SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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Mystic, Financial, Inc.
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Mystic Financial Logo
September 12, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders of Mystic Financial, Inc., the holding company for Medford Co-
operative Bank, Medford, Massachusetts, which will be held on October 18,
2000 at The Medford Co-operative Bank, 201 Salem Street, Medford,
Massachusetts, at 10:00 a.m. Eastern Time (the "Annual Meeting").
The attached Notice of the 2000 Annual Meeting of Stockholders and
Proxy Statement describes the formal business to be transacted at the
Annual Meeting. Directors and officers of Mystic Financial will be present
at the Annual Meeting to report on the business of Mystic Financial and
Medford Co-operative Bank and to answer questions.
The Board of Directors of Mystic Financial has determined that an
affirmative vote on each matter to be considered at the Annual Meeting is
in the best interests of Mystic Financial 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 Annual Meeting. Your vote is
important regardless of the number of shares you own. Voting by proxy will
not prevent you from voting in person at the Annual Meeting but will assure
that your vote is counted if you are unable to 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.
Sincerely yours,
/s/ John J. McGlynn
John J. McGlynn
Chairman of the Board
MYSTIC FINANCIAL, INC.
60 HIGH STREET
MEDFORD, MASSACHUSETTS 02155
(781) 395-2800
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
At the 2000 Annual Meeting, we will ask you to:
* Elect two directors to serve for a term of three years. The
following two directors are the Board of Directors' nominees:
John J. McGlynn Robert H. Surabian
* Ratify the appointment of Wolf & Company, P.C. as our
independent auditors for the fiscal year ending June 30, 2001;
and
* Transact any other business as may properly come before the
Annual Meeting.
You may vote at the Annual Meeting if you were a stockholder of
Mystic Financial at the close of business on August 24, 2000, the record
date.
By Order of the Board of Directors,
/s/ Lorraine P. Silva
Lorraine P. Silva
Secretary
Medford, Massachusetts
September 12, 2000
You are cordially invited to attend the Annual Meeting. It is important
that your shares be represented regardless of the number of shares you own.
The Board of Directors urges you to sign, date and mark the enclosed proxy
card promptly and return it in the enclosed envelope. Returning the proxy
card will not prevent you from voting in person if you attend the Annual
Meeting.
GENERAL INFORMATION
General
We have sent you this Proxy Statement and enclosed proxy card because
the Board of Directors is soliciting your proxy to vote at the Annual
Meeting. This Proxy Statement summarizes the information you will need to
know to cast an informed vote at the Annual Meeting. You do not need to
attend the Annual Meeting to vote your shares. You may simply complete,
sign and return the enclosed proxy card and your votes will be cast for you
at the Annual Meeting.
We began mailing this Proxy Statement, the Notice of Annual Meeting
and the enclosed proxy card on or about September 12, 2000 to all
stockholders entitled to vote. If you owned Mystic Financial's common
stock at the close of business on August 24, 2000, the record date, you are
entitled to vote at the Annual Meeting. On the record date, there were
1,991,104 shares of common stock outstanding.
Quorum
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 entitled to vote are represented in person or by
proxy at the Annual Meeting, a quorum will exist. Shares underlying broker
non-votes will not be counted as having been voted in person or by proxy
and will have no effect on the election of directors.
Voting Rights
You are entitled to one vote at the Annual Meeting for each share of
Mystic Financial's common stock that you owned at the close of business on
August 24, 2000. The number of shares you own (and may vote) is listed at
the top of the back of the proxy card.
You may vote your shares at the Annual Meeting in person or by proxy.
To vote in person, you must attend the Annual Meeting and obtain and submit
a ballot, which we will provide to you at the Annual Meeting. To vote by
proxy, you must complete, sign and return the enclosed proxy card. If you
properly complete your proxy card and send it to us in time to vote, your
"proxy" (one of the individuals named on your proxy card) will vote your
shares as you have directed. If you sign the proxy card but do not make
specific choices, your proxy will vote your shares FOR each of the
proposals identified in the Notice of the Annual Meeting.
