February 22, 1999
Dear Stockholder:
You are cordially invited to attend the Special Meeting of
Stockholders of Mystic Financial, Inc. (the "Company"), the holding company
for Medford Co-operative Bank (the "Bank"), Medford, Massachusetts, which
will be held on March 24, 1999 at the Bank's Salem Street office, 201 Salem
Street, Medford, Massachusetts 02155, at 10:00 a.m. Eastern Time (the
"Special Meeting").
The attached Notice of Special Meeting and Proxy Statement describe
the formal business that we will transact at the Special Meeting. In
addition to the formal items of business, directors and officers of the
Company will be present to answer your questions.
The Board of Directors of the Company has determined that an
affirmative vote on each matter to be considered at the Special Meeting is
in the best interests of the Company and its stockholders and unanimously
recommends a vote "FOR" each of these matters.
Please complete, sign and return the enclosed proxy card promptly
whether or not you plan to attend the Special 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 Special Meeting but will assure
that your vote is counted if you cannot attend.
On behalf of the Board of Directors and the employees of Mystic
Financial, Inc. and Medford Co-operative Bank, we thank you for your
continued support and look forward to seeing you at the meeting.
Sincerely yours,
Robert H. Surabian
President and Chief Executive Officer
Mystic Financial, Inc.
60 High Street
Medford, Massachusetts 02155
(781) 395-2800
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
We will hold the Special Meeting of Stockholders on March 24, 1999 at
Medford Co-operative Bank's Salem Street office, 201 Salem Street, Medford,
Massachusetts 02155, at 10:00 a.m., Eastern Time. At the Special Meeting,
we will ask you to:
* Approve the proposed Mystic Financial, Inc. 1999 Stock Option Plan;
* Approve the proposed Mystic Financial, Inc. 1999 Recognition and
Retention Plan; and
* Authorize the Board of Directors, in its discretion, to direct the
vote of proxies upon such matters incident to the conduct of the
Special Meeting, and at any adjournment or postponement.
You may vote at the Special Meeting if you were a stockholder of the
Company at the close of business on February 5, 1999, the record date.
By Order of the Board of Directors,
Lorraine P. Silva
Secretary
Medford, Massachusetts
February 22, 1999
============================================================================
You are cordially invited to attend the Special 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 Special
Meeting.
============================================================================
MYSTIC FINANCIAL, INC.
PROXY STATEMENT FOR THE
SPECIAL MEETING OF STOCKHOLDERS
To Be Held on March 24, 1999
GENERAL INFORMATION
General
We sent you this Proxy Statement and enclosed proxy card because the
Board of Directors is soliciting your proxy to vote at the Special Meeting.
This Proxy Statement summarizes the information you need to know to cast an
informed vote at the Special Meeting. You do not need to attend the Special
Meeting to vote your shares. You may simply complete, sign and return the
enclosed proxy card.
We began mailing this Proxy Statement, the Notice of Special Meeting
and the enclosed proxy card on or about February 22, 1999 to all
stockholders entitled to vote. If you owned the Company's Common Stock at
the close of business on February 5, 1999, the record date, you are entitled
to vote at the Special Meeting. On the record date, there were 2,573,555
shares of Common Stock outstanding.
Quorum Requirement
A quorum of stockholders 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 of the Company entitled to vote are represented in person or
by proxy at the Special 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 Special Meeting.
Voting Rights
You are entitled to one vote at the Special Meeting for each share of
the Company's Common Stock that you owned of record at the close of business
on February 5, 1999. 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 Special Meeting in person or by proxy.
To vote in person, you must attend the Special Meeting, and obtain and
submit a ballot, which we will provide to you at the Special Meeting. To
vote by proxy, you must complete and return the enclosed proxy card. If you
properly complete your proxy card and send it to us in time to vote, your
"proxy" (one of the individuals named on your proxy card) will vote your
shares as you have directed. If you sign the proxy card but do not make
specific choices, your proxy will vote your shares FOR each of the proposals
identified in the Notice of the Special Meeting.
If any other matter is presented, your proxy will vote the shares
represented by all properly executed proxies on such matters as a majority
of the Board of Directors determines. As of the date of this Proxy
Statement, we know of no other matters that may be presented at the Special
Meeting, other than those listed in the Notice of the Special Meeting.
Vote Required
The vote required for each proposal is set forth in the discussion of
the proposal under the caption "--Vote Required."
Confidential Voting Policy
The Company maintains a policy of keeping stockholder votes
confidential. We only let our Inspectors 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. We will, however, forward any written comments that you may
have to management.
Revoking Your Proxy
You may revoke your proxy at any time before it is exercised by:
* Filing with the Company a letter revoking the proxy;
* Submitting another signed proxy with a later date; and
* Attending the Special Meeting and voting in person, if you file a
written revocation with the Secretary of the Special Meeting prior to
the voting of such proxy.
If your shares are not registered in your own name, you will need
appropriate documentation from your stockholder of record to vote personally
at the Special Meeting. Examples of such documentation include a broker's
statement, letter or other document that will confirm your ownership of
shares of the Company.
Solicitation of Proxies
The Company will pay the costs of soliciting proxies from its
stockholders. Directors, officers or employees of the Company and the 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. The
Company has hired MacKenzie Partners, Inc. to assist in the solicitation of
proxies for a fee not to exceed $4,000, plus out-of-pocket expenses.
Interest of Persons in Matters to be Acted Upon
Directors and officers of the Bank and the Company will be granted
stock options and restricted stock awards under the Stock Option Plan and
Recognition Plan being presented for approval in Proposals 1 and 2, if the
stockholders approve the Plans.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Stockholders of the Company
The following table contains stockholder information for persons known
to the Company to "beneficially own" 5% or more of the Company's common
stock as of February 1, 1999. In general, beneficial ownership includes
those shares that a person has the power to vote, sell, or otherwise
dispose. Beneficial ownership also includes that number of shares which an
individual has the right to acquire within 60 days (such as stock options).
Two or more persons may be considered the beneficial owner of the same
share. We obtained the information provided in the following table from
filings with the Securities and Exchange Commission (the "SEC") and with the
Company. In this proxy statement, "voting power" is the power to vote or
direct the voting of shares, and "investment power" includes the power to
dispose or direct the disposition of shares.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, $.01 Mystic Financial, Inc. Employee 216,890(1) 8.43%
par value Stock Ownership Plan Trust
Marine Midland Bank
140 Broadway
New York, NY 10005
Common Stock, $.01 Thomson Horstman & Bryant, Inc. 170,000(2) 6.60%
par value Park 80 West, Plaza Two
Saddle Brook, NJ 07663
<FN>
- --------------------
<F1> The Mystic Financial, Inc. Employee Stock Ownership Plan ("ESOP") is
administered by the compensation committee of the Company's Board of
Directors (the "Compensation Committee"). The ESOP's assets are held
in a trust (the "ESOP Trust"), for which Marine Midland Bank, serves
as trustee (the "ESOP Trustee"). The ESOP Trust purchased these shares
with funds borrowed from the Company, initially placed these shares in
a suspense account for future allocation and intends to allocate them
to employees participating in the ESOP over a period of years as its
acquisition debt is retired. The ESOP Trustee is the beneficial owner
of the shares held in the ESOP Trust. The terms of the ESOP Trust
Agreement provide that, subject to the ESOP Trustee's fiduciary
responsibilities under the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), the ESOP Trustee will vote, tender or
exchange shares of Common Stock held in the ESOP Trust allocated to
participants' accounts in accordance with instructions received from
the participants. As of December 31, 1998, 21,689 shares have been
allocated to the accounts of the ESOP participants.
<F2> Based on a Schedule 13G filed with the SEC on January 28, 1999,
Thomson Horstman & Bryant, Inc. is a Delaware corporation which is an
investment advisor registered under the Investment Advisors Act of
1940.
</FN>
</TABLE>
Security Ownership of Management
The following table shows the Company's common stock beneficially
owned by each director and executive officer, and all directors and
executive officers of the Company as a group, as of February 1, 1999.
Except as otherwise indicated, each person and each group shown in the table
has sole voting and investment power with respect to the shares of common
stock listed next to their name.
<TABLE>
<CAPTION>
Amount and Percent of
Nature Common
Position with of Beneficial Stock
Name the Company(1) Ownership(2) Outstanding
- ----------------------------------------------------------------------------------------------------
<S> <S> <C> <C>
Julie Bernardin Director 2,400(3) 0.09%
Frederick N. Dello Russo Director 2,500(4) 0.10
Ralph W. Dunham Executive Vice President, Chief
Financial Officer and Treasurer 6,000(5) 0.23
John A. Hackett Director 5,300(6) 0.21
Richard M. Kazanjian Director 17,500(7) 0.68
John W. Maloney Director 10,100(8) 0 39
John J. McGlynn Chairman of the Board 11,200(9) 0.44
Lorraine P. Silva Director 20,000(10) 0.78
Robert H. Surabian President, Chief Executive
Officer and Director 61,000(11) 2.37
Robert B. Risman Director Emeritus 10,000 0.39
All directors and executive
officers as a group (14 persons) 362,690(12) 14.09%
<FN>
- --------------------
<F1> Titles are for both the Company and the Bank.
<F2> See "Principal Stockholders of the Company" for a definition of
"beneficial ownership."
<F3> Includes 1,900 shares held in Ms. Bernardin's individual retirement
account ("IRA").
<F4> Includes 1,500 shares jointly owed with his spouse. Includes 1,000
shares held in Mr. Dello Russo's employer's profit sharing plan.
<F5> Includes 1,584 shares held in Mr. Dunham's IRA and 200 shares held by
Mr. Dunham as custodian for his two children.
<F6> Includes 2,500 shares held in Mr. Hackett's IRA, 2,500 shares held in
his spouse's IRA, 200 shares jointly held with his spouse, and 100
shares which Mr. Hackett holds as custodian for his minor child.
<F7> Includes 14,100 shares jointly owned by Mr. Kazanjian and his spouse,
2,400 shares held in Mr. Kazanjian's IRA and 1,000 shares held in his
spouse's IRA.
<F8> Includes 10,000 shares held in Mr. Maloney's employer's profit sharing
plan.
<F9> Includes 9,400 shares jointly owned by Mr. McGlynn and his spouse and
1,800 shares owned by Mr. McGlynn's spouse.
<F10> Includes 10,000 shares owned by Mrs. Silva's spouse.
<F11> Includes 30,000 shares owned by Mr. Surabian's spouse.
<F12> The amount of shares for all directors and executive officers as a
group includes 216,890 shares held by the ESOP Trust, over which the
Compensation Committee (consisting of Mr. Hackett, Mr. McGlynn and Ms.
Silva) may be deemed to have sole "investment power," thereby causing
each committee member to be deemed a beneficial owner. Each committee
member disclaims beneficial ownership of these shares. The individual
participants in the ESOP have shared voting power with the ESOP
Trustee with respect to the unallocated shares held in the ESOP Trust.
As of December 31, 1998, 21,689 shares have been allocated to the
accounts of the ESOP participants.
</FN>
</TABLE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Directors' Compensation
Fee Arrangements. Currently, each director of the Bank receives the
following fees:
* an annual retainer of $7,200;
* fees of $400 per Board meeting attended; and
* fees ranging from $650 to $950 monthly for committee meetings.
In addition to the fees listed above, the Bank pays a $6,000
additional annual retainer to the Chairman of the Board and a $1,200
additional annual retainer to the Clerk of the Board. Total directors
fees for fiscal 1998 were $68,200 and total committee fees were $62,870. The
Company does not compensate directors of the Company for their services, but
anticipates that the directors will be covered by the Stock Option Plan and
Recognition and Retention Plan under consideration at the Special Meeting.
Executive Compensation
Cash Compensation. The following table shows the cash compensation
paid during the fiscal years ended June 30, 1998, and 1997, to the named
executive.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation(1)(2)
----------------------------------------------------------------------------
Other
Annual LTIP All Other
Name and Principal Compensation Payouts Compensation
Positions Year Salary($) Bonus($) ($) ($) ($)(3)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Surabian, 1998 153,360 47,000 - - 8,112
President and Chief Executive 1997 148,896 37,000 - - 7,500
Officer
Ralph W. Dunham, 1998 98,633 10,000 - - 5,367
Chief Financial Officer, Executive 1997 93,600 9,400 - - 4,750
Vice President and Treasurer
<FN>
- --------------------
<F1> Under Annual Compensation, the column titled "Salary" includes base
salary and payroll deductions for health insurance under the Bank's
health insurance plan and pre-tax contributions to the Bank's 401(k)
Plan. The amounts under "Bonus" include a stipend of $17,500 to be
paid annually for a ten-year period by the Bank to Mr. Surabian to
cover premiums due on a life insurance policy owned by him. Mr.
