROPOSAL 2
APPROVAL OF THE WESTFIELD FINANCIAL, INC.
2007 STOCK OPTION PLAN
-----------------------------------------------------------------
The Board of Directors of Westfield Financial has adopted the Westfield
Financial, Inc. 2007 Stock Option Plan, subject to approval by a majority of
the holders of Westfield Financial's outstanding shares of common stock.
Provided below is a summary of our reasons for adopting this plan and seeking
the approval of our shareholders. The following summary is qualified in its
entirety by the full text of the plan document. The plan document is included
at the end of this Proxy Statement as Appendix A and is incorporated by
reference into this proposal.
Why We Are Asking for Shareholder Approval
We are asking for shareholders to approve the Westfield Financial, Inc.
2007 Stock Option Plan so that we will be able to grant stock options to our
directors, officers and other key employees. Most of the companies with which
we compete for directors and management-level employees are public companies
that offer stock options as part of their director and officer compensation
packages. By approving this plan, our shareholders will enable us to offer a
more competitive compensation package in attracting and retaining highly
qualified directors and officers. In addition, the value of the stock options
that we would grant under this plan relates directly to the market price of our
common stock. Adding stock options to our compensation packages would link the
financial interest of our directors and officers with the financial interest of
our shareholders.
If We Do Not Receive Shareholder Approval, We Will Not Implement the Option Plan
Applicable federal banking regulations did not permit us to implement a
stock option plan during the first six months after the completion of the
reorganization of Westfield Financial and our second-step public offering.
These regulations permit us to implement a stock option plan after six months
and before the first anniversary of these events only if we obtain the approval
of the holders of a majority of our shares of common stock. If we do not
receive this approval, it will not be possible for us to grant stock options
under this plan. As of May 31, 2007, we had 1,364,520 options outstanding and
no options available for grant under the 2002 Stock Option Plan. In the event
we do not receive shareholder approval, we expect that the Board will consider
substituting other forms of compensation to assure that our compensation
packages for officers and directors are competitive with those of other
publicly traded financial services companies in our market area.
Purpose of the Option Plan
The purpose of the plan is to promote growth and profitability to
Westfield Financial and its shareholders, to provide certain key officers,
directors and employees of Westfield Financial and its affiliates with an
incentive to achieve corporate objectives, to attract and retain individuals of
outstanding competence and to provide such individuals with an equity interest
in Westfield Financial.
34
Description of the Option Plan
Administration. The plan will be administered by the Compensation
Committee consisting of all members of the Board or, if designated by the
Board, a committee comprised solely of "Disinterested Board Members." In
general, a Disinterested Board Member is a member of the Board who (1) is not a
an officer or employee of Westfield Financial or Westfield Bank; (2) is not a
former employee of Westfield Financial who receives compensation for prior
services during the taxable year; (3) has not been an officer of Westfield
Financial; (4) does not receive compensation from Westfield Financial or
Westfield Bank other than for service as a director; and (5) does not have an
interest in nor is engaged in a business relationship which would require
disclosure under the SEC's proxy solicitation rules. The Compensation Committee
must consist of at least two Disinterested Board Members.
Stock Subject to the Option Plan. Westfield Financial has reserved
1,560,101 shares of its common stock for issuance upon the exercise of options
under the plan. Such shares may be unissued shares or shares previously issued
and subsequently reacquired by Westfield Financial. Any shares subject to
grants under the plan which expire or are terminated, forfeited or canceled
without having been exercised or vested in full shall be available for new
option grants. As of May 31, 2007, the aggregate fair market value of the
shares reserved for issuance under the plan was $16,147,045, based on the
latest closing sales price per share of common stock of $10.35 on the American
Stock Exchange on May 31, 2007.
Eligibility. The Compensation Committee may select people who receive
stock option grants. The Compensation Committee has the discretion to set the
amounts, terms and conditions of awards pursuant to individual options
agreements and the terms of the plan. As of the date of this proxy statement,
the Compensation Committee has not selected the employees and directors who
will be eligible to receive option grants.
Terms and Conditions of Options. The Compensation Committee sets the
terms and conditions of the stock options that it grants. In setting terms and
conditions, it must observe the following restrictions:
o It may not grant options to purchase more than 390,025 shares to
any one employee. In addition, it may not grant options to purchase
more than 78,005 shares to any one non-employee director or options
to purchase more than 468,030 shares of Westfield Financial's
common stock to all outside directors in the aggregate.
o It may not grant options with an effective date that is before the
date that we receive shareholder approval for the plan.
o It may not grant a stock option with a purchase price that is less
than the fair market value of a share of Westfield Financial's
common stock on the date it grants the stock option.
o It may not grant a stock option with a term that is longer than ten
years.
o It may not grant options that become exercisable more rapidly than
at the rate of 20% per year measured from the date of the grant,
with acceleration permitted only in case of death, disability or
change of control, unless (1) the plan is amended on or after
January 3, 2008 to provide the committee with the ability to set
different vesting schedules; and (2) such amendment is approved by
shareholders.
35
The Compensation Committee may grant incentive stock options that qualify for
special federal income tax treatment or non-qualified stock options that do not
qualify for special federal income tax treatment. Incentive stock options are
subject to certain additional restrictions under the Internal Revenue Code and
the plan.
Upon the exercise of an option, the exercise price of the option must be
paid in full. Payment may be made in cash or, if and to the extent authorized
by the Compensation Committee, in the form of common stock of Westfield
Financial already owned by the option holder having an aggregate fair market
value on the date the option is exercised equal to the aggregate exercise price
to be paid. Payment may also be made by the delivery of an exercise notice to
Westfield Financial with irrevocable instructions to a broker to promptly
deliver to Westfield Financial the amount of sale or loan proceeds to pay the
purchase price. Options may be transferred prior to exercise only to certain
family members, certain non-profit organizations and on the death of the option
holder.
Mergers and Reorganizations; Adjustments for Stock Dividends. The number
of shares available under the plan, the maximum limits on option grants to
individual officers and directors and to non-employee directors in the
aggregate and the number of shares subject to outstanding options will be
adjusted to reflect any merger, consolidation or business reorganization in
which Westfield Financial is the surviving entity, and to reflect any stock
split, stock dividend or other event generally affecting the number of shares.
If a merger, consolidation or other business reorganization occurs and
Westfield Financial is not the surviving entity, outstanding options will be
converted into options to purchase voting common equity securities in the
surviving entity having substantially the same terms, conditions and economic
benefit as options granted under the plan. Outstanding options may also be
canceled at any time prior to such merger, consolidation or business
reorganization, so long as the option holder receives payment determined by
Westfield Financial's Board of Directors to be of a value equivalent to the
value of the canceled options.
Termination or Amendment of the Option Plan
The Board of Directors may suspend or terminate the plan in whole or in
part at any time prior to the tenth anniversary of the plan's effective date,
by giving written notice of such suspension or termination to the Compensation
Committee. Unless sooner terminated, the plan will terminate automatically on
the day preceding the tenth anniversary of the plan's effective date. In the
event of any suspension or termination of the plan, all options granted under
the plan that are outstanding on the date of such suspension or termination of
the plan shall remain outstanding and exercisable for the period and on the
terms and conditions set forth in the plan's option agreements.
The Board of Directors may also amend or revise this plan in whole or in
part at any time, provided, however, that no such amendment or revision will be
effective if it amends a material term of the plan, unless approved by the
holders of a majority of the votes cast on a proposal to approve such amendment
or revision.
Federal Income Tax Consequences
The following discussion is intended to be a summary and is not a
comprehensive description of the federal tax laws, regulations and policies
affecting Westfield Financial and recipients of stock option grants under the
plan. Any descriptions of the provisions of any law, regulation or policy are
qualified in their entirety by reference to the particular law, regulation or
policy. Any change in applicable law or regulation or in the policies of
various taxing authorities may have a significant effect on this summary. The
plan is not a qualified plan under Section 401(a) of the Internal Revenue Code.
36
Federal Tax Consequences for Option Recipients. Incentive stock options
will not create federal income tax consequences when they are granted. If they
are exercised during employment or within three months after termination of
employment, the exercise will not result in income that may increase taxable
income, but will create an item of adjustment that may affect liability for
alternative minimum tax. When the shares acquired on exercise of an incentive
stock option are sold, the seller must pay federal income taxes on the amount
by which the sales price exceeds the purchase price. This amount will be taxed
at capital gains rates if the sale occurs at least two years after the option
was granted and at least one year after the option was exercised. Otherwise, it
is taxed as ordinary income.
Incentive stock options that are exercised more than one year after
termination of employment due to death or disability or three months after
termination of employment for other reasons are treated as non-qualified stock
options. Non-qualified stock options will not create federal income tax
consequences when they are granted. When they are exercised, federal income
taxes at ordinary income tax rates must be paid on the amount by which the fair
market value of the shares acquired by exercising the option exceeds the
exercise price. When an option holder sells shares acquired by exercising
non-qualified stock option, he or she must pay federal income taxes on the
amount by which the sales price exceeds the purchase price plus the amount
included in ordinary income at option exercise. This amount will be taxed at
capital gains rates, which will vary depending upon the time that has elapsed
since the exercise of the option. A cash payment under the plan's change of
control provisions is taxed as if it were the exercise of a non-qualified stock
option followed immediately by a resale of the stock acquired by exercising the
option.
Federal Tax Consequences for Westfield Financial. When a non-qualified
stock option is exercised, Westfield Financial may be allowed a federal income
tax deduction for the same amount that the option holder includes in his or her
ordinary income. When an incentive stock option is exercised, there is no tax
deduction unless the shares acquired are resold sooner than two years after the
option was granted or one year after the option was exercised. A cash payment
under the plan's change of control provisions is deductible as if it were the
exercise of a non-qualified stock option. The Internal Revenue Code places an
annual limit of $1 million each on the tax deduction which we may claim in any
fiscal year for the compensation of our Chief Executive Officer and certain
other highly compensated executive officers. There is an exception to this
limit for so-called "qualified performance-based compensation." We have
designed this plan with the intention that the stock options that we grant will
constitute qualified performance-based compensation. As a result, we do not
believe that this limit will impair our ability to claim federal income tax
deductions that are otherwise available when an option holder exercises a
non-qualified stock option. No executive of Westfield Financial currently
receives compensation that would be rendered nondeductible by this limitation.
The preceding statements summarize the general principles of current
federal income tax law applicable to options that may be granted under the
plan. State and local tax consequences may also be significant.
===============================================================================
The Board of Directors unanimously recommends a vote "FOR" the adoption of the
Westfield Financial, Inc. 2007 Stock Option Plan.
===============================================================================
37
--------------------------------------------------------------
PROPOSAL 3
APPROVAL OF THE WESTFIELD FINANCIAL, INC.
2007 RECOGNITION AND RETENTION PLAN
--------------------------------------------------------------
The Board of Directors of Westfield Financial has adopted the Westfield
Financial, Inc. 2007 Recognition and Retention Plan, subject to approval by a
majority of the holders of Westfield Financial's outstanding shares of common
stock. Provided below is a summary of our reasons for adopting this plan and
seeking the approval of our shareholders. The following summary is qualified in
its entirety by the full text of the plan document. The plan document is
included at the end of this proxy statement as Appendix B and is incorporated
by reference into this proposal.