If any other matter is presented, your proxy will vote the shares
represented by all properly executed proxies on such matters as a majority
of the Board of Directors determines. As of the date of this Proxy
Statement, we know of no other matters that may be presented at the Annual
Meeting, other than those listed in the Notice of the Annual Meeting.
Vote Required
Proposal 1: The two nominees for director who receive the most
Elect Two votes will be elected. So, if you do not vote for a
Directors nominee, or you indicate "withhold authority" for any
nominee on your proxy card, your vote will not count
"for" or "against" the nominee. You may not vote your
shares cumulatively for the election of directors.
Proposal 2: The affirmative vote of a majority of the shares
Ratify Appointment present in person or by proxy at the Annual Meeting
of Independent and entitled to vote on this proposal is required
Public Accountants to ratify the appointment of Wolf & Company, P.C.
as Mystic Financial's independent certified public
accountants. So, if you "abstain" from voting, it has
the same effect as if you voted "against" this
proposal.
Effect of Broker Non-Votes
If your broker holds shares that you own in "street name," the broker
may vote your shares on the two proposals listed above even if the broker
does not receive instructions from you. If your broker does not vote on
any of the proposals, this will constitute a "broker non-vote." Here is
the effect of a "broker non-vote":
* Proposal 1: Elect Two Directors. A broker non-vote would have no
effect on the outcome of this proposal because only a plurality of
votes cast is required to elect a director.
* Proposal 2: Ratify Appointment of Independent Public Accountants.
A broker non-vote would have no effect on the outcome of this
proposal.
Revoking Your Proxy
You may revoke your proxy at any time before it is exercised by:
* Filing with the Secretary of Mystic Financial a letter revoking the
proxy;
* Submitting another signed proxy with a later date; or
* Attending the Annual Meeting and voting in person, provided you file
a written revocation with the Secretary of the Annual Meeting prior
to the voting of such proxy.
If your shares are not registered in your own name, you will need
appropriate documentation from your stockholder of record to vote
personally at the Annual Meeting. Examples of such documentation include a
broker's statement, letter or other document that will confirm your
ownership of shares of Mystic Financial.
Solicitation of Proxies
Mystic Financial will pay the costs of soliciting proxies from its
stockholders. Directors, officers or employees of Mystic Financial and
Medford Co-operative Bank may solicit proxies by:
* mail;
* telephone; and
* other forms of communication.
We will also reimburse persons, firms and corporations holding shares
in their names or in the name of their nominees, which are beneficially
owned by others, for the expenses that incur in forwarding the proxy
materials to and obtaining proxies from such beneficial owners. In
addition, we have retained MacKenzie Partners, Inc. to assist in the
solicitation of proxies, which firm will be paid a fee of $2,500, plus out-
of-pocket expenses.
Security Ownership of Certain Beneficial Owners
The following table contains common stock ownership information for
persons known to Mystic Financial to "beneficially own" 5% or more of
Mystic Financial's common stock as of August 24, 2000. 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) of the date this table was prepared. 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 SEC and with Mystic Financial. 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>
Percent of
Amount of Shares of
Name and Address Beneficial Common Stock
Title of Class of Beneficial Owner Ownership Outstanding
-------------- ------------------- ---------- ------------
<S> <C> <C> <C>
Common Stock, Mystic Financial, Inc. Employee 170,310(1) 8.55%
$.01 par value Stock Ownership Plan Trust
HSBC Bank USA
140 Broadway
New York, NY 10005
Common Stock, Malta Partners, L.P. 106,000(2)(3) 5.32%
$.01 par value Malta Partners II, L.P.
Malta Hedge Fund, L.P.
Malta Hedge Fund II, L.P.