Surabian pays all taxes required on these payments which are reported
on his IRS Form W-2. Mr. Surabian is not paid any fees to serve as a
member of the Board of Directors of the Company or the Bank.
<F2> Compensation received in 1997 by Mr. Surabian and Mr. Dunham was only
for services provided to the Bank. In 1998, Mr. Surabian and Mr.
Dunham were paid for services provided to both the Bank and the
Company.
<F3> Includes matching contributions made by the Bank to the 401(k) Plan on
Mr. Surabian's and Mr. Dunham's behalf.
</FN>
</TABLE>
Employment Agreements
Employment Agreements with the Company and Two Senior Executives.
The Company entered into separate Employment Agreements with Messrs.
Surabian and Dunham (the "Senior Executives"), on behalf of both the
Company and the Bank, effective as of January 8, 1998. These Employment
Agreements establish the respective duties and compensation of the Senior
Executives and are intended to ensure that the Company and the Bank will
be able to maintain a stable and competent senior executive management
team. The continued success of the Company and the Bank depends to a
significant degree on the skills and competence of Mr. Surabian and Mr.
Dunham.
Term. The Employment Agreements provide for a three-year term for
Messrs. Surabian and Dunham. The term of the Mr. Surabian's Employment
Agreement will be automatically extended on a daily basis so that the
remaining term of this Agreement will always be three years unless the
Board or Mr. Surabian give written notice of non-renewal. Mr. Dunham's
Employment Agreement provides that, commencing on the Agreement's first
anniversary date and continuing on each anniversary date, the Board may,
with Mr. Dunham's concurrence, extend the Employment Agreement for an
additional year, so that the remaining term will be three years, after the
Board conducts his performance evaluation.
Salary and Benefits. The benefits of Employment Agreements
provide:
* Annual review of base salary. Mr. Surabian's base salary as of
January 1, 1999 was $161,031 and Mr. Dunham's was $106,352.
* Entitlement to participation in pension, savings, incentive and
welfare benefit plans.
* Eligibility for fringe benefits applicable to executive personnel,
such as fees for club and organization memberships.
Termination and Benefits Payable upon Termination. The Company may
terminate the Senior Executives at any time for cause, as defined in the
Employment Agreements. In the event of the termination of the Senior
Executive's employment with the Company and the Bank for reasons other
than for cause, death or disability, or in the event of the Senior
Executive's resignation from the Company and the Bank for certain reasons
specified in the Employment Agreements, the Senior Executive would be
entitled to a lump sum cash payment in an amount equal to the present
value of the remaining base salary payments due to the Senior Executive
for the remaining term of the Agreement. However, in the event a Senior
Executive's employment terminates following a change in control of the
Company, for purposes of computing the lump sum severance amount payable,
the remaining term of each Executive's Employment Agreement will be deemed
to be three years. The Agreements also provide for the Company (or the
Bank, if applicable) to continue the Senior Executive's life, health and
disability insurance coverage for the remaining term of the Employment
Agreement. In addition, the Company's Employment Agreement with Mr.
Surabian provides for him to receive the bonus payments and additional
contributions or benefits he would have earned under any employee benefit
plan of the Company or the Bank during the remaining term of his
Employment Agreement, as well as the payments that would have been made
under any incentive compensation plan during the remaining term of his
Employment Agreement. In general, for purposes of the Employment
Agreements, the ESOP and any plans to be maintained by the Company or the
Bank, a "change of control" will generally be deemed to occur when a
person or group of persons acting in concert acquires beneficial ownership
of 25% or more of any class of equity security of the Company or the Bank,
upon stockholder approval of a merger or consolidation or a change of the
majority of the Board of Directors of the Company or the Bank, or
liquidation or sale of substantially all the assets of the Company or the
Bank.
Either the Bank or the Company may make the payments due to the
Senior Executives under the Employment Agreements, and these payments will
not be duplicated; the Employment Agreements provide that the Company will
guarantee that all payments due to the Senior Executives will be paid to
them. The Senior Executives would be entitled to reimbursement of certain
costs incurred in interpreting or enforcing the Employment Agreements.
Cash and benefits paid to a Senior Executive under the Employment
Agreements together with payments under other benefit plans following a
"change of control" of the Company or the Bank may constitute an "excess
parachute" payment under Section 280G of the Code, resulting in the
imposition of a 20% excise tax on the recipient and the denial of the
deduction for such excess amounts to the Company and the Bank. The
Company's Employment Agreements include a provision indemnifying each
Senior Executive on an after-tax basis for any "golden parachute" excise
taxes.
Effective as of July 1, 1998, the Company amended Mr. Surabian's
Employment Agreement to provide him with a special benefit in the event of
his retirement from the service of the Company during the term of his
Agreement. Prior to this amendment (hereinafter, the "Amendatory
Agreement"), Mr. Surabian's Employment Agreement did not provide him with
retirement benefits in addition to those available through participation in
the savings and pension plans of the Company and the Bank (described below).
Pursuant to the Amendatory Agreement, if Mr. Surabian retires during the
term of his Employment Agreement but not before he reaches age 67 or dies or
becomes disabled during the term of his Employment Agreement, he would be
entitled to receive a lump sum retirement benefit payable by the Company
equal to the dollar value of the total number of shares of Common Stock
expected to be allocated to Mr. Surabian under the ESOP during the full term
of the ESOP's ten-year loan. The retirement benefit payable to Mr. Surabian
under the Amendatory Agreement would be calculated by (i) projecting the
total number of shares of Common Stock to be allocated to Mr. Surabian's
ESOP account balance during the ten-year term of the ESOP's loan, (ii)
reducing such projection by the number of shares actually allocated to Mr.
Surabian's account in the ESOP, and then by (iii) multiplying the remaining
number of shares by the average price ("Average Price") of a share of the
Company's Common Stock determined over the twelve calendar quarters
immediately preceding Mr. Surabian's retirement. The supplemental benefit
would be payable from the Company's general assets.
Benefits
Employee Stock Ownership Plan and Trust. The Company has established,
and the Bank has adopted, an ESOP and related trust, effective as of January
1, 1998. Substantially all employees of the Bank or the Company who have
attained age 21 and have completed one year of service are eligible to
become participants in the ESOP. The ESOP purchased 216,890 shares of the
Common Stock issued by the Company in its conversion to stock form with
funds borrowed from the Company. Although contributions to the ESOP are
discretionary, the Company or the Bank intends to make annual contributions
to the ESOP in an aggregate amount at least equal to the principal and
interest requirement on the debt. This loan is for a term of 10 years,
bears interest at the rate of 8% per annum and calls for level annual
payments of principal and interest designed to amortize the loan over its
term. The loan also permits optional pre-payment. The Company and the Bank
may make additional annual contributions to the ESOP to the maximum extent
deductible for federal income tax purposes.
The ESOP Trust has pledged ESOP shares as collateral for the loan. The
ESOP Trustee holds these shares in a suspense account until released for
allocation among participants in the ESOP as the loan is repaid. The pledged
shares will be released annually from the suspense account in an amount
proportional to the repayment of the ESOP loan for each plan year. The
Company will allocate the released shares among the accounts of participants
on the basis of the participant's compensation for the year of allocation.
Benefits generally become vested at the rate of 20% per year with vesting
beginning after an employee's completion of three years of service and full
vesting to occur after seven years of service. Participants also become
immediately vested upon termination of employment due to death, retirement
at age 65 or older, permanent disability or upon the occurrence of a change
of control. Forfeitures will be reallocated among remaining participating
employees, in the same proportion as contributions. Vested benefits may be
paid in a single sum or installment payments and are payable upon death,
retirement at age 65 or older, disability or separation from service. As of
December 31, 1998, 21,689 shares have been allocated to participants' ESOP
accounts.
In connection with the establishment of the ESOP, the Board of
Directors appointed the Compensation Committee to administer the ESOP and
appointed Marine Midland Bank as the ESOP Trustee. The Compensation
Committee may instruct the ESOP Trustee regarding investment of funds
contributed to the ESOP. The ESOP Trustee, subject to its fiduciary duty,
must vote all allocated shares held in the ESOP in accordance with the
instructions of the participating employees. Under the ESOP, unallocated
shares will be voted in a manner calculated to most accurately reflect the
instructions it has received from participants regarding the allocated stock
as long as such vote is in accordance with the provisions of ERISA.
The ESOP may purchase additional shares of Common Stock in the future,
and may do so either on a leveraged basis with borrowed funds or with cash
dividends, periodic employer contributions or other cash flow. The ESOP's
fiduciaries will determine whether it will make such purchases and the terms
and conditions of any such purchases, by taking into account such factors as
they consider relevant at the time, including:
* their judgment as to the attractiveness of the Common Stock as an
investment;
* the price at which Common Stock may be purchased; and, in the case of
leveraged purchases,
* the terms and conditions on which borrowed funds are available; and
* the willingness of the Company or the Bank to offer purchase money
financing or guarantee purchase money financing offered by third
parties.
Pension Plan. The Pension Plan provides a benefit for all eligible
Bank employees. The benefit is equal to an amount (A) the participant's
accrued benefit under the applicable Prior Plan determined as of December
31, 1988 plus (B) one percent (1%) of the participant's "Final Average
Compensation" (defined to mean a participant's highest compensation averaged
over three years) plus (C) one-half of one percent (.5%) of the
participant's Final Average Compensation in excess of covered compensation
multiplied by the participant's benefit service after December 31, 1988.
The Bank funds the Pension Plan on an actuarial basis and the trustee holds
all assets in trust.
A participant will become incrementally vested in their accrued
benefit under the Pension Plan as follows:
* at a rate of 20% each year beginning after two years of service with
the Bank;
* full vesting to occur after six years of service or earlier
termination of employment due to disability, death or attainment of
normal retirement age.
The following table illustrates the annual benefit payable upon normal
retirement at age 65 in the form of a single life annuity, with no offset
for Social Security benefits, under the Pension Plan at various levels of
compensation and years of service under the Plan:
<TABLE>
<CAPTION>
Years of Service at Retirement
Final Average ---------------------------------------
Compensation 10 15 20 25
--------------------------------------------------------
<S> <C> <C> <C> <C>
$ 50,000 $ 7,500 $11,250 $15,000 $18,750
75,000 11,250 16,875 22,500 28,125
100,000 15,000 22,500 30,000 37,500
125,000 18,750 28,125 37,500 46,875
150,000 (1) 22,500 33,750 45,000 56,250
175,000 (1) 26,250 39,375 52,500 65,625
200,000 (1) 30,000 45,000 60,000 75,000
<FN>
- --------------------
<F1> These are hypothetical benefits based on the Pension Plan's normal
retirement benefit formula. The benefits shown above do not reflect
an offset for Social Security benefits and there are no other offsets.
For the Pension Plan year ended December 31, 1998, the annual
compensation for calculating benefits may not exceed $160,000 (as
adjusted for subsequent years pursuant to Code provisions)
</FN>
</TABLE>
The following table sets forth the years of credited service
determined as of December 31, 1998, the end of the 1997 plan year, for Mr.
Surabian and Mr. Dunham. The accrued benefit of each Mr. Surabian and Mr.
Dunham under the Pension Plan is determined on the basis of each officer's
"Years of Credited Service" shown below, and his "Final Average Compensation
(which includes salary and bonus)," as defined above.
<TABLE>
<CAPTION>
Years of Credited Service
-------------------------
Years Months
----- ------
<S> <C> <C>
Mr. Surabian 20 1
Mr. Dunham 10 10
</TABLE>
401(k) Plan. The 401(k) Plan permits eligible employees to save for
retirement by making pre-tax and post-tax contributions to the Plan of up to
twelve percent (12%) of the annual salary. The Bank may make "matching"
contributions on each participating employee's behalf for "eligible" pre-tax
and post-tax contributions made by participants. Under the 401(k) Plan, the
Bank will make a 50% "matching" contribution for each pre-tax contribution
made by a participant up to 5% of the participant's total annual salary. An
employee will always be 100% vested in any pre-tax or post-tax contributions
he makes to the 401(k) Plan and will become incrementally vested in any
matching contributions made on his behalf at a rate of 20% for each year of
service with the Bank, with initial vesting to begin after two years of
service and full vesting to occur after six years of service or upon earlier
disability, death or attainment of normal retirement age. Distributions may
be made at the election of a participant in either a single lump sum payment
or installments, as provided in the Plan.