Why We Are Asking for Shareholder Approval
We are asking for shareholders to approve the Westfield Financial, Inc.
2007 Recognition and Retention Plan so that we will be able to grant stock
awards to certain key officers, employees and directors. Most of the companies
with which we compete for directors and management-level employees are public
companies that offer stock awards as part of their director and officer
compensation packages. By approving this plan, our shareholders will enable us
to offer a more competitive compensation package in attracting and retaining
highly qualified directors, officers and employees. In addition, the value of
the stock awards that we would grant under this plan relates directly to the
market price of our common stock. Adding stock awards to our compensation
packages would link the financial interest of our directors, officers and
employees with the financial interest of our shareholders.
If We Do Not Receive Shareholder Approval, We Will Not Implement the Plan
Applicable federal banking regulations did not permit us to implement a
stock award plan during the first six months after the completion of the
reorganization of Westfield Financial and our second-step public offering.
These regulations permit us to implement a stock award plan after six months
and before the first anniversary of these events only if we obtain the approval
of the holders of a majority of our shares of common stock. If we do not
receive this approval, it will not be possible for us to grant stock awards
under this plan. As of May 31, 2007, we had 107,887 shares of unvested
restricted stock and no shares available for grant under the 2002 Recognition
and Retention Plan. In the event we do not receive shareholder approval, we
expect that the Board will consider substituting other forms of compensation to
assure that our compensation packages for officers, directors and employees are
competitive with those of other publicly traded financial services companies in
our market area.
Purpose of the Recognition and Retention Plan
The purpose of the plan is to promote the growth and profitability of
Westfield Financial and its shareholders, to provide certain key officers,
employees and directors of Westfield Financial and its affiliates with an
incentive to achieve corporate objectives, to attract and retain individuals of
outstanding competence and to provide such individuals with an equity interest
in Westfield Financial.
38
Description of the Recognition and Retention Plan
Administration. The plan will be administered by the Compensation
Committee consisting of all members of the Board or, if designated by the
Board, a committee comprised solely of "Disinterested Board Members." In
general, a Disinterested Board Member is a member of the Board who (1) is not a
an officer or employee of Westfield Financial or Westfield Bank; (2) is not a
former employee of Westfield Financial who receives compensation for prior
services during the taxable year; (3) has not been an officer of Westfield
Financial; (4) does not receive compensation from Westfield Financial or
Westfield Bank other than for service as a director; and (5) does not have an
interest in nor is engaged in a business relationship which would require
disclosure under the SEC's proxy solicitation rules. The Compensation Committee
must consist of at least two Disinterested Board Members.
Stock Subject to the Recognition and Retention Plan. Westfield Financial
will establish a trust and will contribute certain amounts of money or property
to be determined by the Board of Directors, in its discretion. No contributions
by participants will be permitted. The funding agent will invest the assets of
the trust primarily in the shares of our common stock that will be used to make
restricted stock awards. It is currently anticipated that the fund will
purchase common stock on the open market or in private transactions. The trust
will not purchase previously authorized but unissued shares from Westfield
Financial. The trust is not authorized to purchase more than 624,041 shares of
common stock of Westfield Financial. As of May 31, 2007, the aggregate fair
market value of the shares to be granted under this plan was $6,458,824 based
on the closing sales price per share of Westfield Financial's common stock of
$10.35 on the American Stock Exchange on May 31, 2007.
Eligibility. The Compensation Committee for the plan selects the people
who receive restricted stock awards under the plan. Any employee of Westfield
Financial or any affiliate approved by the Compensation Committee may be
selected to receive stock awards. As of the date of this proxy statement, the
administrative committee had not selected the employees and directors who will
receive stock awards.
Terms and Conditions of Awards. The Compensation Committee may, in its
discretion, grant awards of restricted stock to eligible individuals, up to a
maximum of 624,041 shares. The Compensation Committee will determine at the
time of the grant the number of shares of common stock subject to an award, the
vesting schedule applicable to the award and may, in its discretion, establish
other terms and conditions applicable to the award. In setting terms and
conditions, it must observe the following restrictions:
o It may not grant restricted stock awards for more than 156,010
shares of Westfield Financial's common stock to any one officer or
employee, more than 31,202 shares of common stock to any one
non-employee director or more than 187,212 shares of common stock
to all non-employee directors in the aggregate.
o It may not grant restricted stock awards with an effective date
that is before the date that we receive shareholder approval for
the plan.
o It may not grant restricted stock awards that vest more rapidly
than at the rate of 20% per year measured from the date of the
grant, with acceleration permitted only in cases of death,
disability or change of control, unless (1) the plan is amended on
or after January 3, 2008 to provide the committee with the ability
to set different vesting schedules; and (2) such amendment is
approved by shareholders.
39
As a general rule, shares of our common stock that are subject to a restricted
stock award are held in trust for the benefit of the award recipient until
vested and, when vested, are transferred from the fund to the award recipient.
While the shares are held in the fund, the award recipient receives dividends
and exercises voting rights. In the alternative, the Compensation Committee may
authorize the immediate distribution of the restricted shares to the award
recipient in the form of a stock certificate bearing a legend containing the
applicable vesting restrictions.
Mergers and Reorganizations. The number of shares available under the
plan, the maximum limits on awards to individual officers and directors and to
non-employee directors in the aggregate, and any outstanding awards will be
adjusted to reflect any merger, consolidation or business reorganization in
which Westfield Financial is the surviving entity, and to reflect any stock
split, stock dividend or other event generally affecting the number of shares.
If a merger, consolidation or other business reorganization occurs and
Westfield Financial is not the surviving entity, the funding agent will hold
any money, stock, securities or other property received in the fund, and adjust
any award by allocating such money, stock, securities or other property to the
individual eligible for the award.
Termination or Amendment
The Board may suspend or terminate the plan in whole or in part at any
time by giving written notice of such suspension or termination to the
Compensation Committee. However, the plan may not be terminated while there are
outstanding awards that may vest in the future. Upon the termination of the
plan, the funding agent will make distributions from the trust as directed by
the Compensation Committee and will return any remaining assets of the trust to
Westfield Financial.
The Board may also amend or revise the plan in whole or in part at any
time. However, without shareholder approval, no amendment or revision may be
made to the plan that provides for vesting of awards on retirement or provides
for accelerated vesting of awards.
Federal Income Tax Consequences
The following discussion is intended to be a summary and is not a
comprehensive description of the federal tax laws, regulations and policies
affecting Westfield Financial and recipients of awards that may be granted
under the plan. Any descriptions of the provisions of any law, regulation or
policy are qualified in their entirety by reference to the particular law,
regulation or policy. Any change in applicable law or regulation or in the
policies of various taxing authorities may have a significant effect on this
summary. The plan is not a qualified plan under Section 401(a) of the Internal
Revenue Code.
The stock awards under the plan do not result in federal income tax
consequences to either Westfield Financial or the award recipient. As a general
rule, once the award is vested and the shares subject to the award are
distributed, the award recipient will generally be required to include in
ordinary income, for the taxable year in which the vesting date occurs, an
amount equal to the fair market value of the shares on the vesting date.
Westfield Financial will generally be allowed to claim a deduction, for
compensation expense, in a like amount. If dividends are paid on unvested
shares held under the plan, such dividend amounts will also be included in the
ordinary income of the recipient. Westfield Financial will be allowed to claim
a deduction for compensation expense for this amount as well.
Section 162(m) of the Internal Revenue Code limits Westfield Financial's
deductions for compensation in excess of $1 million per year for the chief
executive officer and the certain other highly paid executives named in its
proxy statement. Compensation amounts resulting from restricted stock awards
will be subject to this deduction limitation if this amount of the restricted
stock awards plus other compensation of the executive that is subject to the
limit exceeds $1 million. No executive of Westfield
40
Financial currently receives compensation subject to this limitation. We expect
that the Compensation Committee will take these deduction limits into account
in setting the size and the terms and conditions of restricted stock awards.
However, the Compensation Committee may decide to grant restricted stock awards
all or a portion of which will exceed the deduction limit.
The preceding statements are intended to summarize the general principles
of current federal income tax law applicable to awards that may be granted
under the plan. State and local tax consequences may also be significant.
===============================================================================
The Board of Directors unanimously recommends a vote "FOR" the adoption of the
Westfield Financial, Inc. 2007 Recognition and Retention Plan.
===============================================================================
ADDITIONAL INFORMATION
Information About Shareholder Proposals
If you wish to submit proposals to be included in our proxy statement for
the 2008 Annual Meeting of Westfield Financial shareholders, we must receive
them on or before January 17, 2008, 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.
ss.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 2008 Annual Meeting of
Shareholders, 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 Article I of our Bylaws.
By Order of the Board of Directors,
/s/ Philip R. Smith
Philip R. Smith
Secretary
Westfield, Massachusetts
June 18, 2007
===============================================================================
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.
===============================================================================
41
APPENDIX A
WESTFIELD FINANCIAL, INC.
2007 STOCK OPTION PLAN
--------------------
A-1
TABLE OF CONTENTS
Page
ARTICLE I
PURPOSE
Section 1.1 General Purpose of the Plan....................................5
ARTICLE II
DEFINITIONS
Section 2.1 Bank...........................................................5
Section 2.2 Board..........................................................5
Section 2.3 Change of Control..............................................5
Section 2.4 Code...........................................................7
Section 2.5 Committee......................................................7
Section 2.6 Company........................................................7
Section 2.7 Disability.....................................................7
Section 2.8 Disinterested Board Member.....................................7
Section 2.9 Effective Date.................................................7
Section 2.10 Eligible Director..............................................7
Section 2.11 Eligible Employee..............................................7
Section 2.12 Employer.......................................................7
Section 2.13 Exchange Act...................................................7
Section 2.14 Exercise Price.................................................7
Section 2.15 Fair Market Value..............................................8
Section 2.16 Family Member..................................................8
Section 2.17 OTS Regulations................................................8
Section 2.18 Incentive Stock Option.........................................8
Section 2.19 Non-Profit Organization........................................8
Section 2.20 Non-Qualified Stock Option.....................................8
Section 2.21 Option.........................................................8
Section 2.22 Option Period..................................................8
Section 2.23 Person.........................................................8
Section 2.24 Plan...........................................................8
Section 2.25 Retirement.....................................................9
Section 2.26 Service........................................................9
Section 2.27 Share..........................................................9
Section 2.28 Termination for Cause..........................................9
ARTICLE III
AVAILABLE SHARES
Section 3.1 Available Shares...............................................9
A-2
ARTICLE IV
ADMINISTRATION
Section 4.1 Committee.....................................................10
Section 4.2 Committee Action..............................................10
Section 4.3 Committee Responsibilities....................................10
ARTICLE V
STOCK OPTION GRANTS
Section 5.1 Grant of Options..............................................11
Section 5.2 Size of Option................................................11
Section 5.3 Exercise Price................................................12
Section 5.4 Option Period.................................................12
Section 5.5 Required Regulatory Provisions................................12
Section 5.6 Additional Restrictions on Incentive Stock Options............14
ARTICLE VI
OPTIONS -- IN GENERAL
Section 6.1 Method of Exercise............................................15
Section 6.2 Limitations on Options........................................16
ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.1 Termination...................................................17
Section 7.2 Amendment.....................................................17
Section 7.3 Adjustments in the Event of a Business Reorganization.........17
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Status as an Employee Benefit Plan............................18
Section 8.2 No Right to Continued Employment..............................18
Section 8.3 Construction of Language......................................18
Section 8.4 Governing Law.................................................18
Section 8.5 Headings......................................................18
Section 8.6 Non-Alienation of Benefits....................................19
Section 8.7 Taxes.........................................................19
Section 8.8 Notices.......................................................19
Section 8.9 Required Regulatory Provisions................................19
Section 8.10 Approval of Shareholders......................................19
A-3
ARTICLE IX
ADDITIONAL PROVISIONS SUBJECT TO FURTHER SHAREHOLDER APPROVAL
Section 9.1 Accelerated Vesting Upon Retirement...........................20
Section 9.2 Discretion to Establish Vesting Schedules and Certain
Plan Limits..................................................20
Section 9.3 No Effect Prior to Shareholder Approval.......................20
A-4
WESTFIELD FINANCIAL, INC.