Sandler O' Neill Asset Management, LLC
Sandler O'Neill Asset Management
Holdings, LLC
Terry Maltese
780 Third Avenue, 30th Floor,
New York, NY 10017
Malta Offshore, Ltd.
c/o Hemisphere Fund Managers
Limited, Harbor Centre, Third Floor
George Town,
Grand Cayman, Cayman Islands,
British West Indies
Common Stock, Thomson Horstman & Bryant, Inc. 166,000(4) 8.34%
$.01 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 Mystic Financial's
Board of Directors (the "Compensation Committee"). The ESOP's assets
are held in a trust (the "ESOP Trust"), for which HSBC Bank USA,
serves as trustee (the "ESOP Trustee"). The ESOP Trust purchased
these shares with funds borrowed from Mystic Financial, 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
June 30, 2000, 46,579 shares have been allocated to the accounts of
the ESOP participants.
<F2> Based on a Schedule 13D filed with the SEC on May 25, 2000, Malta
Partners, L.P. ("MP"), Malta Hedge Fund, L.P. ("MHF"), Malta Partners
II, L.P. ("MPII"), and Malta Hedge II, L.P. ("MHFII") are Delaware
limited partnerships (collectively, the "Partnerships"). Sandler
O'Neill Assets Management LLC ("SOAM") is a New York limited
liability company. Mr. Maltese in his capacity as President and
managing member of SOAM and SOAM Holdings, LLC ("Holdings"), a
Delaware limited liability company, exercises voting and dispositive
power over all shares of common stock of Mystic Financial held by the
Partnerships.
MP, MHF, MPII and MHFII reported shared voting and dispositive power
with respect to 8,900, 10,400, 30,400 and 44,600 shares of common
stock of Mystic Financial, respectively. As the provider of
administrative and management services for the Partnerships and Malta
Offshore, Ltd., SOAM reported shared voting and dispositive power
with respect to 106,000 shares of common stock. By reason of its
position as general partner of each of the Partnerships, Holdings
reported shared voting and dispositive power with respect to 94,300
shares of common stock of Mystic Financial. Mr. Maltese reported
shared voting and dispositive power with respect to 106,000 shares of
common stock of Mystic Financial.
<F3> Based on a Schedule 13D filed with the SEC on May 25, 2000, Malta
Offshore, Ltd. is a Cayman Islands company. Malta Offshore, Ltd
reported shared voting and dispositive power with respect to 11,700
shares of common stock of Mystic Financial.
<F4> Based on a Schedule 13G filed with the SEC on January 21, 2000,
Thomson Horstman & Bryant, Inc. is a Delaware corporation which is an
investment advisor registered under the Investment Advisors Act of
1940, who reported sole voting power as to 41,000 shares and shared
dispositive power as to 166,000 shares of common stock of Mystic
Financial.
</FN>
</TABLE>
Security Ownership of Management
The following table shows the number of shares of Mystic Financial's
common stock beneficially owned by each director and named executive
officer, and all directors and executive officers of Mystic Financial and
Medford Co-operative Bank as a group, as of June 30, 2000. Except as
otherwise indicated, each person 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 Nature Percent of
Position with of Beneficial Common Stock
Name Mystic Financial** Ownership(1)(2)(3)(4) Outstanding
---- ------------------ --------------------- ------------
<S> <C> <C> <C>
Julie Bernardin Director 9,722(5) *
Thomas G. Burke Senior Vice President and 8,323(6) *
Commercial Loan Officer
Frederick N. Dello Russo Director 11,839(7) *
Ralph W. Dunham Executive Vice President, 27,539(8) 1.38
Chief Financial Officer and
Treasurer
John A. Hackett Director 13,662(9) *
Richard M. Kazanjian Director 13,150(10) *
John W. Maloney Director 19,339(11) *
John J. McGlynn Chairman of the Board 20,404(12) 1.02
John M. O'Donnell Senior Vice President and 6,581(13) *
Commercial Loan Officer
Lorraine P. Silva Director 27,110(14) 1.36
Robert H. Surabian President, Chief Executive 101,934(15) 5.12
Officer and Director
Robert B. Risman Director Emeritus of 14,910(16) *
Medford Co-operative Bank
All directors and executive officers as a group (15 persons) 467,465(17)(18) 23.48%
<FN>
___________________
* Less than 1% of common stock outstanding.