Benefit Restoration Plan. Effective July 1, 1998, the Company adopted
the Benefit Restoration Plan of Mystic Financial, Inc. ("BRP") in order to
provide the person then serving as its Chief Executive Officer with the
benefits that would be due to such executive under the Pension Plan, the
401(k) Plan and the ESOP if such benefits had not been limited by certain
statutory restrictions under the Code. The Company intends to establish an
irrevocable "grantor trust" for use in connection with the BRP. The assets
of such "grantor trust" would be considered part of the general assets of
the Company and subject to the claims of its general creditors. Earnings on
the trust's assets would be taxable to the Company.
Stock Option Plan. The Board of Directors of the Company has adopted
the Mystic Financial, Inc. 1999 Stock Option Plan. The Plan is subject to
the approval of the Company's stockholders at the Special Meeting and
approval by the Commissioner of Banks of the Commonwealth of Massachusetts.
See "Proposal 1 - Mystic Financial, Inc. 1999 Stock Option Plan."
Recognition and Retention Plan. The Board of Directors of the Company
has adopted the Mystic Financial, Inc. 1999 Recognition and Retention Plan.
The Plan is subject to the approval of the Company's stockholders at the
Special Meeting and approval by the Commissioner of Banks of the
Commonwealth of Massachusetts. See "Proposal 2 - Mystic Financial, Inc.
1999 Recognition and Retention Plan."
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended June 30, 1998, the Compensation Committee
consisted of Messrs. Hackett, McGlynn and Mrs. Silva. During the 1998 fiscal
year, there were no interlocks between members of the Compensation Committee
or executive officers of the Company and corporations with respect to which
such persons are affiliated.
- ----------------------------------------------------------------------------
PROPOSAL 1
APPROVAL OF THE MYSTIC FINANCIAL, INC.
1999 STOCK OPTION PLAN
- ----------------------------------------------------------------------------
General Plan Information
The Company has adopted, subject to the approval of its stockholders
and approval by the Commissioner of Banks of the Commonwealth of
Massachusetts, the Mystic Financial, Inc. 1999 Stock Option Plan (the
"Option Plan"). The purpose of the Option Plan is to enable the Company to
grant certain officers, employees and outside directors a right, known as
an option ("Option"), to purchase shares of the Common Stock of the Company
at a stated price during a specified period or term. If the Option is not
exercised during its term, it will expire. The Option Plan is not an
employee pension or welfare benefit plan. As a result, the Option Plan is
not subject to ERISA. The key terms of the Option Plan are summarized below.
However, for your reference, a copy of the Option Plan is also attached to
this Proxy Statement and is labeled "Appendix A."
Vote Required
The Option Plan must be approved by a majority of the stockholders of
the Company to be effective. Under the Company's Bylaws, if a majority of
the shares of the Company's Common Stock present and entitled to vote at the
Special Meeting, vote in favor of the Option Plan, the Option Plan will be
approved by the Company's stockholders at the Special Meeting. For purposes
of this discussion, the date that the Company's stockholders approve the
Option Plan will be referred to as the "Option Plan Effective Date." If a
majority of the Company's stockholders do not approve the Option Plan, it
will not become effective and no Options may be granted to anyone under the
Option Plan.
Regulatory Approvals
The Option Plan must be approved by the Commissioner of Banks of the
Commonwealth of Massachusetts to be effective. As of February 22, 1999, the
Commissioner of Banks has not yet approved the Option Plan. Until such
approval is obtained, the Option Plan will not become effective.
Purpose of the Option Plan
The Option Plan is a long-term incentive compensation plan. Its
purpose is to promote the growth and profitability of the Company by
providing its key officers, employees and directors with an "equity stake"
in the Company that will encourage them to achieve corporate goals and
increase the value of the Company and its subsidiaries. The Option Plan
will also assist the Company in attracting and retaining officers, employees
and directors of outstanding caliber and experience through future grants to
be made from the Option Plan's share reserve.
Description of the Option Plan
Administration. The Plan will be administered by the members of the
Compensation Committee who are Disinterested Directors (the "Committee").
The Committee will select the officers and employees who will receive
Options under the Option Plan. In addition, the Committee will determine,
in accordance with the provisions of the Option Plan, the specific terms of
each Option, such as the number of shares to be covered by the Option and
the time and procedure for exercising the Option. Options granted to
outside or non-employee directors under the Option Plan will be made
pursuant to "automatic formula" grant. This means that the terms of each
outside director's Option will be dictated solely by the terms of the Option
Plan. Subject to certain limitations specified in the Option Plan, the
Committee will have complete authority to interpret the provisions of the
Option Plan and to prescribe or change rules relating to its administration.
The Company will pay for all costs and expenses of administering the Option
Plan.
Stock Subject to the Option Plan. The Company has reserved a total of
257,355 shares of Common Stock ("Option Shares") for use under the Option
Plan. Each time an Option is exercised, one of the Option Shares will be
issued to the Option holder. Option Shares may be authorized and unissued
shares of the Company's Common Stock or shares previously issued and
reacquired by the Company. The Company currently plans to issue Option Shares
from shares of Common Stock held in treasury. Any Option Shares that are
subject to Options granted under the Option Plan that have expired or
terminated, or been forfeited or canceled without having been exercised or
vested in full, will be available for use under the Option Plan. As of
February 1, 1999, the aggregate fair market value of the total number of
Option Shares reserved for issuance under the Option Plan was $3,088,260,
based on the closing sales price per share of Common Stock of $12.00 on The
Nasdaq Stock Market on such date.
Eligibility. Any employee of the Company or the Bank can be selected
by the Committee to participate in the Option Plan. An employee who is
selected to participate in the Option Plan will be known as an "Eligible
Individual." As of February 1, 1999, there were fourteen Eligible
Individuals. Members of the Boards of Directors of the Company and the Bank
and Emeritus Directors who are not officers and employees, are also eligible
to participate in the Option Plan. Each of these individuals will be known
as an "Eligible Director." As of February 1, 1999, there were eight
Eligible Directors.
Awards to Outside Directors. On the Option Plan Effective Date, each
Eligible Director will receive a non-qualified stock option to purchase 10,696
shares of Common Stock. As a general rule, these Awards will vest in 20%
installments over a five year period, subject to accelerated vesting upon
certain circumstances, as described below.
Awards to Officers and Employees. As of February 1, 1999, no grants have
been made to Eligible Individuals under the Option Plan. It is the intention
of the Committee to grant the President and Chief Executive Officer, as well
as the Executive Vice President, Chief Financial Officer and Treasurer stock
options for 61,121 and 36,673 Shares of Common Stock, respectively. These
shares will also vest in 20% installments over a five year period subject to
accelerated vesting under certain circumstances, as described below. After
the Option Plan Effective Date, the Committee may, in its discretion, grant
stock options to other Eligible Individuals. The Committee will determine at
the time of the grant, the number of shares of Common Stock that will be
subject to the stock options and the vesting schedule applicable to the stock
options. At the time the stock options are granted, the Committee may, in its
discretion, establish other terms and conditions applicable to the stock
options.
Shares Reserved for Future Grant. The Company has elected to reserve
73,991 shares of Common Stock available for grant under the Option Plan for
future grant to Eligible Individuals and Eligible Individuals and Eligible
Directors. The Company believes that the establishment of this reserve will
enable it to continue to attract and retain individuals of outstanding
competence and experience by providing such individuals with an equity
interest in the Company, thereby promoting the continued profitability and
growth of the Company. The Compensation Committee will determine the persons
eligible to receive future grants and the terms and conditions of any such
future grants. No such determinations have been made as of the date of this
proxy statements.
Terms and Conditions of Options Granted to Officers and Employees.
The Option Plan provides for the grant of Options which qualify for
favorable federal income tax treatment as "incentive stock options" ("ISOs")
and for the grant of non-qualified stock options which do not so qualify
("NQSOs"). ISOs are subject to certain restrictions under the Code. These
restrictions are contained in the Option Plan document. A maximum of 171,785
Option Shares have been reserved for awards under the Option Plan to officers
and employees, as a group. Unless otherwise designated by the Committee,
Options granted under the Option Plan to Eligible Individuals will be ISOs.
Each ISO grant will be exercisable at a price per share equal to the fair
market value of a share of Common Stock on the date of the Option grant. An
ISO Option will generally be exercisable for a period of ten years after the
date of grant (or for a shorter period ending three months after the Option
holder's termination of employment for reasons other than death, disability
or discharge for cause; or one year after termination of employment due to
death or disability; and immediately upon termination for cause). In no
event may an Option be granted with an exercise price per share that is less
than the fair market value of a share of Common Stock when the Option is
granted. An Option holder's right to exercise Options will be suspended
during any period when the Option holder is the subject of a pending
proceeding to terminate his or her employment for cause. If the Option
expires during such suspension, the Company will, upon the employee's
reinstatement, pay damages equal to the value of the expired Options less
the exercise price. Options granted to Eligible Employees will also become
automatically exercisable upon a change in control of the Company, as such
term is defined in the Option Plan.
Upon the exercise of an Option, the exercise price must be paid in
full. Payment may be made in cash or in such other consideration as the
Committee deems appropriate, including, but not limited to, shares of Common
Stock already owned by the Option holder. Options may be transferred prior
to exercise only to certain family members, certain non-profit
organizations, and following the death of the Option holder.
Terms and Conditions of Options Granted to Outside Directors.
Effective on the Option Plan Effective Date, each person who is an Eligible
Director on such date will be granted a NQSO Option to purchase 10,696
Option Shares. These Options will have an exercise price equal to the fair
market value of a share of Common Stock on the date of grant and an exercise
period commencing on the date of the grant and expiring on the earliest of
(i) the date the person ceases to be an Eligible Director due to a removal
for cause (in accordance with the Bylaws of the Bank or the Company, as
applicable) and (ii) the last day of the ten-year period commencing on the
date the Option was granted. On the first December 31st following the date
the Company's stockholders approve the Option Plan and on each December 31st
of the four consecutive calendar years occurring thereafter, an Option
granted to an Eligible Director will become exercisable as to 20% of the
Option Shares as to which his outstanding Option has been granted. All
Option Shares not previously purchased or available for purchase will become
available for purchase on the date of the Option holder's death, disability,
or upon a change in control of the Company, as such terms are defined in the
Option Plan. A maximum of 85,570 Option Shares have been reserved for
awards under the Plan to outside directors, as a group.
Due to the special federal income tax rules applicable to ISOs,
Eligible Directors participating in the Option Plan may only be granted
Options that are NQSOs. Upon the exercise of a NQSO Option, the Eligible
Director will be required to pay the applicable exercise price in full. The
Option Plan permits the Eligible Director to pay the exercise price in cash
or in other consideration, such as through the tender of shares of Common
Stock already owned by the Eligible Director.
Mergers and Reorganizations; Adjustments for Extraordinary Dividends.
The number of shares available under the Option Plan and the outstanding
Options will be adjusted to reflect any merger, consolidation or business
reorganization in which the Company 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 the Company is not the surviving entity,
outstanding Options may be canceled upon 30 days' written notice to the
Option holder so long as the Option holder receives payment determined by
the Board to be the equivalent value of the canceled Options. The Option
Plan provides that the Company will make a cash payment to Option holders to
equitably reflect any extraordinary non-stock dividend that may be paid
which results in a non-taxable return of capital. No representation is made
that any such dividend will be declared or paid.
Termination or Amendment of the Option Plan
Unless sooner terminated, the Option Plan will terminate automatically
on the day preceding the tenth anniversary of the Option Plan Effective
Date. The Board may suspend or terminate the Option Plan in whole or in
part at any time prior to the tenth anniversary of the Option Plan Effective
Date by giving written notice of such suspension or termination to the
Committee. However, if the Option Plan is suspended or terminated, all
Options granted under the Plan that are outstanding on the date of the
suspension or termination will remain outstanding under the terms of the
agreements granting such Options.