2007 STOCK OPTION PLAN
ARTICLE I
PURPOSE
Section 1.1 General Purpose of the Plan.
The purpose of the Plan is to promote the growth and profitability of
Westfield Financial, Inc., to provide eligible directors, certain key officers
and employees of Westfield Financial, Inc. and its affiliates with an incentive
to achieve corporate objectives, to attract and retain individuals of
outstanding competence and to provide such individuals with an equity interest
in Westfield Financial, Inc.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
Section 2.1 Bank means Westfield Bank and any successor thereto.
Section 2.2 Board means the board of directors of the Company.
Section 2.3 Change of Control means any of the following events:
(a) the consummation of a reorganization, merger or consolidation
of the Company with one or more other persons, other than a transaction
following which:
(i) at least 51% of the equity ownership interests of the
entity resulting from such transaction are beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act")) in substantially
the same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) at least 51% of the
outstanding equity ownership interests in the Company; and
(ii) at least 51% of the securities entitled to vote
generally in the election of directors of the entity resulting from
such transaction are beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) in substantially the same
relative proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act)
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at least 51% of the securities entitled to vote generally in the
election of directors of the Company;
(b) the acquisition of all or substantially all of the assets of
the Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of
directors by any person or by any persons acting in concert;
(c) a complete liquidation or dissolution of the Company;
(d) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board of Directors of the
Company do not belong to any of the following groups:
(i) individuals who were members of the Board of Directors of
the Company on the Effective Date; or
(ii) individuals who first became members of the Board of
Directors of the Company after the Effective Date either:
(A) upon election to serve as a member of the Board of
Directors of the Company by affirmative vote of
three-quarters of the members of such board, or of a
nominating committee thereof, in office at the time of such
first election; or
(B) upon election by the shareholders of the Company to
serve as a member of such board, but only if nominated for
election by affirmative vote of three-quarters of the members
of the Board of Directors of the Company, or of a nominating
committee thereof, in office at the time of such first
nomination;
provided, however, that such individual's election or nomination
did not result from an actual or threatened election contest or
other actual or threatened solicitation of proxies or consents
other than by or on behalf of the Board of Directors of the
Company;
(e) approval by the stockholders of the Company of any agreement,
plan or arrangement for the consummation of a transaction which, if
consummated, would result in the occurrence of an event described in
section 2.3(a), (b), (c) or (d); or
(f) any event which would be described in section 2.3(a), (b), (c),
(d) or (e) if the term "Bank" were substituted for the terms "Company"
therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or
a subsidiary of either of them, by the Company, the Bank, or any subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 2.3, the term "person" shall have the meaning assigned
to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
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Section 2.4 Code means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).
Section 2.5 Committee means the Committee described in section 4.1.
Section 2.6 Company means Westfield Financial, Inc., a Massachusetts
corporation, and any successor thereto.
Section 2.7 Disability means a condition of total incapacity, mental or
physical, for further performance of duty with the Company which the Committee
shall have determined, on the basis of competent medical evidence, is likely to
be permanent.
Section 2.8 Disinterested Board Member means a member of the Board who
(a) is not a current employee of the Company or a subsidiary, (b) is not a
former employee of the Company who receives compensation for prior services
(other than benefits under a tax-qualified retirement plan) during the taxable
year, (c) has not been an officer of the Company, (d) does not receive
remuneration from the Company or a subsidiary, either directly or indirectly,
in any capacity other than as a director except in an amount for which
disclosure would not be required pursuant to Item 404(a) of the proxy
solicitation rules of the Securities and Exchange Commission and (e) does not
possess an interest in any other transaction, and is not engaged in a business
relationship, for which disclosure would be required pursuant to Item 404(a) or
(b) of the proxy solicitation rules of the Securities and Exchange Commission.
The term Disinterested Board Member shall be interpreted in such manner as
shall be necessary to conform to the requirements of section 162(m) of the Code
and Rule 16b-3 promulgated under the Exchange Act.
Section 2.9 Effective Date means [__________], 2007.
Section 2.10 Eligible Director means a member of the board of directors
of an Employer who is not also an employee or an officer of any Employer.
Section 2.11 Eligible Employee means any employee whom the Committee may
determine to be a key officer or employee of an Employer and select to receive
a grant of an Option pursuant to the Plan.
Section 2.12 Employer means the Company, the Bank and any successor
thereto and, with the prior approval of the Board, and subject to such terms
and conditions as may be imposed by the Board, any other savings bank, savings
and loan association, bank, corporation, financial institution or other
business organization or institution. With respect to any Eligible Employer or
Eligible Director, the Employer shall mean the entity which employs such person
or upon whose board of directors such person serves.
Section 2.13 Exchange Act means the Securities Exchange Act of 1934, as
amended.
Section 2.14 Exercise Price means the price per Share at which Shares
subject to an Option may be purchased upon exercise of the Option, determined
in accordance with section 5.3.
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Section 2.15 Fair Market Value means, with respect to a Share on a
specified date:
(a) the final reported sales price on the date in question (or if
there is no reported sale on such date, on the last preceding date on
which any reported sale occurred) as reported in the principal
consolidated reporting system with respect to securities listed or
admitted to trading on the principal United States securities exchange on
which the Shares are listed or admitted to trading; or
(b) if the Shares are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a Share on such date
on the National Association of Securities Dealers Automated Quotations
System, or, if no such quotation is provided, on another similar system,
selected by the Committee, then in use; or
(c) if sections 2.15(a) and (b) are not applicable, the fair market
value of a Share as the Committee may determine.
Section 2.16 Family Member means the spouse, parent, child or sibling of
an Eligible Director or Eligible Employee.
Section 2.17 OTS Regulations means the rules and regulations of the
Office of Thrift Supervision.
Section 2.18 Incentive Stock Option means a right to purchase Shares that
is granted to Eligible Employees pursuant to section 5.1, that is designated by
the Committee to be an Incentive Stock Option and that is intended to satisfy
the requirements of section 422 of the Code.
Section 2.19 Non-Profit Organization means any organization which is
exempt from federal income tax under section 501(c)(3), (4), (5), (6), (7), (8)
or (10) of the Internal Revenue Code.
Section 2.20 Non-Qualified Stock Option means a right to purchase Shares
that is either (a) granted to an Eligible Director or (b) granted to an
Eligible Employee and either (i) is not designated by the Committee to be an
Incentive Stock Option, or (ii) does not satisfy the requirements of section
422 of the Code.
Section 2.21 Option means either an Incentive Stock Option or a
Non-Qualified Stock Option granted under the Plan.
Section 2.22 Option Period means the period during which an Option may be
exercised, determined in accordance with section 5.4.
Section 2.23 Person means an individual, a corporation, a bank, a savings
bank, a savings and loan association, a financial institution, a partnership,
an association, a joint-stock company, a trust, an estate, an unincorporated
organization and any other business organization or institution.
Section 2.24 Plan means the Westfield Financial, Inc. 2007 Stock Option
Plan, as amended from time to time.
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Section 2.25 Retirement means with respect to an Eligible Employee,
termination of all service for all Employers as an employee at or after the
normal or early retirement date set forth in any tax-qualified retirement plan
of the Bank, whether or not the individual in question actually participates in
any such tax-qualified plan of the Bank, and in the case of an Eligible
Director, termination of all service for all Employers as a voting member of
the Employer's board of directors after the attainment of the latest age at
which the Eligible Director is eligible for election or appointment as a voting
member of the Employer's board of directors under the Employer's charter.
Section 2.26 Service means service for the Company (or any subsidiary or
affiliate) as an employee in any capacity, service as a director or emeritus
director or advisory director of the Company.
Section 2.27 Share means a share of Common Stock, par value $.01 share,
of Westfield Financial, Inc.
Section 2.28 Termination for Cause means termination of service or
removal from office with the Employer upon the occurrence of any of the
following: (a) the individual intentionally engages in dishonest conduct in
connection with his performance of services for the Employer resulting in his
conviction of a felony; (b) the individual is convicted of, or pleads guilty or
nolo contendere to, a felony or any crime involving moral turpitude; (c) the
individual breaches his fiduciary duties to the Employer for personal profit;
or (d) the individual willfully breaches or violates any law, rule or
regulation (other than traffic violations or similar offenses), or final cease
and desist order in connection with his performance of services for the
Employer.
ARTICLE III
AVAILABLE SHARES
Section 3.1 Available Shares.
(a) The maximum aggregate number of Shares with respect to which
Options may be granted at any time shall be equal to the excess of:
(i) 1,560,101 Shares; over
(ii) the sum of:
(A) the number of Shares with respect to which
previously granted Options may then or may in the future be
exercised; plus
(B) the number of Shares with respect to which
previously granted Options have been exercised;
subject to adjustment pursuant to section 7.3.
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(b) Options to purchase an aggregate maximum of 468,030 Shares
(subject to adjustment pursuant to section 7.3) may be granted to
Eligible Directors, and Options to purchase a maximum of 78,005 Shares
(subject to adjustment pursuant to section 7.3) may be granted to any one
Eligible Director.
(c) Options to purchase an aggregate maximum of 1,560,101 Shares
(subject to adjustment pursuant to section 7.3) may be granted to
Eligible Employees, and Options to purchase a maximum of 390,025 Shares
(subject to adjustment pursuant to section 7.3) may be granted to any one
Eligible Employee.
(d) For purposes of this section 3.1, an Option shall not be
considered as having been exercised to the extent that such Option
terminates by reason other than the purchase of related Shares; provided,
however, that for purposes of meeting the requirements of section 162(m)
of the Code, no Eligible Employee who is a covered employee (within the
meaning of section 162(m) of the Code) shall receive grants of Options
for an aggregate number of Shares that is in excess of the amount
specified for him under this section 3.1, computed as if any Option which
is canceled or forfeited reduced the maximum number of Shares.
ARTICLE IV
ADMINISTRATION
Section 4.1 Committee.
The Plan shall be administered by the Compensation Committee (the
"Committee") consisting of all members of the Board or, if designated by the
Board, by a committee comprised solely of Disinterested Board Members. If the
Committee consists of fewer than two Disinterested Board Members, then the
Board shall appoint to the Committee such additional Disinterested Board
Members as shall be necessary to provide for a Committee consisting of at least
two Disinterested Board Members.
Section 4.2 Committee Action.
The Committee shall hold such meetings, and may make such administrative
rules and regulations, as it may deem proper. A majority of the members of the
Committee shall constitute a quorum, and the action of a majority of the
members of the Committee present at a meeting at which a quorum is present, as
well as actions taken pursuant to the unanimous written consent of all of the
members of the Committee without holding a meeting, shall be deemed to be
actions of the Committee. All actions of the Committee shall be final and
conclusive and shall be binding upon the Company and all other interested
parties. Any Person dealing with the Committee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by the Chair of the Committee and one member of the Committee, by two
members of the Committee or by a representative of the Committee authorized to
sign the same in its behalf.
Section 4.3 Committee Responsibilities.
Subject to the terms and conditions of the Plan and such limitations as
may be imposed by the Board, the Committee shall be responsible for the overall
management and
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administration of the Plan and shall have such authority as shall be necessary
or appropriate in order to carry out its responsibilities, including, without
limitation, the authority:
(a) to interpret and construe the Plan, and to determine all
questions that may arise under the Plan as to eligibility for
participation in the Plan, the number of Shares subject to the Options,
if any, to be granted, and the terms and conditions thereof;
(b) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(c) to take any other action not inconsistent with the provisions
of the Plan that it may deem necessary or appropriate.
ARTICLE V
STOCK OPTION GRANTS
Section 5.1 Grant of Options.
(a) Subject to the limitations of the Plan, the Committee may, in
its discretion, grant to an Eligible Employee or an Eligible Director an
Option to purchase Shares. An Option for Eligible Employees must be
designated as either an Incentive Stock Option or a Non-Qualified Stock
Option and, if not designated as either, shall be a Non-Qualified Stock
Option. An Option for an Eligible Director shall be a Non-Qualified Stock
Option.
(b) Any Option granted under this section 5.1 shall be evidenced by
a written agreement which shall:
(i) specify the number of Shares covered by the Option
determined in accordance with section 5.2;
(ii) specify the Exercise Price, determined in accordance
with section 5.3, for the Shares subject to the Option;
(iii) specify the Option Period determined in accordance with
section 5.4;
(iv) set forth specifically or incorporate by reference the
applicable provisions of the Plan; and
(v) contain such other terms and conditions not inconsistent
with the Plan as the Committee may, in its discretion, prescribe
with respect to an Option granted to an Eligible Employee or an
Eligible Director.
Section 5.2 Size of Option.
Subject to section 3.1 and such limitations as the Board may from time to
time impose, the number of Shares as to which an Eligible Employee or Eligible
Director may be granted Options shall be determined by the Committee, in its
discretion.
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Section 5.3 Exercise Price.
The price per Share at which an Option granted to an Eligible Employee or
Eligible Director shall be determined by the Committee, in its discretion;
provided, however, that the Exercise Price shall not be less than the Fair
Market Value of a Share on the date on which the Option is granted.
Section 5.4 Option Period.
Subject to section 5.5, the Option Period during which an Option granted
to an Eligible Employee may be exercised shall commence on the date specified
by the Committee in the Option agreement and shall expire on the date specified
in the Option agreement or, if no date is specified, on the earliest of:
(a) in the case of an Option granted to an Eligible Employee:
(i) the close of business on the last day of the three-month
period commencing on the date of the Eligible Employee's
termination of employment with the Employer, other than on account
of death or Disability, Retirement or a Termination for Cause;
(ii) the close of business on the last day of the one-year
period commencing on the date of the Eligible Employee's
termination of employment due to death, Disability or Retirement;
(iii) the date and time when the Eligible Employee ceases to
be an employee of the Employer due to a Termination for Cause; and
(iv) the last day of the ten-year period commencing on the
date on which the Option was granted; and
(b) in the case of an Option granted to an Eligible Director:
(i) removal for cause in accordance with the Employer's
bylaws, or Termination for Cause; or
(ii) the last day of the ten-year period commencing on the
date on which the Option was granted.
Section 5.5 Required Regulatory Provisions.
Notwithstanding anything contained herein to the contrary:
(a) no Option shall be granted to an Eligible Employee or Eligible
Director under the Plan prior to shareholder approval in accordance with
section 8.10;
(b) each Option granted to an Eligible Employee or Eligible
Director shall become exercisable no more rapidly than as follows:
(i) prior to the first anniversary of the grant date, an
Option shall not be exercisable;
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(ii) on and after the first anniversary, but prior to the
second anniversary, of the grant date, an Option may be exercised
as to a maximum of twenty percent (20%) of the Shares subject to
the Option when granted;
(iii) on and after the second anniversary, but prior to the
third anniversary, of the grant date, an Option may be exercised as
to a maximum of forty percent (40%) of the Shares subject to the
Option when granted, including in such forty percent (40%) any
optioned Shares purchased prior to such second anniversary;
(iv) on and after the third anniversary, but prior to the
fourth anniversary, of the grant date, an Option may be exercised
as to a maximum of sixty percent (60%) of the Shares subject to the
Option when granted, including in such sixty percent (60%) any
optioned Shares purchased prior to such third anniversary;
(v) on and after the fourth anniversary, but prior to the
fifth anniversary, of the grant date, an Option may be exercised as
to a maximum of eighty percent (80%) of the Shares subject to the
Option when granted, including in such eighty percent (80%) any
optioned Shares purchased prior to such fourth anniversary; and
(vi) on and after the fifth anniversary of the grant date and
for the remainder of the Option Period, an Option may be exercised
as to the entire number of optioned Shares not theretofore
purchased;
to the extent that any Option shall not have become exercisable and vested
prior to the date on which the Option holder terminates Service with an
Employer, such Option shall not thereafter become exercisable provided,
however, that such an Option shall become fully exercisable, and all optioned
Shares not previously purchased shall become available for purchase, on the
date of the Option holder's death, Disability or upon a Change of Control while
in the Service of an Employer. Notwithstanding anything in the Plan to the
contrary, section 5.5(b) shall apply in determining the exercisability of
Options granted after shareholder approval of section 9.2 hereof only if no
different vesting schedule is established by the Committee and specified in the
agreement evidencing the outstanding Option.
(c) The Option Period of any Option granted hereunder, whether or
not previously vested, shall be suspended as of the time and date at
which the Option holder has received notice from the Board that his or
her employment is subject to a possible Termination for Cause, or in the
case of an Eligible Director, removal for cause in accordance with the
Employer's by-laws. Such suspension shall remain in effect until the
Option holder receives official notice from the Board that he or she has
been cleared of any possible Termination for Cause, or in the case of an
Eligible Director, removal for cause, at which time, the original
Exercise Period shall be reinstated without any adjustment for the
intervening suspended period. In the event that the Option Period under
section 5.4 expires during such suspension, the Company shall pay to the
Eligible Employee, within 30 days after his reinstatement as an employee
of the Company,
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damages equal to the value of the expired Options (based on the Fair
Market Value of a Share as of the expiration of the Option Period less
the Exercise Price of such Options).
(d) No Option granted to an Eligible Employee or Eligible Director
hereunder, whether or not previously vested, shall be exercised after the
time and date at which the Option holder's services with the Employer are
terminated in a Termination for Cause, or, in the case of an Eligible
Director, removal for cause in accordance with the Employer's by-laws.
Section 5.6 Additional Restrictions on Incentive Stock Options.
An Option granted to an Eligible Employee designated by the Committee to
be an Incentive Stock Option shall be subject to the following limitations:
(a) If, for any calendar year, the sum of (i) plus (ii) exceeds
$100,000, where (i) equals the Fair Market Value (determined as of the
date of the grant) of Shares subject to an Option intended to be an
Incentive Stock Option which first become available for purchase during
such calendar year, and (ii) equals the Fair Market Value (determined as
of the date of grant) of Shares subject to any other options intended to
be Incentive Stock Options and previously granted to the same Eligible
Employee which first become exercisable in such calendar year, then that
number of Shares optioned which causes the sum of (i) and (ii) to exceed
$100,000 shall be deemed to be Shares optioned pursuant to a
Non-Qualified Stock Option or Non-Qualified Stock Options, with the same
terms as the Option or Options intended to be an Incentive Stock Option;
(b) The Exercise Price of an Incentive Stock Option granted to an
Eligible Employee who, at the time the Option is granted, owns Shares
comprising more than 10% of the total combined voting power of all
classes of stock of the Company shall not be less than 110% of the Fair
Market Value of a Share, and if an Option designated as an Incentive
Stock Option shall be granted at an Exercise Price that does not satisfy
this requirement, the designated Exercise Price shall be observed and the
Option shall be treated as a Non-Qualified Stock Option;
(c) The Option Period of an Incentive Stock Option granted to an
Eligible Employee who, at the time the Option is granted, owns Shares
comprising more than 10% of the total combined voting power of all
classes of stock of the Company, shall expire no later than the fifth
anniversary of the date on which the Option was granted, and if an Option
designated as an Incentive Stock Option shall be granted for an Option
Period that does not satisfy this requirement, the designated Option
Period shall be observed and the Option shall be treated as a
Non-Qualified Stock Option;
(d) An Incentive Stock Option that is exercised during its
designated Option Period but more than:
(i) three (3) months after the termination of employment with
the Company, a parent or a subsidiary (other than on account of
disability within the meaning of section 22(e)(3) of the Code or
death) of the Eligible Employee to whom it was granted; and
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(ii) one (1) year after such individual's termination of
employment with the Company, a parent or a subsidiary due to
disability (within the meaning of section 22(e)(3) of the Code) or
death;
may be exercised in accordance with the terms but shall at the time of exercise
be treated as a Non-Qualified Stock Option; and
(e) Except with the prior written approval of the Committee, no
individual shall dispose of Shares acquired pursuant to the exercise of
an Incentive Stock Option until after the later of (i) the second
anniversary of the date on which the Incentive Stock Option was granted,
or (ii) the first anniversary of the date on which the Shares were
acquired.
ARTICLE VI
OPTIONS -- IN GENERAL
Section 6.1 Method of Exercise.
(a) Subject to the limitations of the Plan and the Option
agreement, an Option holder may, at any time during the Option Period,
exercise his or her right to purchase all or any part of the Shares to
which the Option relates; provided, however, that the minimum number of
Shares which may be purchased at any time shall be 100, or, if less, the
total number of Shares relating to the Option which remain unpurchased.
An Option holder shall exercise an Option to purchase Shares by:
(i) giving written notice to the Committee, in such form and
manner as the Committee may prescribe, of his intent to exercise
the Option;
(ii) delivering to the Committee full payment, consistent
with section 6.1(b), for the Shares as to which the Option is to be
exercised; and
(iii) satisfying such other conditions as may be prescribed
in the Option agreement.
(b) The Exercise Price of Shares to be purchased upon exercise of
any Option shall be paid in full in cash (by certified or bank check or
such other instrument as the Company may accept) or, if and to the extent
permitted by the Committee, in the form of Shares already owned by the
Option holder having an aggregate Fair Market Value on the date the
Option is exercised equal to the aggregate Exercise Price to be paid.
Payment for any Shares to be purchased upon exercise of an Option may
also be made by delivering a properly executed exercise notice to the
Company, together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds to
pay the purchase price. To facilitate the foregoing, the Company may
enter into agreements for coordinated procedures with one or more
brokerage firms. The Committee shall have no obligation to allow, and may
in its sole and absolute discretion decline to allow, the use of any
exercise method described in section 6.1(b) in any one or more case or in
all cases.