The Board may amend or revise the Option Plan in whole or in part at
any time in response to regulatory comments or otherwise, but if the
amendment or revision amends a material term of the Option Plan, this
amendment will be subject to approval by the shareholders of the Company to
the extent required to comply with Section 162(m) of the Code.
Federal Income Tax Consequences
A summary of the federal tax laws, regulations and policies affecting
the Company and recipients of ISOs and NQSOs that may be granted under the
Option Plan is set forth below. It should be noted that any change in the
applicable law or regulation or in the policies of various taxing
authorities may have a material effect on this summary.
There are no federal income tax consequences for the Company or the
Option holder at the time an ISO is granted or upon the exercise of an ISO.
If there is no sale or other disposition of the shares acquired upon the
exercise of an ISO within two years after the date the ISO was granted, or
within one year after the exercise of the ISO, then at no time will any
amount be deductible by the Company with respect to the ISO. If the Option
holder exercises an ISO and sells or otherwise disposes of the shares so
acquired after satisfying the foregoing holding period requirements, then he
will realize a capital gain or loss on the sale or disposition. If the
Option holder exercises his ISO and sells or disposes of his shares prior to
satisfying the foregoing holding period requirements, then an amount equal
to the difference between the amount realized upon the sale or other
disposition of such shares and the price paid for such shares upon the
exercise of the ISO will be includable in the ordinary income of such
person, and such amount will ordinarily be deductible by the Company at the
time it is includable in such person's income.
With respect to the grant of NQSOs, there are no federal income tax
consequences for the Company or the Option holder at the date of the grant.
Upon the exercise of a NQSO, an amount equal to the difference between the
fair market value of the shares to be purchased on the date of exercise and
the aggregate purchase price of such shares is generally includable in the
ordinary income of the person exercising such NQSO, although such inclusion
may be at a later date in the case of an Option holder whose disposition of
such shares could result in liability under Section 16(b) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"). The Company will
ordinarily be entitled to a deduction for federal income tax purposes at the
time the Option holder is taxed on the exercise of the NQSO equal to the
amount which the Option holder is required to include as ordinary income.
Section 162(m) of the Code limits the Company's deductions of compensation
in excess of $1,000,000 per year for the chief executive officer and the
other executives named in its proxy statement, but provides for certain
exceptions for performance based compensation. The Company intends the
Option Plan to comply with the requirements for an exception to Section
162(m) applicable to stock option plans so that the Company's deduction for
compensation related to the exercise of stock options would not be subject
to the $1,000,000 limitation. No executive of the Company currently
receives compensation subject to this limitation.
The foregoing statements are intended to summarize the general
principles of current federal income tax law applicable to Options that may
be granted under the Option Plan. State and local tax consequences may also
be significant.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE MYSTIC FINANCIAL, INC. 1999 STOCK OPTION PLAN.
- ----------------------------------------------------------------------------
PROPOSAL 2
APPROVAL OF THE MYSTIC FINANCIAL, INC.
1999 RECOGNITION AND RETENTION PLAN
- ----------------------------------------------------------------------------
General Plan Information
The Company has adopted, subject to the approval of its stockholders
and the Commissioner of Banks of the Commonwealth of Massachusetts, the
Mystic Financial, Inc. 1999 Recognition and Retention Plan (the "RRP"). The
RRP allows the Company to grant restricted stock awards ("Awards") to
certain officers, employees and outside directors. A "restricted stock
award" constitutes a right to receive a certain number of shares of Common
Stock upon the Award holder's satisfaction of certain requirements, such as
completion of five years of service with the Company. As a general rule, if
the Award holder fails to fulfill the requirements contained in the
restricted stock award, it will not vest. Instead, the Award will be
forfeited and canceled. The RRP, like the proposed Option Plan, is not
subject to ERISA. The key terms of the RRP are summarized below. For your
convenience, a copy of the RRP is attached to this Proxy Statement and is
labeled "Appendix B."
Vote Required
The RRP must be approved by a majority of the stockholders of the
Company to be effective. Under the Company's Bylaws, if a majority of the
shares of the Company's Common Stock present and entitled to vote at the
Special Meeting vote in favor of the RRP, it will be approved by the
Company's stockholders at the Special Meeting. For purposes of this
discussion, the date that the Company's stockholders approve the RRP will be
referred to as the "RRP Effective Date." If a majority of the Company's
shareholders do not approve the RRP, it will not become effective and no
Awards may be granted to anyone.
Regulatory Approvals
The RRP must be approved by the Commissioner of Banks of the
Commonwealth of Massachusetts to be effective. As of February 22, 1999, the
Commissioner of Banks has not yet approved the RRP. Until such approval is
obtained, the RRP will not become effective.
Purpose of the RRP
The RRP is also a long-term incentive compensation plan. Its purpose
is also to promote the growth and profitability of the Company by providing
key personnel and directors with an incentive to achieve corporate
objectives. Awards granted under the RRP are also used to attract and
retain individuals of outstanding competence and to provide such individuals
with an equity interest in the Company. The RRP will also assist the
Company in attracting and retaining top-notch officers, employees and
directors through future awards to be made from the RRP's share reserve.
Description of the RRP
Administration. The members of the Compensation Committee who are
Disinterested Directors (the "Committee") will administer the RRP. The
Committee will have the authority to determine, in accordance with the terms
of the RRP, the officers and employees to whom Awards will be granted, the
number of shares subject to each Award, and the terms of such Awards, such
as the conditions that must be satisfied by the Award holder in order for
the Award to become "vested" and distributable to the Award holder. Awards
made under the RRP to outside directors will be determined by "automatic
formula" grant. As a result, the Committee will have no discretion in
determining the material terms of the Awards granted to directors. Subject
to certain restrictions contained in the RRP, the Committee will have
complete authority to interpret the RRP and to prescribe or change any rules
it may implement concerning the administration of the RRP. The Company will
pay for all costs and expenses of administering the RRP.
Stock Subject to the RRP. The Company will establish a trust ("Trust"
or "RRP Trust") and will contribute, or cause to be contributed, to the
Trust, from time to time, such amounts of money or property as the Board
may determine, in its discretion. No contributions by participants will be
permitted. A trustee ("Trustee"), to be appointed by the Company, will
invest the assets of the Trust in shares of Common Stock and in such
investments including savings accounts, time or other interest bearing
deposits in or other interest bearing obligations of the Company, in the
proportions determined by the Committee. However, the Trustee will not be
authorized to purchase more than 102,942 shares of Common Stock for the RRP.
As of February 1, 1999, the aggregate fair market value of the Common Stock
to be purchased for the RRP was $1,235,304, based on the closing sales
price per share of $12.00 on The Nasdaq Stock Market on such date. It is
currently anticipated that the Trustee will purchase shares of Common Stock
on the open market, but it may also purchase shares of Common Stock from the
Company or in private transactions.
Eligibility. Any employee of the Company or the Bank can be selected
by the Committee to participate in the RRP. Each of these individuals will
be known as an "Eligible Individual." As of February 1, 1999, there were
fourteen Eligible Individuals. Members of the Boards of Directors of the
Company and the Bank and Emeritus Directors are also eligible to participate
in the RRP. Each of these individuals will be known as an "Eligible
Directors." As of February 1, 1999, there were eight Eligible Directors.
Awards to Outside Directors. On the RRP Effective Date, each Eligible
Director with three or more years of service on the Board will receive an
Award of 4,971 shares and each Eligible Director with less than three years
of service on the Board will receive an Award of 2,200 shares. As a general
rule, these Awards will vest in 20% installments over a five year period,
subject to accelerated vesting upon certain circumstances, as described
below.
Awards to Officers and Employees. On the RRP Effective Date, the
President and Chief Executive Officer will receive an Award of 24,448 shares
and the Executive Vice President, Chief Financial Officer and Treasurer will
receive an Award of 14,668 shares. These shares will also vest in 20%
installments over a five year period subject to accelerated vesting under
certain circumstances, as described below. After the RRP Effective Date,
the Committee may, in its discretion, grant Awards of restricted stock to
other Eligible Individuals. The Committee will determine at the time of
the grant, the number of shares of Common Stock that will be subject to the
Award and the vesting schedule applicable to the Award. At the time the
Award is granted, the Committee may, in its discretion, establish other
terms and conditions applicable to the Award.
Shares Reserved for Future Awards. The Company has elected to reserve
29,600 shares of Common Stock available for award under the RRP for future
awards to Eligible Individuals and Eligible Directors. The Company believes
that the establishment of this reserve will enable it to continue to attract
and retain individuals of outstanding competence and experience by providing
such individuals with an equity interest in the Company, thereby promoting the
continued profitability and growth of the Company. The Compensation Committee
will determine the persons eligible to receive future awards and the terms and
conditions of any such future awards. No such determinations have been made
as of the date of this proxy statement.
Terms and Conditions of Awards. Stock subject to Awards will be held
in the RRP Trust, pursuant to the terms of the RRP, until the Awards become
vested. An individual who has been granted an Award will be entitled to
exercise voting rights with respect to the shares covered by the Award. In
addition, the Award holder will be eligible to receive any cash dividends
declared and paid with respect to the shares covered by the Award
regardless of whether the Award has vested. The Committee will exercise
the voting rights with respect to the shares of Common Stock held in the RRP
Trust that have not been allocated to participants under the RRP. The
Committee will direct the Trustee to exercise these voting rights in a
manner that best reflects the voting directions given by the RRP
participants for their Awards. Each Award holder will also be entitled to
direct the manner of response to any tender offer, exchange offer or other
offer made to shareholders with respect to the shares of Common Stock
covered by the Award regardless of whether the Award has vested. If the
Award holder does not give any directions in response to such offer, the
shares will not be tendered or exchanged. The Committee will direct the
Trustee to respond to any tender offer, exchange offer or other offer in a
manner that best reflects the directions given by the participants in the
RRP.
The shares covered by an Award will become vested in accordance with
the terms of the Award. As soon as practicable following the vesting of an
Award, the Trustee will transfer the shares covered by the Award to the
Award holder. As a general rule, shares covered by an Award granted to
either an Eligible Employee or an Eligible Director under the RRP will vest
at the rate of 20% per year on each December 31st following the date of
grant. The RRP does, however, provide that shares covered by the Award
will become 100% vested on the date of the recipient's death, disability or
upon a change in control of the Company (as such terms are defined in the
RRP). If an Award holder terminates employment or ceases to be a director
for reasons other than death or disability, the individual generally will
forfeit his rights to the unvested shares that were held for him in the RRP
Trust. Individuals may designate a beneficiary to receive distributions from
the RRP in the event of the Award holder's death.
Mergers and Reorganizations. The number of shares available under the
RRP and Awards granted under the RRP will be adjusted to reflect any merger,
consolidation or business reorganization in which the Company 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 the Company is not the surviving
entity, the Trustee will hold any money, stock, securities or other property
received in the trust fund, and adjusting any award by allocating such
money, stock, securities or other property to the Eligible Director or
Eligible Individual.
Termination or Amendment of the RRP
The Board may suspend or terminate the RRP in whole or in part at any
time by giving written notice of such suspension or termination to the
Committee, but the RRP may not be terminated while there are outstanding
Awards that may become vested. Upon the termination of the RRP, the Trustee
shall make distributions from the Trust in such amounts and to such persons
as the Committee may direct and shall return the remaining assets of the
Trust, if any, to the Company.
Federal Income Tax Consequences
A summary of the federal tax laws, regulations and policies affecting
the Company and recipients of Awards that may be granted under the RRP is
provided below. Any change in applicable law or regulation or in the
policies of various taxing authorities may have a material effect on the
summary provided below.
A restricted stock award granted under the RRP does not result in
federal income tax consequences to either the Company or the Award holder.
Upon the vesting of the Award and the distribution of the vested shares, the
Award holder will generally be required to include in ordinary income, for
the taxable year in which the vesting date occur, an amount equal to the
fair market value of the shares on the vesting date, and the Company will
generally be allowed to claim a deduction, for compensation expense, for the
same amount. To the extent that dividends are paid with respect to unvested
shares held under the RRP and distributed to the Award holder, such dividend
amounts will likewise be includible in the ordinary income of the recipient
and allowable as a deduction, for compensation expense, to the Company.