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(c) When the requirements of section 6.1(a) and (b) have been
satisfied, the Committee shall take such action as is necessary to cause
the issuance of a stock certificate evidencing the Option holder's
ownership of such Shares. The Person exercising the Option shall have no
right to vote or to receive dividends, nor have any other rights with
respect to the Shares, prior to the date as of which such Shares are
transferred to such Person on the stock transfer records of the Company,
and no adjustments shall be made for any dividends or other rights for
which the record date is prior to the date as of which such transfer is
effected, except as may be required under section 7.3.
Section 6.2 Limitations on Options.
(a) An Option by its terms shall not be transferable by the Option
holder other than to Family Members or Non-Profit Organizations or by
will or by the laws of descent and distribution and shall be exercisable,
during the lifetime of the Option holder, only by the Option holder, a
Family Member or a Non-Profit Organization. Any such transfer shall be
effected by written notice to the Company given in such form and manner
as the Committee may prescribe and shall be recognized only if such
notice is received by the Company prior to the death of the person giving
it. Thereafter, the transferee shall have, with respect to such Option,
all of the rights, privileges and obligations which would attach
thereunder to the transferor if the Option were issued to such
transferor. If a privilege of the Option depends on the life, employment
or other status of the transferor, such privilege of the Option for the
transferee shall continue to depend on the life, employment or other
status of the transferor. The Committee shall have full and exclusive
authority to interpret and apply the provisions of this Plan to
transferees to the extent not specifically described herein.
Notwithstanding the foregoing, an Incentive Stock Option is not
transferable by an Eligible Employee other than by will or the laws of
descent and distribution, and is exercisable, during his lifetime, solely
by him.
(b) The Company's obligation to deliver Shares with respect to an
Option shall, if the Committee so requests, be conditioned upon the
receipt of a representation as to the investment intention of the Option
holder to whom such Shares are to be delivered, in such form as the
Committee shall determine to be necessary or advisable to comply with the
provisions of applicable federal, state or local law. It may be provided
that any such representation shall become inoperative upon a registration
of the Shares or upon the occurrence of any other event eliminating the
necessity of such representation. The Company shall not be required to
deliver any Shares under the Plan prior to (i) the admission of such
Shares to listing on any stock exchange on which Shares may then be
listed, or (ii) the completion of such registration or other
qualification under any state or federal law, rule or regulation as the
Committee shall determine to be necessary or advisable.
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ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.1 Termination.
The Board may suspend or terminate the Plan in whole or in part at any
time prior to the tenth anniversary of the Effective Date by giving written
notice of such suspension or termination to the Committee. Unless sooner
terminated, the Plan shall terminate automatically on the day preceding the
tenth anniversary of the Effective Date. In the event of any suspension or
termination of the Plan, all Options theretofore granted under the Plan that
are outstanding on the date of such suspension or termination of the Plan shall
remain outstanding and exercisable for the period and on the terms and
conditions set forth in the Option agreements evidencing such Options.
Section 7.2 Amendment.
The Board may amend or revise the Plan in whole or in part at any time;
provided, however, that, to the extent required to comply with section 162(m)
of the Code, no such amendment or revision shall be effective if it amends a
material term of the Plan unless approved by the holders of a majority of the
votes cast on a proposal to approve such amendment or revision.
Section 7.3 Adjustments in the Event of a Business Reorganization.
(a) In the event of any merger, consolidation, or other business
reorganization in which the Company is the surviving entity, and in the
event of any stock split, stock dividend or other event generally
affecting the number of Shares held by each Person who is then a holder
of record of Shares, the number of Shares covered by each outstanding
Option and the number of Shares available to any individual or group of
individuals pursuant to section 3.1 shall be adjusted to account for such
event. Such adjustment shall be effected by multiplying such number of
Shares by an amount equal to the number of Shares that would be owned
after such event by a Person who, immediately prior to such event, was
the holder of record of one Share, and the Exercise Price of the Options
shall be adjusted by dividing the Exercise Price by such number of
Shares; provided, however, that the Committee may, in its discretion,
establish another appropriate method of adjustment.
(b) In the event of any merger, consolidation, or other business
reorganization in which the Company is not the surviving entity, any
Options granted under the Plan which remain outstanding shall be
converted into options to purchase voting common equity securities of the
business entity which survives such merger, consolidation or other
business reorganization having substantially the same terms and
conditions as the outstanding Options under this Plan and reflecting the
same economic benefit (as measured by the difference between the
aggregate exercise price and the value exchanged for outstanding Shares
in such merger, consolidation or other business reorganization), all as
determined by the Committee prior to the consummation of such merger;
provided, however, that the Committee may, at any time prior to the
consummation of such merger,
A-17
consolidation or other business reorganization, direct that all, but not
less than all, outstanding Options be canceled as of the effective date
of such merger, consolidation or other business reorganization in
exchange for a cash payment per optioned Share equal to the excess (if
any) of the value exchanged for an outstanding Share in such merger,
consolidation or other business reorganization over the Exercise Price of
the Option being canceled.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Status as an Employee Benefit Plan.
This Plan is not intended to satisfy the requirements for qualification
under section 401(a) of the Code or to satisfy the definitional requirements
for an "employee benefit plan" under section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended. It is intended to be a non-qualified
incentive compensation program that is exempt from the regulatory requirements
of the Employee Retirement Income Security Act of 1974, as amended. The Plan
shall be construed and administered so as to effectuate this intent.
Section 8.2 No Right to Continued Employment.
Neither the establishment of the Plan nor any provisions of the Plan nor
any action of the Board or the Committee with respect to the Plan shall be held
or construed to confer upon any Eligible Director or Eligible Employee any
right to a continuation of his or her position as a director or employee of the
Company. The Employers reserve the right to remove any Eligible Director or
dismiss any Eligible Employee or otherwise deal with any Eligible Director or
Eligible Employee to the same extent as though the Plan had not been adopted.
Section 8.3 Construction of Language.
Whenever appropriate in the Plan, words used in the singular may be read
in the plural, words used in the plural may be read in the singular, and words
importing the masculine gender may be read as referring equally to the feminine
or the neuter. Any reference to an Article or section number shall refer to an
Article or section of this Plan unless otherwise indicated.
Section 8.4 Governing Law.
The Plan shall be construed, administered and enforced according to the
laws of the Commonwealth of Massachusetts without giving effect to the conflict
of laws principles thereof, except to the extent that such laws are preempted
by federal law. The Plan shall be construed to comply with applicable OTS
Regulations.
Section 8.5 Headings.
The headings of Articles and sections are included solely for convenience
of reference. If there is any conflict between such headings and the text of
the Plan, the text shall control.
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Section 8.6 Non-Alienation of Benefits.
The right to receive a benefit under the Plan shall not be subject in any
manner to anticipation, alienation or assignment, nor shall such right be
liable for or subject to debts, contracts, liabilities, engagements or torts.
Section 8.7 Taxes.
The Company shall have the right to deduct from all amounts paid by the
Company in cash with respect to an Option under the Plan any taxes required by
law to be withheld with respect to such Option. Where any Person is entitled to
receive Shares pursuant to the exercise of an Option, the Company shall have
the right to require such Person to pay the Company the amount of any tax which
the Company is required to withhold with respect to such Shares, or, in lieu
thereof, to retain, or to sell without notice, a sufficient number of Shares to
cover the minimum amount required to be withheld under applicable law.
Section 8.8 Notices.
Any communication required or permitted to be given under the Plan,
including any notice, direction, designation, comment, instruction, objection
or waiver, shall be in writing and shall be deemed to have been given at such
time as it is delivered personally or five (5) days after mailing if mailed,
postage prepaid, by registered or certified mail, return receipt requested,
addressed to such party at the address listed below, or at such other address
as one such party may by written notice specify to the other party:
(a) If to the Committee:
Westfield Financial, Inc.
141 Elm Street
Westfield, Massachusetts 01085
Attention: Corporate Secretary
(b) If to an Option holder, to the Option holder's address as
shown in the Employer's records.
Section 8.9 Required Regulatory Provisions.
The grant and settlement of Options under this Plan shall be conditioned
upon and subject to compliance with section 18(k) of the Federal Deposit
Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations promulgated
thereunder.
Section 8.10 Approval of Shareholders.
The Plan shall not be effective or implemented unless approved by the
holders of a majority of the total votes eligible to be cast at any duly called
annual or special meeting of the Company in which case the Plan shall be
effective as of the later of (a) July 3, 2007 or (b) the date of such approval.
No Option shall be granted prior to the date on which the Plan becomes
effective.
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ARTICLE IX
ADDITIONAL PROVISIONS SUBJECT TO FURTHER SHAREHOLDER APPROVAL
Section 9.1 Accelerated Vesting Upon Retirement.
Notwithstanding anything in the Plan to the contrary, but subject to
section 9.3, in the event of an Option holder's Retirement, all Options granted
to the Option holder under the Plan on the date of the Option holder's
Retirement shall, to the extent not already exercisable, become exercisable on
the date of the Option holder's Retirement.
Section 9.2 Discretion to Establish Vesting Schedules and Certain Plan
Limits.
Notwithstanding anything in this Plan to the contrary, but subject to
section 9.3 hereof, section 5.5(b) shall apply in determining the
exercisability of Options granted to Eligible Employees and Eligible Directors
only if no different vesting schedule is established by the Committee and
specified in the agreement evidencing the outstanding Option which the
Committee may do in its discretion. In addition, the limits imposed by section
3.1(b) shall not apply.
Section 9.3 No Effect Prior to Shareholder Approval.
Notwithstanding anything contained in this Article IX to the contrary,
the provisions of this Article IX shall not be applied, and shall be of no
force or effect, unless and until the shareholders of the Company shall have
approved such provisions by affirmative vote of the holders of a majority of
the Shares represented in person or by proxy and entitled to vote at a meeting
of shareholders duly called and held on or after January 3, 2008.
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APPENDIX B
WESTFIELD FINANCIAL, INC.