Section 162(m) of the Code limits the Company's deductions of compensation
in excess of $1,000,000 per year for the chief executive officer and the
other executives named in its proxy statement. No executive of the Company
currently receives compensation subject to this limitation. Compensation
amounts resulting from the award and vesting of shares will be subject to
this deduction limitation, if such amount when added to other includible
compensation exceeds $1,000,000. Dividends declared and paid with respect
to vested shares, as well as any gain or loss realized upon an Award
holder's disposition of the shares, will be treated as dividend income and
capital gain or loss, respectively, in the same manner as for other
shareholders.
The foregoing statements are intended to summarize the general
principles of current federal income tax law applicable to Awards that may
be granted under the RRP. State and local tax consequences may also be
significant.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE MYSTIC FINANCIAL, INC. 1999 RECOGNITION AND RETENTION PLAN.
NEW PLAN BENEFITS
MYSTIC FINANCIAL, INC. STOCK PLANS
----------------------------------
The following table discloses the benefits that will be received by
Eligible Directors and may be received by Eligible Employees under the
Option Plan and RRP, subject to the approval of Proposals 1 and 2 by the
shareholders and approval of the Plans by the Commissioner of Banks of the
Commonwealth of Massachusetts.
<TABLE>
<CAPTION>
Option Plan(1)(2) RRP(3)(4)
------------------ ------------------
Name/Position # $ Value # $ Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert H. Surabian, President &
Chief Executive Officer 61,121 - 24,448 $293,376
- --------------------------------------------------------------------------------------
Ralph W. Dunham, Executive Vice President,
Chief Financial Officer and Treasurer 36,673 - 14,668 $176,016
- --------------------------------------------------------------------------------------
Non-Executive Director Group 85,570 - 34,226 $410,712
- --------------------------------------------------------------------------------------
Non-Executive Employee Group(5) N/A N/A N/A N/A
- --------------------------------------------------------------------------------------
<FN>
- --------------------
<F1> As of February 1, 1999 no grants have been made under the Option Plan.
It is not determinable at this time what benefits, if any, each of the
persons or groups listed above will receive under such Plan. The
numbers in the table reflect the Committee's intentions of grants to
be made upon the Option Plan Effective Date. On the first December
31st following the date the Company's stockholders approve the Option
Plan and on each December 31st of the four consecutive calendar years
occurring thereafter, 20% of the shares subject to each Option will
become exercisable.
<F2> On the Option Plan Effective Date, each Eligible Director will receive
a NQSO Option to purchase 10,696 shares with an exercise price equal
to the fair market value of a share of Common Stock on the Option Plan
Effective Date. Such Options will expire on the earliest of the
Eligible Director's removal for cause or on the tenth anniversary of
the date of the grant.
<F3> As of February 1, 1999 no grants have been made under the RRP. It is
not determinable at this time what benefits, if any, each of the
persons or groups listed above will receive under such Plan. The
numbers in the table reflect the Committee's intentions of grants to
be made upon the RRP Effective Date. On the first December 31st
following the date the Company's stockholders approve the RRP and on
each December 31st of the four consecutive calendar years occurring
thereafter, 20% of the shares covered by each Award will become
vested and distributed to the Award holder.
<F4> On the RRP Effective Date, each Eligible Director with three or more
years of service on the Board will receive an Award of 4,971 shares
and each Eligible Director with less than three years of service on
the Board will receive an Award of 2,200 shares. The dollar value is
based on a price per share of $12.00, the closing sale price for a
share of Common Stock as reported on The Nasdaq Stock Market on
February 1, 1999. The actual value of the benefits under this Plan
will depend on the fair market value of a share on the RRP Effective
Date, which is indeterminable at this time.
<F5> The grants to be made to these individuals have not been determined at
this time.
</FN>
</TABLE>
- ----------------------------------------------------------------------------
PROPOSAL 3
AUTHORIZATION OF THE BOARD OF DIRECTORS, IN ITS DISCRETION, TO
DIRECT THE VOTE OF THE PROXIES UPON SUCH OTHER MATTERS INCIDENT
TO THE CONDUCT OF THE SPECIAL MEETING AS MAY PROPERLY COME
BEFORE THE SPECIAL MEETING, AND AT ANY ADJOURNMENT OR POSTPONEMENT
OF THE SPECIAL MEETING
- ----------------------------------------------------------------------------
The Bylaws of the Company require that the Company transact no
business and take no corporate action at a special meeting other than that
stated in the Notice of Meeting. The Board of Directors is not aware of any
other business that may properly come before the Special Meeting. The Board
seeks the authorization of the stockholders, in the event matters incident
to the conduct of the Special Meeting properly come before the meeting,
including, but not limited to, the consideration of whether to adjourn the
Special Meeting once called to order, to direct the manner in which those
shares represented at the Special Meeting by proxies solicited pursuant to
this Proxy Statement shall be voted with respect to such matters. As to all
such matters, the Board intends that it would direct the voting of such
shares in the manner the Board determines, in its discretion, and in the
exercise of its duties and responsibilities, to be in the best interests of
the Company and its stockholders, taken as a whole.
The Board of Directors unanimously recommends that stockholders
vote "For" authorization of the Board of Directors of Mystic
Financial, Inc., in its discretion, to direct the vote of the
proxies upon such other matters incident to the conduct of the
Special Meeting as may properly come before the Special Meeting,
and any adjournment or postponement thereof, including, without
limitation, a motion to adjourn the Special Meeting.
ADDITIONAL INFORMATION
Information About Stockholder Proposals
If you wish to submit proposals to be included in our 1999 proxy
statement for the 1999 Annual Meeting of Stockholders, we must receive them
by May 19, 1999, pursuant to the proxy soliciting regulations of the SEC.
SEC rules contain standards as to what stockholder proposals are required to
be in the proxy statement. Any such proposal will be subject to 17 C.F.R.
[SECTION]240.14a-8 of the rules and regulations promulgated by the SEC.
In addition, under the Company's Bylaws, if you wish to nominate a
director or bring other business before an annual meeting:
* You must be a stockholder of record and have given timely notice in
writing to the Secretary of the Company.
* Your notice must contain specific information required in our Bylaws.
By Order of the Board of Directors,
Lorraine P. Silva
Secretary
Medford, Massachusetts
February 22, 1999
- ----------------------------------------------------------------------------
To assure that your shares are represented at the Special Meeting, please
complete, sign, date and promptly return the accompanying proxy card in the
postage-paid envelope provided.
- ----------------------------------------------------------------------------
APPENDIX A
Mystic Financial, Inc.
1999 Stock Option Plan
--------------------
Adopted November 16, 1998
Effective as of March 24, 1999
TABLE OF CONTENTS
-----------------
Article I Purpose
--------- -------
Section 1.1 General Purpose of the Plan 1
Article II Definitions
---------- -----------
Section 2.1 Bank 1
Section 2.2 Beneficiary 1
Section 2.3 Board 1
Section 2.4 Change in Control 1
Section 2.5 Code 3
Section 2.6 Committee 3
Section 2.7 Company 3
Section 2.8 Disability 3
Section 2.9 Disinterested Board Member 3
Section 2.10 Effective Date 3
Section 2.11 Eligible Director 3
Section 2.12 Eligible Individual 4
Section 2.13 Exchange Act 4
Section 2.14 Exercise Price 4
Section 2.15 Fair Market Value 4
Section 2.16 Incentive Stock Option 4
Section 2.17 Non-Qualified Stock Option 4
Section 2.18 Option 4
Section 2.19 Option Period 4
Section 2.20 Person 5
Section 2.21 Plan 5
Section 2.22 Service 5
Section 2.23 Share 5
Section 2.24 Termination for Cause 5
Article III Administration
----------- --------------
Section 3.1 Committee 5
Section 3.2 Committee Action 5
Section 3.3 Committee Responsibilities 6
Article IV Stock Options
---------- -------------
Section 4.1 Available Shares 6
Section 4.2 Grants to Eligible Individuals 6
Section 4.3 Grants to Eligible Directors 8
Section 4.4 Designation of Beneficiary 9
Section 4.5 Method of Exercise 10
Section 4.6 Provisions Applicable to All Options 11
Section 4.7 Additional Provisions Relating to Incentive
Stock Options 12
Section 4.8 Required Regulatory Provisions 12
Article V Amendment and Termination
--------- -------------------------
Section 5.1 Termination 13
Section 5.2 Amendment 13
Section 5.3 Adjustments in the Event of a Business Reorganization 14
Article VI Miscellaneous
---------- -------------
Section 6.1 Status as an Employee Benefit Plan 15
Section 6.2 No Right to Continued Employment 15
Section 6.3 Construction of Language 15
Section 6.4 Governing Law 15
Section 6.5 Headings 15
Section 6.6 Non-Alienation of Benefits 16
Section 6.7 Taxes 16
Section 6.8 Required Approvals 16
Section 6.9 Notices 16
Mystic Financial, Inc.
----------------------
1999 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
the Company, to provide eligible directors and certain key executive
officers of the Company 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 the
Company.
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 Medford Co-operative Bank, a state chartered
stock savings bank, and any successor thereto.
Section 2.2 Beneficiary means the person designated by an Eligible
Director or Eligible Individual pursuant to section 4.4 to succeed to his
rights with respect to outstanding Options, in the event such Eligible
Director or Eligible Individual dies prior to exercising all Options
outstanding to him.
Section 2.3 Board means the Board of Directors of the Company.
Section 2.4 Change in Control means any of the following events:
(a) approval by the stockholders of the Company of a
transaction that would result in the 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 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, or approval by the stockholders of the Company of any
transaction which would result in such an acquisition;
(c) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such
liquidation or dissolution;
(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 of this Plan; or
(ii) individuals who first became members of the Board of
Directors of the Company after the effective date of this Plan
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 stockholders of the
Company to serve as a member of the Board of Directors of
the Company, but only if nominated for election 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 nomination;
provided, however, that such individual's election or nomination
did not result from an actual or threatened election contest
(within the meaning of Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents (within the meaning of Rule
14a-11 of Regulation 14A promulgated under the Exchange Act)
other than by or on behalf of the Board of the Company; or
(e) any event which would be described in section 2.4(a), (b),
(c) or (d) if "the Bank" were substituted for the term "the Company"
each time such term appears therein.
In no event, however, shall a Change in Control of the Company be deemed to
have occurred as a result of any acquisition of securities or assets of the
Company or the Bank by a parent or subsidiary of either of them or by any
employee benefit plan maintained by any of them. For purposes of this
section 2.4, the term "person" shall have the meaning assigned to it under
sections 13(d)(3) or 14(d)(2) of the Exchange Act.
Section 2.5 Code means the Internal Revenue Code of 1986 (including
the corresponding provisions of any succeeding law).
Section 2.6 Committee means the Committee described in section 3.1.
Section 2.7 Company means Mystic Financial, Inc. and any successor
thereto, and any direct or indirect subsidiary which, with the approval of
the Board, adopts this plan.
Section 2.8 Disability means any physical or mental impairment that
would qualify the Participant for benefits under the applicable long-term
disability plan maintained by the Company or, if no such plan is then in
effect, the Federal Social Security Act.
Section 2.9 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, either directly or indirectly, in any
capacity other than as a director; and (e) is not currently and for a period
of at least one year has not been eligible for discretionary awards under
any stock compensation plan of the Company. 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 2.10 Effective Date means March 24, 1999, subject to the
approval of the Plan by the stockholders of the Company and the Commissioner
of Banks of the Commonwealth of Massachusetts, as provided in section 6.8.
Section 2.11 Eligible Director means a member of the Board, including
a director emeritus, who is not also an employee or an officer of the
Company (or any subsidiary or affiliate thereof).
Section 2.12 Eligible Individual means any executive officer whom the
Committee may determine to be a key officer of the Company, or any
subsidiary or affiliate, and select to receive an Option under the Plan.
Section 2.13 Exchange Act means the Securities Exchange Act of 1934,
as amended (including the corresponding provisions of any succeeding law).
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 4.2 with regard to Options granted to
Eligible Individuals and section 4.3 with regard to Options granted to
Eligible Directors.
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 the OTC
Bulletin Board or 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 Incentive Stock Option means a right to purchase Shares
that (a) is granted to an Eligible Individual; (b) is designated by the
Committee to be an Incentive Stock Option; and (c) satisfies the
requirements of section 422 of the Code.