2007 RECOGNITION AND RETENTION PLAN
--------------------
B-1
TABLE OF CONTENTS
Page
ARTICLE I
PURPOSE
Section 1.1 General Purpose of the Plan....................................5
ARTICLE II
DEFINITIONS
Section 2.1 Award..........................................................5
Section 2.2 Award Notice...................................................5
Section 2.3 Bank...........................................................5
Section 2.4 Beneficiary....................................................5
Section 2.5 Board..........................................................5
Section 2.6 Change of Control..............................................5
Section 2.7 Code...........................................................7
Section 2.8 Committee......................................................7
Section 2.9 Company........................................................7
Section 2.10 Disability.....................................................7
Section 2.11 Disinterested Board Member.....................................7
Section 2.12 Effective Date.................................................7
Section 2.13 Eligible Director..............................................7
Section 2.14 Eligible Employee..............................................7
Section 2.15 Employer.......................................................8
Section 2.16 Exchange Act...................................................8
Section 2.17 OTS Regulation.................................................8
Section 2.18 Fund...........................................................8
Section 2.19 Funding Agent..................................................8
Section 2.20 Funding Agreement..............................................8
Section 2.21 Person.........................................................8
Section 2.22 Plan...........................................................8
Section 2.23 Retirement.....................................................8
Section 2.24 Service........................................................8
Section 2.25 Share..........................................................9
ARTICLE III
SHARES AVAILABLE UNDER PLAN
Section 3.1 Shares Available Under Plan....................................9
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ARTICLE IV
ADMINISTRATION
Section 4.1 Committee......................................................9
Section 4.2 Committee Action...............................................9
Section 4.3 Committee Responsibilities....................................10
ARTICLE V
THE FUND
Section 5.1 Contributions.................................................10
Section 5.2 The Fund......................................................10
Section 5.3 Investments...................................................10
ARTICLE VI
AWARDS
Section 6.1 To Eligible Directors.........................................11
Section 6.2 To Eligible Employees.........................................11
Section 6.3 Awards in General.............................................11
Section 6.4 Share Allocations.............................................11
Section 6.5 Dividend Rights...............................................11
Section 6.6 Voting Rights.................................................12
Section 6.7 Tender Offers.................................................12
Section 6.8 Limitations on Awards.........................................13
ARTICLE VII
VESTING
Section 7.1 Vesting of Awards.............................................14
Section 7.2 Designation of Beneficiary....................................14
Section 7.3 Manner of Distribution........................................15
Section 7.4 Taxes.........................................................15
ARTICLE VIII
AMENDMENT AND TERMINATION
Section 8.1 Termination...................................................16
Section 8.2 Amendment.....................................................16
Section 8.3 Adjustments in the Event of a Business Reorganization.........16
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ARTICLE IX
MISCELLANEOUS
Section 9.1 Status as an Employee Benefit Plan............................17
Section 9.2 No Right to Continued Employment..............................17
Section 9.3 Construction of Language......................................17
Section 9.4 Governing Law.................................................17
Section 9.5 Headings......................................................17
Section 9.6 Non-Alienation of Benefits....................................17
Section 9.7 Notices.......................................................18
Section 9.8 Required Regulatory Provisions................................18
Section 9.9 Approval of Shareholders......................................18
ARTICLE X
ADDITIONAL PROVISIONS SUBJECT TO FURTHER SHAREHOLDER APPROVAL
Section 10.1 Accelerated Vesting Upon Retirement...........................18
Section 10.2 Discretion to Establish Vesting Schedules and Certain
Plan Limits..................................................19
Section 10.3 No Effect Prior to Stockholder Approval.......................19
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WESTFIELD FINANCIAL, INC.
2007 RECOGNITION AND RETENTION PLAN
ARTICLE I
PURPOSE
Section 1.1 General Purpose of the Plan.
The purpose of the Plan is to promote the growth and profitability of
Westfield Financial, Inc. and its affiliated companies and to provide eligible
directors, certain key officers and employees of Westfield Financial, Inc. and
its affiliated companies with an incentive to achieve corporate objectives, to
attract and retain directors, key officers and employees of outstanding
competence and to provide such directors, officers and employees with an equity
interest in Westfield Financial, Inc. and its affiliated companies.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
Section 2.1 Award means a grant of Shares to an Eligible Director or
Eligible Employee pursuant to section 6.1 or 6.2.
Section 2.2 Award Notice means, with respect to a particular Award, a
written instrument signed by the Company and the Awards recipient evidencing
the granting of the Award and establishing the terms and conditions thereof.
Section 2.3 Bank means Westfield Bank and any successor thereto.
Section 2.4 Beneficiary means the Person designated by an Eligible
Director or Eligible Employee pursuant to section 7.2 to receive distribution
of any Shares available for distribution to such Eligible Director or Eligible
Employee, in the event such Eligible Director or Eligible Employee dies prior
to receiving distribution of such Shares.
Section 2.5 Board means the Board of Directors of the Company.
Section 2.6 Change of Control means any of the following events:
(a) the consummation of a reorganization, merger or consolidation
of the Company with one or more other persons, other than a transaction
following which:
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(i) at least 51% of the equity ownership interests of the
entity resulting from such transaction are beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act")) in substantially
the same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) at least 51% of the
outstanding equity ownership interests in the Company; and
(ii) at least 51% of the securities entitled to vote
generally in the election of directors of the entity resulting from
such transaction are beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) in substantially the same
relative proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 51% of the securities
entitled to vote generally in the election of directors of the
Company;
(b) the acquisition of all or substantially all of the assets of
the Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of
directors by any person or by any persons acting in concert;
(c) a complete liquidation or dissolution of the Company;
(d) the occurrence of any event if, immediately following such
event, at least 50% of the members of the board of directors of the
Company do not belong to any of the following groups:
(i) individuals who were members of the board of directors of
the Company on the Effective Date; or
(ii) individuals who first became members of the board of
directors of the Company after the Effective Date either:
(A) upon election to serve as a member of the board of
Directors of the Company by affirmative vote of
three-quarters of the members of such board, or of a
nominating committee thereof, in office at the time of such
first election; or
(B) upon election by the shareholders of the Company to
serve as a member of such board, but only if nominated for
election by affirmative vote of three-quarters of the members
of the board of directors of the Company, or of a nominating
committee thereof, in office at the time of such first
nomination;
provided, however, that such individual's election or nomination
did not result from an actual or
B-6
threatened election contest or other actual or threatened
solicitation of proxies or consents other than by or on behalf of
the board of directors of the Company;
(e) approval by the stockholders of the Company of any agreement,
plan or arrangement for the consummation of a transaction which, if
consummated, would result in the occurrence of an event described in
section 2.6(a), (b), (c) or (d); or
(f) any event which would be described in section 2.6(a), (b), (c),
(d) or (e) if the term "Bank" were substituted for the term "Company"
therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or
a subsidiary of either of them, by the Company, the Bank, or any subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 2.6, the term "person" shall have the meaning assigned
to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
Section 2.7 Code means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).
Section 2.8 Committee means the Committee described in section 4.1.
Section 2.9 Company means Westfield Financial, Inc., a Massachusetts
corporation, and any successor thereto.
Section 2.10 Disability means a condition of total incapacity, mental or
physical, for further performance of duty with the Company which the Committee
shall have determined, on the basis of competent medical evidence, is likely to
be permanent.
Section 2.11 Disinterested Board Member means a member of the Board who
(a) is not a current employee of the Company or a subsidiary, (b) does not
receive remuneration from the Company or a subsidiary, either directly or
indirectly, in any capacity other than as a director, except in an amount for
which disclosure would not be required pursuant to Item 404(a) of the proxy
solicitation rules of the Securities and Exchange Commission and (c) does not
possess an interest in any other transaction, and is not engaged in a business
relationship, for which disclosure would be required pursuant to Item 404(a) or
(b) of the proxy solicitation rules of the Securities and Exchange Commission.
The term Disinterested Board Member shall be interpreted in such manner as
shall be necessary to conform to the requirements of Rule 16b-3 promulgated
under the Exchange Act.
Section 2.12 Effective Date means [ ], 2007.
Section 2.13 Eligible Director means a member of the board of directors
of an Employer who is not also an employee of any Employer.
Section 2.14 Eligible Employee means any employee whom the Committee may
determine to be a key officer or employee of the Employer and selects to
receive an Award pursuant to the Plan.
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Section 2.15 Employer means the Company, the Bank and any successor
thereto and, with the prior approval of the Board of Directors of the Company,
and subject to such terms and conditions as may be imposed by the Board, any
other savings bank, savings and loan association, bank, corporation, financial
institution or other business organization or institution. With respect to any
Eligible Employee or Eligible Director, the Employer shall mean the entity
which employs such person or upon whose board of directors such person serves.
Section 2.16 Exchange Act means the Securities and Exchange Act of 1934,
as amended.
Section 2.17 OTS Regulation means the rules and regulations of the Office
of Thrift Supervision.
Section 2.18 Fund means the corpus (consisting of contributions paid over
to the Funding Agent, and investments thereof), and all earnings, appreciations
or additions thereof and thereto, held by the Funding Agent under the Funding
Agreement in accordance with the Plan, less any depreciation thereof and any
payments made therefrom pursuant to the Plan.
Section 2.19 Funding Agent means the trustee or custodian of the Fund
from time to time in office. The Funding Agent shall serve as Funding Agent
until it is removed or resigns from office and is replaced by a successor
Funding Agent or Funding Agents appointed by Westfield Financial, Inc.
Section 2.20 Funding Agreement means the agreement between Westfield
Financial, Inc. and the Funding Agent therein named or its successor pursuant
to which the Fund shall be held in trust or custody.
Section 2.21 Person means an individual, a corporation, a bank, a savings
bank, a savings and loan association, a financial institution, a partnership,
an association, a joint-stock company, a trust, an estate, an unincorporated
organization and any other business organization or institution.
Section 2.22 Plan means the Westfield Financial, Inc. 2007 Recognition
and Retention Plan as amended from time to time.
Section 2.23 Retirement means with respect to an Eligible Employee,
termination of all service for all Employers as an employee at or after the
normal or early retirement date set forth in any tax-qualified retirement plan
of the Bank, whether or not the individual in question actually participates in
any such tax-qualified plan of the Bank, and in the case of an Eligible
Director, termination of all service for all Employers as a voting member of
the Employer's board of directors after the attainment of the latest age at
which the Eligible Director is eligible for election or appointment as a voting
member of the Employer's board of directors under the Employer's charter.
Section 2.24 Service means service for the Company (or any subsidiary or
affiliate) as an employee in any capacity, service as a director or emeritus
director or advisory director of the Company.
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Section 2.25 Share means a share of common stock of Westfield Financial,
Inc., par value $.01 per share.
ARTICLE III
SHARES AVAILABLE UNDER PLAN
Section 3.1 Shares Available Under Plan.
(a) The maximum number of Shares available for Awards under the
Plan shall be 624,041, subject to adjustment pursuant to section 8.3.
(b) An aggregate maximum of 187,212 Shares (subject to adjustment
pursuant to section 8.3) may be granted as Awards to Eligible Directors,
and a maximum of 31,202 Shares (subject to adjustment pursuant to section
8.3) may be granted as Awards to any one Eligible Director.
(c) An aggregate maximum of 624,041 Shares (subject to adjustment
pursuant to section 8.3) may be granted as Awards to Eligible Employees,
and a maximum of 156,010 Shares (subject to adjustment pursuant to
section 8.3) may be granted as Awards to any one Eligible Employee.
ARTICLE IV
ADMINISTRATION
Section 4.1 Committee.
The Plan shall be administered by the Compensation Committee (the
"Committee") consisting of all members of the Board or, if designated by the
Board, by a committee comprised solely of Disinterested Board Members. If the
Committee consists of fewer than two Disinterested Board Members, then the
Board shall appoint to the Committee such additional Disinterested Board
Members as shall be necessary to provide for a Committee consisting of at least
two Disinterested Board Members.
Section 4.2 Committee Action.
The Committee shall hold such meetings, and may make such administrative
rules and regulations, as it may deem proper. A majority of the members of the
Committee shall constitute a quorum, and the action of a majority of the
members of the Committee present at a meeting at which a quorum is present, as
well as actions taken pursuant to the unanimous written consent of all of the
members of the Committee without holding a meeting, shall be deemed to be
actions of the Committee. All actions of the Committee shall be final and
conclusive and shall be binding upon the Company and all other interested
parties. Any Person dealing with the Committee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by the Chair of the Committee and one member of the Committee, by two
members of the Committee or by a representative of the Committee authorized to
sign the same in its behalf.
B-9
Section 4.3 Committee Responsibilities.
Subject to the terms and conditions of the Plan and such limitations as
may be imposed by the Board, the Committee shall be responsible for the overall
management and administration of the Plan and shall have such authority as
shall be necessary or appropriate in order to carry out its responsibilities,
including, without limitation, the authority:
(a) to interpret and construe the Plan, and to determine all
questions that may arise under the Plan as to eligibility for Awards
under the Plan, the amount of Shares, if any, to be granted pursuant to
an Award, and the terms and conditions of such Award;
(b) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(c) to take any other action not inconsistent with the provisions
of the Plan that it may deem necessary or appropriate.
ARTICLE V
THE FUND
Section 5.1 Contributions.
Westfield Financial, Inc. shall contribute, or cause to be contributed,
to the Fund, from time to time, such amounts of money or property as shall be
determined by the Board, in its discretion. No contributions by Eligible
Directors or Eligible Employees shall be permitted.
Section 5.2 The Fund.
The Fund shall be held and invested under the Funding Agreement with the
Funding Agent. The provisions of the Funding Agreement shall include provisions
conferring powers on the Funding Agent as to investment, control and
disbursement of the Trust Fund, and such other provisions not inconsistent with
the Plan as may be prescribed by or under the authority of the Board. No bond
or security shall be required of any Funding Agent at any time in office.
Section 5.3 Investments.
The Funding Agent shall invest the Trust Fund in Shares and in such other
investments as may be permitted under the Funding Agreement, including savings
accounts, time or other interest bearing deposits in or other interest bearing
obligations of the Company, in such proportions as shall be determined by the
Committee; provided, however, that in no event shall the Fund be used to
purchase more than 624,041 Shares (subject to adjustment pursuant to section
8.3). Notwithstanding the immediately preceding sentence, the Funding Agent may
temporarily invest the Fund in short-term obligations of, or guaranteed by, the
U.S. Government or an agency thereof, or the Funding Agent may retain the Trust
Fund uninvested or may sell assets of the Fund to provide amounts required for
purposes of the Plan.
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ARTICLE VI
AWARDS
Section 6.1 To Eligible Directors.
Subject to the limitations of the Plan and such limitations as the Board
may from time to time impose, the number of Shares as to which an Eligible
Director may be granted an Award shall be determined by the Committee in its
discretion; provided, however, that in no event shall the number of Shares
allocated to an Eligible Director in an Award exceed the number of Shares then
held in the Fund and not allocated in connection with other Awards.
Section 6.2 To Eligible Employees.
Subject to the limitations of the Plan and such limitations as the Board
may from time to time impose, the number of Shares as to which an Eligible
Employee may be granted an Award shall be determined by the Committee in its
discretion; provided, however, that in no event shall the number of Shares
allocated to an Eligible Employee in an Award exceed the number of Shares then
held in the Trust and not allocated in connection with other Awards.
Section 6.3 Awards in General.
Any Award shall be evidenced by an Award Notice issued by the Committee
to the Eligible Director or Eligible Employee, which notice shall:
(a) specify the number of Shares covered by the Award;
(b) specify the date of grant of the Award;
(c) specify the dates on which such Shares shall become vested; and
(d) contain such other terms and conditions not inconsistent with
the Plan as the Board or Committee may, in its discretion, prescribe.
Section 6.4 Share Allocations.
Upon the grant of an Award to an Eligible Director or Eligible Employee,
the Committee shall notify the Funding Agent of the Award and of the number of
Shares subject to the Award. Thereafter, until such time as the Shares subject
to such Award become vested or are forfeited, the books and records of the
Funding Agent shall reflect that such number of Shares have been awarded to
such Award recipient.
Section 6.5 Dividend Rights.
(a) Unless the Committee determines otherwise with respect to any
Award and specifies such determination in the relevant Award Notice, any
cash dividends or distributions declared and paid with respect to Shares
subject to the Award that are, as of the record date for such dividend,
allocated to an Eligible Director or Eligible Employee in
B-11
connection with such Award shall be promptly paid to and retained by such
Eligible Director or Eligible Employee. Any cash dividends declared and
paid with respect to Shares that are not, as of the record date for such
dividend, allocated to any Eligible Director or Eligible Employee in
connection with any Award shall, at the direction of the Committee, be
held in the Trust or used to pay the administrative expenses of the Plan,
including any compensation due to the Funding Agent.
(b) Unless the Committee determines otherwise with respect to any
Award and specifies such determination in the relevant Award Notice, any
dividends or distributions declared and paid in property other than cash
with respect to Shares shall be subject to the same vesting and other
restrictions as the Shares to which the Award relates. Any such dividends
declared and paid with respect to Shares that are not, as of the record
date for such dividend, allocated to any Eligible Director or Eligible
Employee in connection with any Award shall, at the direction of the
Committee, be held in the Trust or used to pay the administrative
expenses of the Plan, including any compensation due to the Funding Agent
or, in the case of a stock dividend, used for future Awards.
Section 6.6 Voting Rights.
(a) Each Eligible Director or Eligible Employee to whom an Award
has been made that is not fully vested shall have the right to exercise,
or direct the exercise of, all voting rights appurtenant to unvested
Shares related to such Award. Such a direction for any Shares as to which
the Eligible Director or Eligible Employee is not the record owner shall
be given by completing and filing, with the inspector of elections, the
Funding Agent or such other person who shall be independent of the
Company as the Committee shall designate in the direction, a written
direction in the form and manner prescribed by the Committee. If no such
direction is given by an Eligible Director or Eligible Employee, then the
voting rights appurtenant to the Shares allocated to him shall not be
exercised.
(b) To the extent that the Fund contains Shares that are not
allocated in connection with an Award, all voting rights appurtenant to
such Shares shall be exercised by the Funding Agent in such manner as the
Committee shall direct to reflect the voting directions given by Eligible
Directors or Eligible Employees with respect to Shares allocated in
connection with their Awards.
(c) The Committee shall furnish, or cause to be furnished, to each
Eligible Director or Eligible Employee who is not the record holder of
the Shares relating to his or her Award all annual reports, proxy
materials and other information furnished by Westfield Financial, Inc.,
or by any proxy solicitor, to the holders of Shares.
Section 6.7 Tender Offers.
(a) Each Eligible Director or Eligible Employee to whom an Award
has been made that is not fully vested shall have the right to respond,
or to direct the response, with respect to the Shares related to such
Award, to any tender offer, exchange offer or other offer made to the
holders of Shares. Such a direction for any Shares as to which the
Eligible Director or Eligible Employee is not the record owner shall be
given by completing and filing, with the
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inspector of elections, the Funding Agent or such other person who shall
be independent of the Company as the Committee shall designate in the
direction, a written direction in the form and manner prescribed by the
Committee. If no such direction is given by an Eligible Director or
Eligible Employee, then the Shares shall not be tendered or exchanged.
(b) To the extent that the Fund contains Shares that are not
allocated in connection with an Award, all responses to tender, exchange
and other offers appurtenant to such Shares shall be given by the Funding
Agent in such manner as the Committee shall direct to reflect the
responses given by Eligible Directors or Eligible Employees with respect
to Shares allocated in connection with their Awards.
(c) The Committee shall furnish, or cause to be furnished, to each
Eligible Director or Eligible Employee, all information furnished by the
offeror to the holders of Shares.
Section 6.8 Limitations on Awards.
(a) No Award shall be granted under the Plan prior to the later of
the date on which the Plan is approved by shareholders pursuant to
section 9.9 or July 3, 2007;
(b) No Award granted under the Plan prior to shareholder approval
of section 10.2 hereof shall become vested more rapidly than under the
following schedule:
(i) prior to the first anniversary of the grant date, no part
of any Award shall be vested in the absence of the death or
Disability of the Award recipient or upon a Change of Control;
(ii) on and after the first anniversary of the grant date and
prior to the second anniversary of the grant date, an Award will be
vested as to a maximum of twenty percent (20%) of the Shares
subject to the Award when granted in the absence of the death or
Disability of the Award recipient or upon a Change of Control;
(iii) on and after the second anniversary of the grant date
and prior to the third anniversary of the grant date, an Award may
be vested as to a maximum of forty percent (40%) of the Shares
subject to the Award when granted in the absence of the death or
Disability of the Award recipient or upon a Change of Control;
(iv) on and after the third anniversary of the grant date and
prior to the fourth anniversary of the grant date, an Award may be
vested as to a maximum of sixty percent (60%) of the Shares subject
to the Award when granted in the absence of the death or Disability
of the Award recipient or upon a Change of Control;
(v) on and after the fourth anniversary of the grant date and
prior to the fifth anniversary of the grant date, an Award may be
vested as to a maximum of eighty percent (80%) of the Shares
subject to the Award when granted in the
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absence of the death or Disability of the Award recipient or upon a
Change of Control; and
(vi) on and after the fifth anniversary of the grant date,
the Award may be vested as to one hundred percent (100%) of the
Shares subject to the Award when granted; and
(vii) an Award may become fully vested on the date of the
Award holder's death, Disability or upon a Change of Control
without regard to the time expired from and after the Effective
Date and the grant date.
(c) An Award by its terms shall not be transferable by the Eligible
Director or Eligible Employee other than by will or by the laws of
descent and distribution, and the Shares granted pursuant to such Award
and held in the Trust shall be distributable, during the lifetime of the
Recipient, only to the Recipient.
ARTICLE VII
VESTING
Section 7.1 Vesting of Awards.
Subject to the terms and conditions of the Plan, unless otherwise
determined by the Committee and specified in the Award Notice relating to an
Award, Shares subject to each Award granted to an Eligible Director or Eligible
Employee under the Plan shall become vested as follows: (i) twenty percent
(20%) of such Shares shall become vested on the first anniversary of the date
of grant; (ii) an additional twenty percent (20%) of such Shares shall become
vested on the second anniversary of the date of grant; (iii) an additional
twenty percent (20%) of such Shares shall become vested on the third
anniversary of the date of grant; (iv) an additional twenty percent (20%) of
such Shares shall become vested on the fourth anniversary of the date of grant;
(v) an additional twenty percent (20%) of such Shares shall become vested on
the fifth anniversary of the date of grant; provided that to the extent that
any Award shall not have become vested prior to the date on which the Award
holder terminates Service with an Employer such Award shall not thereafter
become vested and provided, further, an Award shall become 100% vested upon the
Award recipient's death, Disability or upon the occurrence of a Change of
Control while in the Service of an Employer.
Section 7.2 Designation of Beneficiary.
An Eligible Director or Eligible Employee who has received an Award may
designate a Beneficiary to receive any undistributed Shares that are, or
become, available for distribution on, or after, the date of his death. Such
designation (and any change or revocation of such designation) shall be made in
writing in the form and manner prescribed by the Committee. In the event that
the Beneficiary designated by an Eligible Director or Eligible Employee dies
prior to the Eligible Director or Eligible Employee, or in the event that no
Beneficiary has been designated, any undistributed Shares that are, or become,
available for distribution on, or after, the Eligible Director's or Eligible
Employee's death shall be paid to the executor or administrator of the Eligible
Director's or Eligible Employee's estate, or if no such executor or
B-14
administrator is appointed within such time as the Committee, in its sole
discretion, shall deem reasonable, to such one or more of the spouse and
descendants and blood relatives of such deceased person as the Committee may
select.