Section 2.17 Non-Qualified Stock Option means a right to purchase
Shares that (a) is granted to an Eligible Director; (b) is granted to an
Eligible Individual and is not designated by the Committee to be an
Incentive Stock Option; or (c) is granted to an Eligible Individual and does
not satisfy the requirements of section 422 of the Code.
Section 2.18 Option means either an Incentive Stock Option or a Non-
Qualified Stock Option.
Section 2.19 Option Period means the period during which an Option
may be exercised, determined in accordance with section 4.2 with regard to
Options granted to Eligible Individuals and section 4.3 with regard to
Options granted to Eligible Directors.
Section 2.20 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 2.21 Plan means the Mystic Financial, Inc. 1999 Stock Option
Plan, as amended from time to time.
Section 2.22 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, or, with respect to
any individual who is contractually bound by restrictive covenants against
competition or solicitation which operate to benefit the Company (or any
subsidiary or affiliate), performance under such covenants.
Section 2.23 Share means a share of Common Stock, par value $0.01 per
share, of the Company.
Section 2.24 Termination for Cause means termination of employment
for personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease and desist order, in
each case as measured against standards generally prevailing at the relevant
time in the savings and community banking industry.
Article III
-----------
Administration
--------------
Section 3.1 Committee.
The Plan shall be administered by a Committee consisting of the
members of the Compensation Committee of the Company who are Disinterested
Board Members. If fewer than two members of the Compensation Committee of
the Company are 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 3.2 Committee Action.
The Committee shall hold such meetings, and may make such
administrative rules and regulations, as it may deem proper. A majority of
the members of the Committee shall constitute a quorum, and the action of a
majority of the members of the Committee present at a meeting at which a
quorum is present, as well as actions taken pursuant to the unanimous
written consent of all of the members of the Committee without holding a
meeting, shall be deemed to be actions of the Committee. All actions of the
Committee shall be final and conclusive and shall be binding upon the
Company and all other interested parties. Any person dealing with the
Committee shall be fully protected in relying upon any written notice,
instruction, direction or other communication signed by the secretary of the
Committee and one member of the Committee, by two members of the Committee
or by a representative of the Committee authorized to sign the same in its
behalf.
Section 3.3 Committee Responsibilities.
Subject to the terms and conditions of the Plan and such limitations
as may be imposed from time to time by the Board, the Committee shall be
responsible for the overall management and administration of the Plan and
shall have such authority as shall be necessary or appropriate in order to
carry out its responsibilities, including, without limitation, the
authority:
(a) to interpret and construe the Plan, and to determine all
questions that may arise under the Plan as to eligibility for
participation in the Plan, the number of Shares subject to the
Options, if any, to be granted, and the terms and conditions thereof;
(b) to adopt rules and regulations and to prescribe forms for
the operation and administration of the Plan; and
(c) to take any other action not inconsistent with the
provisions of the Plan that it may deem necessary or appropriate.
Article IV
----------
Stock Options
-------------
Section 4.1 Available Shares.
Subject to section 5.3, the maximum aggregate number of Shares with
respect to which Options may be granted pursuant to the Mystic Financial,
Inc. 1999 Stock Option Plan shall be 257,355 Shares.
Section 4.2 Grants to Eligible Individuals.
(a) Subject to section 4.8 and such limitations as the Board may from
time to time impose, the number of Shares as to which an Eligible Individual
may be granted Options shall be determined by the Committee, in its
discretion. In no event, however, shall any single Eligible Individual be
granted Options representing in the aggregate the right to purchase more
than 171,785 Shares.
(b) The price per Share at which an Option granted to an Eligible
Individual may be exercised 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.
(c) Subject to section 4.8, the Option Period during which an Option
granted to an Eligible Individual 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:
(i) the close of business on the last day of the three-month
period commencing on the date of the Eligible Individual's termination
of Service, other than on account of death, Disability 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 Individual's termination
of Service due to death or Disability;
(iii) the date and time when the Eligible Individual ceases to
be an employee of the Company (and all subsidiaries and affiliates
thereof) 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.
(d) Each Option granted hereunder shall become exercisable in
accordance with a schedule as prescribed by the Committee when the Option is
granted; provided, however, that each Option granted to an Eligible
Individual on the Effective Date shall become exercisble as follows:
(i) on and after the first December 31st immediately following
the Effective Date, the Option may be exercised as to a maximum of
twenty percent (20%) of the Shares subject to the Option when granted;
(ii) on and after the second December 31st, but prior to the
third December 31st, immediately following the Effective Date, the
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;
(iii) on and after the third December 31st, but prior to the
fourth December 31st, immediately following the Effective Date, the
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;
(iv) on or after the fourth December 31st, but prior to the
fifth December 31st, immediately following the Effective Date, the
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;
(v) on and after the fifth December 31st immediately following
the Effective Date, the 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 prior to the
date on which the Option holder terminates Service with the Company, 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 or Disability; and provided, further, that, such an
Option shall also become fully exercisable on the effective date of any
Change in Control.
Section 4.3 Grants to Eligible Directors.
(a) On the Effective Date, each Person who is then an Eligible
Director shall be granted an Option to purchase 10,696 Shares.
(b) The price per Share at which an Option granted to an Eligible
Director under this section 4.3 may be exercised shall be the Fair Market
Value of a Share on the date on which the Option is granted.
(c) Subject to section 4.8, the Option Period during which an Option
granted to an Eligible Director under this section 4.3 may be exercised
shall commence on the date the Option is granted and shall expire on the
earlier of:
(i) removal for cause in accordance with the Company's bylaws;
or
(ii) the last day of the ten-year period commencing on the date
on which the Option was granted.
(d) During the Option Period, the maximum number of Shares as to
which an outstanding Option granted pursuant to section 4.3(a) may be
exercised shall be as follows:
(i) on and after the first December 31st immediately following
the Effective Date, the Option may be exercised as to a maximum of
twenty percent (20%) of the Shares subject to the Option when granted;
(ii) on and after the second December 31st, but prior to the
third December 31st, immediately following the Effective Date, the
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;
(iii) on and after the third December 31st, but prior to the
fourth December 31st, immediately following the Effective Date, the
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;
(iv) on or after the fourth December 31st, but prior to the
fifth December 31st, immediately following the Effective Date, the
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;
(v) on and after the fifth December 31st immediately following
the Effective Date, the 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 prior
to the date on which the Option holder terminates Service with the
Company (and all subsidiaries and affiliates thereof), 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 or Disability; and provided, further,
that, such an Option shall also become fully exercisable on the
effective date of any Change in Control.
Section 4.4 Designation of Beneficiary.
An Eligible Director or Eligible Individual who has received an Option
may designate a Beneficiary to receive any Options that are outstanding to
the Eligible Director or Eligible Individual on 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
Individual dies prior to the Eligible Director or Eligible Individual, or in
the event that no Beneficiary has been designated, any Options that are
outstanding to the Eligible Director or Eligible Individual on the date of
his death shall be paid to the executor or administrator of the Eligible
Director's or Eligible Individual's estate or other fiduciary appointed or
authorized by a court of competent jurisdiction to collect this asset. If
no court proceeding to initiate the administration or settlement of the
estate has been brought within one year after the death of the Eligible
Individual or Eligible Director and if no such executor or administrator or
other person is appointed within such time as the Committee, in its sole
discretion, shall deem reasonable (but in no event earlier than one year
after such death), any such outstanding Options of such deceased person
shall be paid to one or more of the spouse and descendants and blood
relatives of such deceased person as the Committee may select.
Section 4.5 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
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
shall be 100, or, if less, the total number of Shares relating to the Option
that are then available for purchase. 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 4.5(b), for the Shares as to which the Option is to be
exercised; and
(iii) satisfying such other conditions as may be prescribed in
the Option agreement.
(b) The Exercise Price of Shares to be purchased upon exercise of any
Option shall be paid in full in cash (by certified or bank check or such
other instrument as the Company may accept) or, if and to the extent
permitted by the Committee, by one or more of the following: (i) in the
form of Shares already owned beneficially by the Option holder for a period
of more than six months having an aggregate Fair Market Value on the date
the Option is exercised equal to the aggregate Exercise Price to be paid;
(ii) by requesting the Company to cancel without payment Options outstanding
to such Person for that number of Shares whose aggregate Fair Market Value
on the date of exercise, when reduced by their aggregate Exercise Price,
equals the aggregate Exercise Price of the Options being exercised; or (iii)
by a combination thereof; provided, however, that an election under section
4.5(b)(ii) or (iii) shall be subject to the conditions and limitations of
Rule 16b-3 promulgated under the Exchange Act. 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.
(c) When the requirements of section 4.5(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 5.3.
Section 4.6 Provisions Applicable to All Options.
(a) Any Option granted under the Plan shall be evidenced by a written
agreement which shall:
(i) designate the Option as either an Incentive Stock Option or
a Non-Qualified Stock Option;
(ii) specify the number of Shares covered by the Option;
(iii) specify the Exercise Price for the Shares subject to the
Option;
(iv) specify the Option Period;
(v) set forth specifically or incorporate by reference the
applicable provisions of the Plan; and
(vi) contain such other terms and conditions not inconsistent
with the Plan as the Committee may, in its discretion, prescribe.
(b) An Option by its terms shall not be transferable by the Option
holder other than 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; provided, however, that notwithstanding any provisions of
this Plan to the contrary, and if permitted by the Committee, an option
which is not an Incentive Stock Option may be transferred by, and only by,
the person to whom the Option was originally granted to (i) one or more of
his spouse, children and grandchildren, or (ii) one or more trusts for the
benefit of himself and/or one or more of the foregoing individuals. 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.
(c) 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.
Section 4.7 Additional Provisions Relating to Incentive
Stock Options.
In addition to the limitations of section 4.6, an Option designated by
the Committee to be an Incentive Stock Option shall be subject to the
following additional provisions:
(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 Individual 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 Individual 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) If an Option intended to be an Incentive Stock Option is
not exercised within the three-month period commencing on the date of
the Eligible Individual's termination of employment with the Company
(and all parents, subsidiaries and affiliates thereof) for reasons
other than death or Disability, such Option shall thereafter be deemed
to be a Non-Qualified Stock Option, with the same terms as the
original Option which was intended to be an Incentive Stock Option.
Section 4.8 Required Regulatory Provisions.
Notwithstanding anything contained herein to the contrary:
(a) No Option shall be granted under the Plan prior to the date on
which the Plan is approved by the requisite vote of holders of Shares.
(b) No Eligible Individual may be granted Options to purchase more
than 171,785 Shares.
(c) No Option granted hereunder, whether or not previously vested,
shall be exercised after the time and date at which the Option holder's
employment with the Company is terminated in a Termination for Cause or
after the time and date at which the Option holder is removed from the Board
in accordance with the Company's bylaws.
(d) The effectiveness of the Option Plan shall be conditioned upon
its approval by the Commissioner of Banks of the Commonwealth of
Massachusetts.
Article V
---------
Amendment and Termination
-------------------------
Section 5.1 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 5.2 Amendment.
The Board may amend or revise the Plan in whole or in part at any
time; provided, however, that if the amendment or revision:
(a) materially increases the benefits accruing under the Plan;
(b) materially increases the number of Shares which may be
issued under the Plan; or
(c) materially modifies the requirements as to eligibility for
Options under the Plan;
such amendment or revision shall be subject to approval by the shareholders
of the Company; and provided, further, that no amendment required to comply
with or conform to any condition imposed under section 162(m) of the Code on
federal income tax deductions allowable to the Company in respect of the
Plan shall require such approval.
Section 5.3 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 pursuant to section 4.1 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 (whether or not exercisable)
may be canceled as of the effective date of such merger, consolidation or
business reorganization by the Committee upon 30 days' written notice to the
Option holder; provided, however, that on or as soon as practicable
following the date of cancellation, each Option holder shall receive a
monetary payment in such amount, or other property of such kind and value,
as the Committee determines in good faith to be equivalent in value to the
Options that have been canceled.
(c) In the event that the Company shall declare and pay any dividend
with respect to Shares (other than a dividend payable in Shares or a regular
quarterly cash dividend), including a dividend which results in a nontaxable
return of capital to the holders of Shares for federal income tax purposes,
or otherwise than by dividend makes distribution of property to the holders
of its Shares, then either:
(i) the Company shall make an equivalent payment to each person
holding an outstanding Option as of the record date for such dividend.