Section 7.3 Manner of Distribution.
(a) Except as provided in section 7.3(b), as soon as practicable
following the date any Shares granted pursuant to an Award become vested
pursuant to sections 7.1, the Committee shall take such actions as are
necessary to cause the transfer of record ownership of the Shares that
have become vested from the Funding Agent to the Award holder and shall
cause the Funding Agent to distribute to the Award holder all property
other than Shares then being held in connection with the Shares being
distributed.
(b) The Committee may, in its discretion, cause the transfer to an
Award recipient of record ownership of the Shares subject to such Award
that have not yet vested. Any such Shares shall be held in certificated
form only, and the certificate therefor shall bear the following or a
substantially similar legend:
The securities evidenced hereby are subject to the terms of an
Award Notice dated [date] between the issuer and [name of Award
recipient] pursuant to the Westfield Financial, Inc. 2007
Recognition and Retention Plan, a copy of which is on file with the
issuer and may be inspected at the issuer's executive offices at
141 Elm Street, Westfield, Massachusetts 01085. No sale, transfer,
hypothecation or other disposition of these securities may be made
except in compliance with the terms of such Award Notice and the
terms of the Plan.
(c) The Company's obligation to deliver Shares with respect to an
Award shall, if the Committee so requests, be conditioned upon the
receipt of a representation as to the investment intention of the
Eligible Director or Eligible Employee or Beneficiary to whom such Shares
are to be delivered, in such form as the Committee shall determine to be
necessary or advisable to comply with the provisions of applicable
federal, state or local law. It may be provided that any such
representation shall become inoperative upon a registration of the Shares
or upon the occurrence of any other event eliminating the necessity of
such representation. The Company shall not be required to deliver any
Shares under the Plan prior to (i) the admission of such Shares to
listing on any stock exchange on which Shares may then be listed, or (ii)
the completion of such registration or other qualification under any
state or federal law, rule or regulation as the Committee shall determine
to be necessary or advisable.
Section 7.4 Taxes.
The Company, the Committee or the Funding Agent shall have the right to
require any person entitled to receive Shares pursuant to an Award to pay the
amount of any tax which is required to be withheld with respect to such Shares,
or, in lieu thereof, to retain, or to sell without notice, a sufficient number
of Shares to cover the amount required to be withheld.
B-15
ARTICLE VIII
AMENDMENT AND TERMINATION
Section 8.1 Termination.
The Board may suspend or terminate the Plan in whole or in part at any
time by giving written notice of such suspension or termination to the
Committee; provided, however, that the Plan may not be terminated while there
are outstanding Awards that may thereafter become vested. Upon the termination
of the Plan, the Funding Agent shall make distributions from the Fund in such
amounts and to such persons as the Committee may direct and shall return the
remaining assets of the Fund, if any, to Westfield Financial, Inc.
Section 8.2 Amendment.
The Board may amend or revise the Plan in whole or in part at any time;
provided, however, that no such amendment or revision shall alter the
stockholder approval standard set forth in Article X as a condition precedent
to the effectiveness of Article X or otherwise directly or indirectly give
effect to the substance of the provisions of Article X without compliance with
the stockholder approval requirement set forth therein.
Section 8.3 Adjustments in the Event of a Business Reorganization.
(a) In the event of any merger, consolidation, or other business
reorganization (including but not limited to a Change of Control) in
which Westfield Financial, Inc. is the surviving entity, and in the event
of any stock split, stock dividend or other event generally affecting the
number of Shares held by each person who is then a holder of record of
Shares, the number of Shares held or permitted to be held in the Fund,
the number of Shares covered by outstanding Awards, and the number of
Shares available as Awards in total or to particular individuals or
groups shall be adjusted to account for such event. Such adjustment shall
be effected by multiplying such number of Shares by an amount equal to
the number of Shares that would be owned after such event by a person
who, immediately prior to such event, was the holder of record of one
Share, unless the Committee, in its discretion, establishes another
appropriate method of adjustment.
(b) In the event of any merger, consolidation, or other business
reorganization (including but not limited to a Change of Control) in
which Westfield Financial, Inc. is not the surviving entity, the Funding
Agent shall hold in the Fund any money, stock, securities or other
property received by holders of record of Shares in connection with such
merger, consolidation, or other business reorganization. Any Award with
respect to which Shares had been allocated to an Eligible Director or
Eligible Employee shall be adjusted by allocating to the Eligible
Director or Eligible Employee receiving such Award the amount of money,
stock, securities or other property received by the Funding Agent for the
Shares allocated to such Eligible Director or Eligible Employee, and such
money, stock, securities or other property shall be subject to the same
terms and conditions of the Award that applied to the Shares for which it
has been exchanged.
B-16
ARTICLE IX
MISCELLANEOUS
Section 9.1 Status as an Employee Benefit Plan.
This Plan is not intended to satisfy the requirements for qualification
under section 401(a) of the Code or to satisfy the definitional requirements
for an "employee benefit plan" under section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended. It is intended to be a non-qualified
incentive compensation program that is exempt from the regulatory requirements
of the Employee Retirement Income Security Act of 1974, as amended. The Plan
shall be construed and administered so as to effectuate this intent.
Section 9.2 No Right to Continued Employment.
Neither the establishment of the Plan nor any provisions of the Plan nor
any action of the Board or the Committee with respect to the Plan shall be held
or construed to confer upon any Eligible Director or Eligible Employee any
right to continue in the service of any Employer. The Employers reserve the
right to dismiss any Eligible Director or Eligible Employee or otherwise deal
with any Eligible Director or Eligible Employee to the same extent as though
the Plan had not been adopted.
Section 9.3 Construction of Language.
Whenever appropriate in the Plan, words used in the singular may be read
in the plural, words used in the plural may be read in the singular, and words
importing the masculine gender may be read as referring equally to the feminine
or the neuter. Any reference to an Article or section number shall refer to an
Article or section of this Plan unless otherwise indicated.
Section 9.4 Governing Law.
The Plan shall be construed and enforced in accordance with the laws of
the Commonwealth of Massachusetts without giving effect to the conflict of laws
principles thereof, except to the extent that such laws are preempted by the
federal laws of the United States of America. The Plan shall be construed to
comply with applicable OTS Regulations.
Section 9.5 Headings.
The headings of Articles and sections are included solely for convenience
of reference. If there is any conflict between such headings and the text of
the Plan, the text shall control.
Section 9.6 Non-Alienation of Benefits.
The right to receive a benefit under the Plan shall not be subject in any
manner to anticipation, alienation or assignment, nor shall such right be
liable for or subject to debts, contracts, liabilities, engagements or torts;
provided, however, that any recipient of an Award
B-17
who makes an election pursuant to section 83(b) of the Code to include the
value of the Shares subject to such Award in gross income for federal income
purposes when granted rather than when vested shall have the right to margin
such Shares to finance the payment of taxes. Any Shares so margined shall
nevertheless remain subject to the forfeiture provisions and other terms and
conditions of the Award.
Section 9.7 Notices.
Any communication required or permitted to be given under the Plan,
including any notice, direction, designation, comment, instruction, objection
or waiver, shall be in writing and shall be deemed to have been given at such
time as it is personally delivered or 5 days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed
to such party at the address listed below, or at such other address as one such
party may by written notice specify to the other:
(a) If to the Committee:
Westfield Financial, Inc.
141 Elm Street
Westfield, Massachusetts 01085
Attention: Corporate Secretary
(b) If to an Eligible Director or Eligible Employee, to the
Eligible Director's or Eligible Employee's address as shown in the
Employer's records.
Section 9.8 Required Regulatory Provisions.
The making and payment of Awards under this Plan shall be conditioned
upon and subject to compliance with section 18(k) of the Federal Deposit
Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations promulgated
thereunder.
Section 9.9 Approval of Shareholders.
The Plan shall not be effective or implemented unless approved by the
holders of a majority of the total votes eligible to be cast at any duly called
annual or special meeting of the Company in which case the Plan shall be
effective as of the later of (a) July 3, 2007 or (b) the date of such approval.
No Award shall be made prior to the date on which the Plan becomes effective.
ARTICLE X
ADDITIONAL PROVISIONS SUBJECT TO FURTHER SHAREHOLDER APPROVAL
Section 10.1 Accelerated Vesting Upon Retirement.
Notwithstanding anything in the Plan to the contrary, but subject to
section 10.3, unless otherwise determined by the Committee and specified in the
Award Notice relating to an
B-18
Award in the event of an Award recipient's Retirement, all Awards granted to
the Award recipient under the Plan on the date of the Award recipient's
Retirement shall, to the extent not already vested, become vested on the date
of the Award recipient's Retirement.
Section 10.2 Discretion to Establish Vesting Schedules and Certain Plan
Limits.
Notwithstanding anything in this Plan to the contrary, but subject to
section 10.3 hereof, sections 6.8(b) and 7.1 shall apply in determining the
vesting schedule of Awards only if no different vesting schedule is established
by the Committee and specified in the Award Notice which the Committee may do
in its discretion. In addition, the limits imposed by sections 3.1(b) and
3.1(c) shall no longer apply.
Section 10.3 No Effect Prior to Stockholder Approval.
Notwithstanding anything contained in this Article X to the contrary, the
provisions of this Article X shall not be applied, and shall be of no force or
effect, unless and until the shareholders of the Company shall have approved
such provisions by affirmative vote of the holders of a majority of the Shares
represented in person or by proxy and entitled to vote at a meeting of
shareholders duly called and held on or after January 3, 2008.
B-19
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 July 19, 2007.
The undersigned shareholder of Westfield Financial, Inc. hereby appoints James
C. Hagan and Donald A. Williams, 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
May 31, 2007, at the Annual Meeting of Shareholders (the "Annual Meeting") to
be held on July 19, 2007 at 10:00 a.m., Eastern Time, at the Sheraton
Springfield Monarch Place Hotel, located at 1 Monarch Place, Springfield,
Massachusetts 01144, 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 June 18, 2007, and upon such other
matters as may properly come before the Annual Meeting. The undersigned hereby
revokes all prior proxies.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is given, this Proxy will be
voted FOR the election of all nominees listed in Item 1 and FOR the proposals
listed in Items 2 and 3.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
The Board of Directors unanimously recommends I Will Attend Annual Meeting. [ ]
a vote FOR the nominees named in Item 1 and a Please Mark Your Choice Like This
vote FOR the proposals in Items 2 and 3. in Blue or Black Ink. [X]
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1. The election of three candidates to serve as directors for a term of
office to expire in 2010. Nominees: Victor J. Carra, Richard C. Placek and
Charles E. Sullivan.
For Withhold
[ ] [ ]
- --------------------------------------------------------------------------------
Instruction: TO WITHHOLD AUTHORITY to vote for any individual nominee(s),
write that nominee's name(s) in the space provided:
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2. The approval of the Westfield Financial, Inc. 2007 Stock Option Plan.
For Against Abstain
[ ] [ ] [ ]
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3. The approval of the Westfield Financial, Inc. 2007 Recognition and
Retention Plan.
For Against Abstain
[ ] [ ] [ ]
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The undersigned hereby acknowledges receipt of the
Notice of Annual Meeting of Shareholders and the
Proxy Statement for the Annual Meeting dated June
18, 2007.
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Signature(s)
Dated: , 2007
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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.