Such payment shall be made at substantially the same time, in
substantially the same form and in substantially the same amount per
optioned Share as the dividend or other distribution paid with respect
to outstanding Shares; provided, however, that if any dividend or
distribution on outstanding Shares is paid in property other than
cash, the Company, in its discretion, may make such payment in a cash
amount per optioned Share equal in fair market value to the fair
market value of the non-cash dividend or distribution; or
(ii) the Committee, in its discretion, may adjust the Exercise
Price per Share of outstanding Options in such a manner as the
Committee may determine to be necessary to reflect the effect of the
dividend or other distribution on the Fair Market Value of a Share.
The Committee, in its discretion, may choose to apply section 5.3(c)(i) to
some outstanding Options and section 5.3(c)(ii) to other outstanding
Options.
Article VI
----------
Miscellaneous
-------------
Section 6.1 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 6.2 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 Individual any right to a
continuation of employment by the Company or upon any Eligible Director any
right to a continuation of his position as a director of the Company. The
Company reserves the right to dismiss any Eligible Individual or remove any
Eligible Director or otherwise deal with any Eligible Individual or Eligible
Director to the same extent that it could if the Plan had not been adopted.
Section 6.3 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 6.4 Governing Law.
The Plan shall be construed, administered and enforced according to
the federal laws of the United States of America and, in the absence of
controlling federal law, according to the internal laws of the Commonwealth
of Massachusetts applicable to contracts entered into between citizens and
residents of the Commonwealth of Massachusetts to be performed wholly within
the borders of such State.
Section 6.5 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 6.6 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 6.7 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 amount required to be withheld.
Section 6.8 Required Approvals.
(a) The Plan and all Options granted hereunder shall be conditioned
on the approval of the Plan by the majority of the votes eligible to be cast
by holders of Shares of the Company at a lawful meeting of shareholders. No
Option under the Plan shall be granted, nor shall any such Option be
exercised or any Shares issued or purchased, prior to such approval.
(b) The effectiveness of this Plan shall be conditioned upon its
approval by the Commissioner of Banks of the Commonwealth of Massachusetts.
Section 6.9 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:
Compensation Committee of the Board of Directors
Mystic Financial, Inc.
60 High Street
Medford, Massachusetts 02155
(b) If to an Option holder, to the Option holder's address as
shown in the Company's personnel records.
APPENDIX B
Mystic Financial, Inc.
1999 Recognition and Retention Plan
--------------------
Adopted on November 16, 1998
Effective as of March 24, 1999
TABLE OF CONTENTS
-----------------
Page
----
Article I
---------
Purpose
-------
Section 1.1 General Purpose of the Plan 1
Article II Definitions
---------- -----------
Section 2.1 Award 1
Section 2.2 Award Date 1
Section 2.3 Bank 1
Section 2.4 Beneficiary 1
Section 2.5 Board 1
Section 2.6 Change in Control 2
Section 2.7 Code 3
Section 2.8 Committee 3
Section 2.9 Company 3
Section 2.10 Disability 3
Section 2.11 Disinterested Board Member 4
Section 2.12 Effective Date 4
Section 2.13 Eligible Director 4
Section 2.14 Eligible Individual 4
Section 2.15 Exchange Act 4
Section 2.16 Person 4
Section 2.17 Plan 4
Section 2.18 Service 4
Section 2.19 Share 4
Section 2.20 Trust 4
Section 2.21 Trust Agreement 5
Section 2.22 Trust Fund 5
Section 2.23 Trustee 5
Article III
------------
Shares Available Under Plan
---------------------------
Section 3.1 Shares Available Under Plan 5
Article IV
-----------
Administration
--------------
Section 4.1 Committee 5
Section 4.2 Committee Action 5
Section 4.3 Committee Responsibilities 6
Article V The Trust Fund
--------- --------------
Section 5.1 Contributions 6
Section 5.2 The Trust Fund 6
Section 5.3 Investments 7
Article VI Awards
---------- ------
Section 6.1 To Eligible Directors 7
Section 6.2 To Eligible Individuals 7
Section 6.3 Awards in General 7
Section 6.4 Share Allocations 8
Section 6.5 Dividend Rights 8
Section 6.6 Voting Rights 8
Section 6.7 Tender Offers 9
Article VII Vesting and Distribution of Shares
----------- ----------------------------------
Section 7.1 Vesting of Shares Granted to Eligible Directors 9
Section 7.2 Vesting of Shares Granted to Eligible Individuals 9
Section 7.3 Designation of Beneficiary 10
Section 7.4 Manner of Distribution 10
Section 7.5 Taxes 11
Article VIII Amendment and Termination
------------ -------------------------
Section 8.1 Termination 11
Section 8.2 Amendment 11
Section 8.3 Adjustments in the Event of a Business Reorganization 11
Article IX Miscellaneous
---------- -------------
Section 9.1 Status as an Employee Benefit Plan 12
Section 9.2 No Right to Continued Employment 12
Section 9.3 Construction of Language 12
Section 9.4 Governing Law 12
Section 9.5 Headings 13
Section 9.6 Non-Alienation of Benefits 13
Section 9.7 Taxes 13
Section 9.8 Required Approvals 13
Section 9.9 Notices 13
Mystic Financial, Inc.
1999 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
the Company and to provide eligible directors and certain key officers of
the Company and its affiliates with an incentive to achieve corporate
objectives, to attract and retain eligible directors and key officers of
outstanding competence and to provide such directors and officers with an
equity interest in the Company.
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 Individual.
Section 2.2 Award Date means, with respect to a particular Award, the
date specified by the Committee in the notice of the Award issued to the
Eligible Director or Eligible Individual by the Committee.
Section 2.3 Bank means Medford Co-operative Bank, a state chartered
stock savings bank, and any successor thereto.
Section 2.4 Beneficiary means the person designated by an Eligible
Director or Eligible Individual pursuant to section 7.3 to receive
distribution of any Shares available for distribution to such Eligible
Director or Eligible Individual, in the event such Eligible Director or
Eligible Individual dies prior to receiving distribution of such Shares.
Section 2.5 Board means the Board of Directors of Mystic Financial, Inc.
Section 2.6 Change in Control means any of the following events:
(a) approval by the stockholders of Mystic Financial, Inc. of a
transaction that would result in the reorganization, merger or
consolidation of Mystic Financial, Inc. 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 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 Mystic Financial, Inc.; 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 Mystic Financial, Inc.;
(b) the acquisition of all or substantially all of the assets
of Mystic Financial, Inc. or beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of
the outstanding securities of Mystic Financial, Inc. entitled to vote
generally in the election of directors by any person or by any persons
acting in concert, or approval by the stockholders of Mystic
Financial, Inc. of any transaction which would result in such an
acquisition;
(c) a complete liquidation or dissolution of Mystic Financial,
Inc., or approval by the stockholders of Mystic Financial, Inc. of a
plan for such liquidation or dissolution;
(d) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board of Directors of Mystic
Financial, Inc. do not belong to any of the following groups:
(i) individuals who were members of the Board of
Directors of Mystic Financial, Inc. on the effective date of
this Plan; or
(ii) individuals who first became members of the Board of
Directors of Mystic Financial, Inc. after the effective date of
this Plan either:
(A) upon election to serve as a member of the Board
of Directors of Mystic Financial, Inc. 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 stockholders of Mystic
Financial, Inc. to serve as a member of the Board of
Directors of Mystic Financial, Inc., but only if nominated
for election 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 nomination;
provided, however, that such individual's election or nomination
did not result from an actual or threatened election contest
(within the meaning of Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents (within the meaning of Rule
14a-11 of Regulation 14A promulgated under the Exchange Act)
other than by or on behalf of the Board of Mystic Financial,
Inc.; or
(e) any event which would be described in section 2.6(a), (b),
(c) or (d) if the term "Medford Co-operative Bank" were substituted
for the term "Mystic Financial, Inc." therein.
In no event, however, shall a Change in Control of Mystic Financial, Inc. be
deemed to have occurred as a result of any acquisition of securities or
assets of Mystic Financial, Inc. or the Bank by a parent or 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 Mystic Financial, Inc. and any successor
thereto and Medford Co-operative Bank and any successor thereto, and any
direct or indirect subsidiary of either of them which, with the approval of
the Board of Directors of Mystic Financial, Inc., adopts this Plan.
Section 2.10 Disability means any physical or mental impairment that
would qualify the Participant for benefits under the applicable long-term
disability plan maintained by the Company or, if no such plan is then in
effect, the Federal Social Security Act.
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) 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, either directly or indirectly, in any
capacity other than as a director; and (e) is not currently and for a period
of at least one year has not been eligible for discretionary awards under
any stock compensation plan of the Company. 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 2.12 Effective Date means March 24, 1999, subject to the
approval of the stockholders of Mystic Financial, Inc. and the Commissioner
of Banks of the Commonwealth of Massachusetts, as provided in section 9.8.
Section 2.13 Eligible Director means a member of the Board, including
a director emeritus, who is not also an employee of the Company (or any
subsidiary or affiliate thereof).
Section 2.14 Eligible Individual means any executive officer whom the
Committee may determine to be a key officer of the Company (or any
subsidiary or affiliate) and select to receive an Award pursuant to the
Plan.
Section 2.15 Exchange Act means the Securities and Exchange Act of
1934, as amended (including the corresponding provisions of any succeeding
law).
Section 2.16 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 2.17 Plan means the Mystic Financial, Inc. 1999 Recognition
and Retention Plan, as amended from time to time.
Section 2.18 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, or, with respect to
any individual who is contractually bound by restrictive covenants against
competition or solicitation which operate to benefit the Company (or any
subsidiary or affiliate), performance under such covenants.
Section 2.19 Share means a share of common stock of the Company, par
value $0.01 per share.
Section 2.20 Trust means the legal relationship created by the Trust
Agreement pursuant to which the Trustee holds the Trust Fund in trust. The
Trust may be referred to as the "Recognition and Retention Plan Trust of
Mystic Financial, Inc."
Section 2.21 Trust Agreement means the agreement between Mystic
Financial, Inc. and the Trustee therein named or its successor pursuant to
which the Trust Fund shall be held in trust.
Section 2.22 Trust Fund means the corpus (consisting of contributions
paid over to the Trustee, and investments therein), and all earnings,
appreciations or additions thereof and thereto, held by the Trustee under
the Trust Agreement in accordance with the Plan, less any depreciation
thereof and any payments made therefrom pursuant to the Plan.
Section 2.23 Trustee means the Trustee of the Trust Fund from time to
time in office. The Trustee shall serve as Trustee until it is removed or
resigns from office and is replaced by a successor Trustee or Trustees
appointed by Mystic Financial, Inc.
Article III
-----------
Shares Available Under Plan
---------------------------
Section 3.1 Shares Available Under Plan.
The maximum number of Shares available for Awards under the Plan shall
be 102,942. Such Shares may be authorized but unissued Shares or treasury
Shares purchased from the Company or they may be outstanding Shares
purchased from other holders.
Article IV
----------
Administration
--------------
Section 4.1 Committee.
The Plan shall be administered by the members of the Compensation
Committee of the Company who are Disinterested Board Members. If the
Committee consists of fewer than two Disinterested Board Members, then the
Board shall appoint to the Committee such additional Disinterested Board
Members as shall be necessary to provide for a Committee consisting of at
least two Disinterested Board Members.
Section 4.2 Committee Action.
The Committee shall hold such meetings, and may make such
administrative rules and regulations, as it may deem proper. A majority of
the members of the Committee shall constitute a quorum, and the action of a
majority of the members of the Committee present at a meeting at which a
quorum is present, as well as actions taken pursuant to the unanimous
written consent of all of the members of the Committee without holding a
meeting, shall be deemed to be actions of the Committee. All actions of the
Committee shall be final and conclusive and shall be binding upon the
Company and all other interested parties. Any person dealing with the
Committee shall be fully protected in relying upon any written notice,
instruction, direction or other communication signed by the Secretary of the
Committee and one member of the Committee, by two members of the Committee
or by a representative of the Committee authorized to sign the same in its
behalf.
Section 4.3 Committee Responsibilities.
Subject to the terms and conditions of the Plan and such limitations
as may be imposed by the Board, the Committee shall be responsible for the
overall management and administration of the Plan and shall have such
authority as shall be necessary or appropriate in order to carry out its
responsibilities, including, without limitation, the authority:
(a) to interpret and construe the Plan, and to determine all
questions that may arise under the Plan as to eligibility for Awards
under the Plan, the amount of Shares, if any, to be granted pursuant
to an Award, and the terms and conditions of such Award;
(b) to adopt rules and regulations and to prescribe forms for
the operation and administration of the Plan; and
(c) to take any other action not inconsistent with the
provisions of the Plan that it may deem necessary or appropriate.
Article V
---------
The Trust Fund
--------------
Section 5.1 Contributions.
The Company shall contribute, or cause to be contributed, to the
Trust, 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 Individuals shall be permitted.
Section 5.2 The Trust Fund.
The Trust Fund shall be held and invested under the Trust Agreement
with the Trustee. The Trust Agreement shall include provisions conferring
powers on the Trustee as to the 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 Trustee at any time in office.
Section 5.3 Investments.
The Trustee shall invest the Trust Fund in Shares and in such other
investments as may be permitted under the Trust Agreement, including savings
accounts, time or other interest bearing deposits in, or other interest
bearing obligations of, Medford Co-operative Bank, in such proportions as
shall be determined by the Committee; provided, however, that in no event
shall the Trust Fund be used to purchase more than 102,942 Shares.
Notwithstanding the immediately preceding sentence, the Trustee may
temporarily invest the Trust Fund in short-term obligations of, or
guaranteed by, the U.S. Government or an agency thereof, or the Trustee may
retain the Trust Fund uninvested or may sell assets of the Trust Fund to
provide amounts required for purposes of the Plan.
Article VI
----------
Awards
------
Section 6.1 To Eligible Directors.
On the Effective Date, each Person who is then an Eligible Director
and has completed at least three years of Service as of such Date shall be
granted an Award of 4,971 Shares. On the Effective Date, each Person who is
then an Eligible Director and has completed less than three years of Service
as of such Date shall be granted an Award of 2,200 shares.
Section 6.2 To Eligible Individuals.
(a) On the Effective Date, the Person who then holds the position of
President and Chief Executive Officer of the Company shall be an Eligible
Individual and shall be granted an Award of 24,448 Shares. In addition, on
the Effective Date, the Person who is then holding the position of Chief
Financial Officer of Company shall be an Eligible Individual and shall be
granted an Award of 14,668 Shares.
(b) Subject to such limitations as the Board may from time to time
impose, the number of Shares as to which an Eligible Individual may be
granted an Award shall be determined by the Committee in its discretion.
Section 6.3 Awards in General.
Any Award shall be evidenced by a written notice issued by the
Committee to the Eligible Director or Eligible Individual, which notice
shall:
(a) specify the number of Shares covered by the Award;
(b) specify the Award Date;
(c) specify the dates on which such Shares shall become
available for distribution to the Eligible Director or Eligible
Individual; and
(d) contain such other terms and conditions not inconsistent
with the Plan as the Board may, in its discretion, prescribe.
Section 6.4 Share Allocations.
Upon the grant of an Award to an Eligible Director or Eligible
Individual, the Committee shall notify the Trustee 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 Trustee shall reflect that such number of Shares are being
held for the benefit of the Award recipient.
Section 6.5 Dividend Rights.
Any dividends or distributions declared and paid with respect to
Shares shall be held in the Trust Fund. If, as of the record date for such
dividend or distribution, the Shares with respect to which it is paid are
allocated to an Eligible Director or Eligible Individual in connection with
an Award, the dividends or distributions shall be distributed as soon as
administratively feasible to the holder of the Award.
Section 6.6 Voting Rights.
(a) Each Eligible Director or Eligible Individual to whom an Award
has been made that is not fully vested shall have the right to direct the
manner in which all voting rights appurtenant to the Shares related to such
Award will be exercised while such Shares are held in the Trust Fund. Such
a direction shall be given by completing and filing, with the inspector of
elections, the Trustee or such other person as the Committee shall
designate, a written direction in the form and manner prescribed by the
Committee. If no such direction is given by an Eligible Director or
Eligible Individual, then the voting rights appurtenant to the Shares
allocated to him shall not be exercised.
(b) To the extent that the Trust Fund contains Shares that are not
allocated in connection with an Award, all voting rights appurtenant to such
Shares shall be exercised by the Trustee in such manner as the Committee
shall direct to reflect the voting directions given by Eligible Director or
Eligible Individuals 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 Individual, all annual reports, proxy
materials and other information furnished by the Company, or by any proxy
solicitor, to the holders of Shares.
Section 6.7 Tender Offers.
(a) Each Eligible Director or Eligible Individual to whom an Award
has been made that is not fully vested shall have the right to direct, with
respect to the Shares related to such Award, the manner of response to any
tender offer, exchange offer or other offer made to the holders of Shares.
Such a direction shall be given by completing and filing, with the inspector
of elections, the Trustee or such other person 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 Individual, then the Shares shall not be tendered or
exchanged.
(b) To the extent that the Trust 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 Trustee in
such manner as the Committee shall direct to reflect the responses given by
Eligible Director or Eligible Individuals 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 Individual, all information furnished by the
offeror to the holders of Shares.
Article VII
-----------
Vesting and Distribution of Shares
----------------------------------
Section 7.1 Vesting of Shares Granted to Eligible Directors.
The Shares subject to each Award granted to Eligible Directors under
the Plan shall vest over a five year period, with 20% of the Shares covered
by the Award to vest annually, over a five consecutive year period, on
December 31st of each such year and with the first scheduled vesting date to
occur on the first December 31st immediately following the Effective Date;
provided, however, an Award shall become 100% vested, and all Shares not
previously vested shall be distributed, upon the Award holder's death or
Disability or on the effective date of any Change in Control.
Section 7.2 Vesting of Shares Granted to Eligible Individuals.
Each Award to an Eligible Individual made under the Plan shall become
vested at the times and upon the conditions specified by the Committee in
the Award notice, or, if not specified, the Shares subject to the Award
shall vest over a five year period, with 20% of the Shares covered by the
Award to vest annually, over a five consecutive year period, on December
31st of each such year and with the first scheduled vesting date to occur on
the first December 31st immediately following the Effective Date; provided,
however, an Award shall become 100% vested, and all Shares not previously
vested shall be distributed, on the date of the Award holder's death,
Disability or on the effective date of any Change in Control.
Section 7.3 Designation of Beneficiary.
An Eligible Director or Eligible Individual 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
Individual dies prior to the Eligible Director or Eligible Individual, 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 Individual's death shall be paid to the executor or
administrator of the Eligible Director's or Eligible Individual's estate or
other fiduciary appointed or authorized by a court of competent jurisdiction
to collect this asset. If no court proceeding to initiate the
administration or settlement of the estate has been brought within one year
after the death of the Eligible Individual or Eligible Director and if no
such executor or administrator or other person is appointed within such time
as the Committee, in its sole discretion, shall deem reasonable (but in no
event earlier than one year after such death), any such undistributed Shares
of such deceased person shall be paid to one or more of the spouse and
descendants and blood relatives of such deceased person as the Committee may
select.
Section 7.4 Manner of Distribution.
(a) As soon as practicable following the date any Shares granted
pursuant to an Award become vested pursuant to sections 7.1 and 7.2, 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 Trustee to
the Award holder and shall cause the Trustee to distribute to the Award
holder all property other than Shares then being held in connection with the
Shares being distributed.
(b) 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 Individual 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 7.5 Taxes.
The Company, the Committee or the Trustee 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.
Article VIII
------------
Amendment and Termination
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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 Trustee shall make distributions from the Trust
Fund in such amounts and to such persons as the Committee may direct and
shall return the remaining assets of the Trust Fund, if any, to the Company.
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 shall authorize the issuance
of additional Shares under the Plan without the approval of the shareholders
of the Company to the extent required by law; and provided, further, that no
such amendment shall adversely affect the rights of any person in or with
respect to any Award granted hereunder prior to the date on which such
amendment is adopted or made effective, whichever is later.
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 in Control) 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 held in the Trust Fund, including Shares covered by Awards, 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; 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 (including but not limited to a Change in Control) in which
the Company is not the surviving entity, the Trustee shall hold in the
Trust 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 Individual shall be
adjusted by allocating to the Eligible Director or Eligible Individual
receiving such Award the amount of money, stock, securities or other
property received by the Trustee for the Shares allocated to such Eligible
Director or Eligible Individual without any other change in the terms and
conditions of the Award.
Article IX
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Miscellaneous
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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
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 Individual any right to a
continuation of employment by the Company or upon any Eligible Director any
right to a continuation of his position as a director of the Company. The
Company reserves the right to dismiss any Eligible Individual or remove any
Eligible Director or otherwise deal with any Eligible Individual or Eligible
Director to the same extent that it could if 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, administered and enforced according to
the federal laws of the United States of America and, in the absence of
controlling federal law, according to the internal laws of the Commonwealth
of Massachusetts applicable to contracts entered into between citizens and
residents of the Commonwealth of Massachusetts to be performed wholly within
the borders of such State.
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.
Section 9.7 Taxes.
Mystic Financial, Inc. shall have the right to deduct from all amounts
paid and property distributed with respect to an Award under the Plan any
taxes required by law to be withheld with respect to such Award, or require
the person to whom such cash or property is paid or distributed to pay
Mystic Financial, Inc. the amount of any tax which Mystic Financial, Inc. is
required to withhold with respect to such payment or distribution, or, in
lieu thereof, to retain, or to sell without notice, a sufficient number of
Shares to cover the amount required to be withheld.
Section 9.8 Required Approvals.
(a) The Plan and all Awards granted hereunder shall be conditioned on
the approval of the Plan by the majority of the votes eligible to be cast by
holders of Shares of the Company at a lawful meeting of shareholders. No
Award under the Plan shall be effective prior to such approval.
(b) The effectiveness of this Plan shall be conditioned upon its
approval by the Commission of Banks of the Commonwealth of Massachusetts.
Section 9.9 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:
Compensation Committee of the Board of Directors
Mystic Financial, Inc.
60 High Street
Medford, Massachusetts 02155
(b) If to an Award recipient, to the Award recipient's address
as shown in the personnel records of Mystic Financial, Inc.
Mystic Financial, Inc. REVOCABLE PROXY
This Proxy is solicited on behalf of the Board of Directors
of Mystic Financial, Inc. for the Special Meeting of Stockholders
to be held on March 24, 1999.
The undersigned stockholder of Mystic Financial, Inc. hereby appoints
Richard M. Kazanjian, John J. McGlynn and Robert H. Surabian, each of them,
with full powers of substitution, to represent and to vote as proxy, as
designated, all shares of common stock of Mystic Financial, Inc. held of
record by the undersigned on February 5, 1998, at the Special Meeting of
Stockholders (the "Special Meeting") to be held at 10:00 a.m., Eastern Time,
on March 24, 1999, or at any adjournment or postponement thereof, upon the
matters described in the accompanying Notice of the Special Meeting of
Stockholders and Proxy Statement, dated February 22, 1999, and upon such
other matters as may properly come before the Special 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 Proposals 1, 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 of Mystic Financial, Inc. unanimously recommends a
vote "FOR" the proposals in Items 1, 2 and 3.
I Will Attend Special Meeting. [ ]
Please Mark Your Choice Like This in Blue or Black Ink. [X]
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1. Approval of the Mystic Financial, Inc. 1999 Stock Option Plan.
For Against Abstain
[ ] [ ] [ ]
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2. Approval of the Mystic Financial, Inc. 1999 Recognition and Retention
Plan.
For Against Abstain
[ ] [ ] [ ]
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3. Authorization of the Board of Directors, in its discretion, to
direct the vote of proxies upon such matters incident to the conduct of the
Special Meeting as may properly come before the Special Meeting, and any
adjournment or postponement thereof, including, without limitation, a motion
to adjourn the Special Meeting.
For Against Abstain
[ ] [ ] [ ]
- ----------------------------------------------------------------------------
The undersigned hereby acknowledges receipt of the Notice of Special Meeting
of Stockholders and the Proxy Statement for the Special Meeting.
- ----------------------------------------------------------------------------
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Signature(s)
Dated: , 1999
---------------------------------------------------------------
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.