** Titles are for both Mystic Financial and Medford Co-operative Bank,
except where indicated.
<F1> Includes shares of common stock as to which the named individual has
the right to acquire beneficial ownership, currently or within 60
days of the August 24, 2000 voting record date, pursuant to the
exercise of stock options, as follows: Ms. Bernardin - 2,139,
Messrs. Burke - 1,000, Dello Russo - 2,139, Dunham - 7,334, Hackett
- 2,139, Kazanjian - 2,139, Maloney - 2,139, McGlynn - 2,139 and
O'Donnell - 1,000, Ms. Silva - 2,139, and Messrs. Surabian - 12,224
and Risman - 2,139.
<F2> See "Principal Stockholders of Mystic Financial" for a definition of
"beneficial ownership."
<F3> Includes restricted stock awards of 34,226 shares made to outside
directors under the Mystic Financial, Inc. 1999 Recognition and
Retention Plan ("RRP"). Under the RRP, Messrs. Surabian, Dunham,
Burke and O'Donnell were also granted restricted stock awards of
24,448, 14,668, 3,000 and 3,000 shares of common stock, respectively,
and all other executive officers as a group were granted restricted
stock awards of 8,000 shares. Each recipient of a restricted share
award has sole voting power, but no investment power, over the common
stock covered by the award. The restricted stock awards will vest at
the rate of 20% per year on each December 31st following the date of
grant, with the first installment vested on December 31, 1999.
<F4> The figures shown above include shares held in trust pursuant to the
ESOP that have been allocated as of June 30, 2000 to individual
accounts as follows: Mr. Surabian - 1,182 shares, Mr. Dunham - 2,803
shares, Mr. Burke - 2,823 shares, Mr. O'Donnell - 2,581 shares and
all executive officers as a group 15,506 shares. Such persons have
voting power (subject to the legal duties of the ESOP Trustee) but no
investment power, except in limited circumstances, over such shares.
<F5> Includes 2,112 shares held in Ms. Bernardin's individual retirement
account ("IRA").
<F6> Includes 2,823 shares allocated to Mr. Burke under the ESOP.
<F7> Includes 6,500 shares jointly owed with his spouse and 1,000 shares
held in Mr. Dello Russo's employer's profit sharing plan.
<F8> Includes 1,634 shares held in Mr. Dunham's IRA, 200 shares held by
Mr. Dunham as custodian for his two children and 2,803 shares
allocated to him under the ESOP.
<F9> Includes 2,624 shares held in Mr. Hackett's IRA, 2,622 shares held in
his spouse's IRA, 1,200 shares jointly held with his spouse, and 106
shares which Mr. Hackett holds as custodian for his minor child.
<F10> Includes 6,040 shares jointly owned by Mr. Kazanjian and his spouse.
<F11> Includes 14,900 shares held in Mr. Maloney's employer's profit
sharing plan.
<F12> Includes 11,462 shares jointly owned by Mr. McGlynn and his spouse
and 1,832 shares owned by Mr. McGlynn's spouse.
<F13> Includes 2,581 shares allocated to Mr. O'Donnell under the ESOP.
<F14> Includes 10,000 shares owned by Mrs. Silva's spouse.
<F15> Includes 32,540 shares owned by Mr. Surabian's spouse, 1,000 shares
jointly owned by Mr. Surabian and his spouse and 1,182 shares
allocated to him under the ESOP.
<F16> Includes 5,000 shares jointly owed with his spouse and 2,800 shares
held in an IRA of Mr. Risman's spouse.
<F17> The amount of shares for all directors and executive officers as a
group includes 170,310 shares held by the ESOP Trust that have not
been allocated to eligible participants as of June 30, 2000, 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.
<F18> Includes shares held directly, held by certain members of the named
individuals' families, or held by trusts of which the named
individuals are trustees or substantial beneficiaries, with respect
to which shares the named individuals may be deemed to have sole or
shared voting or dispositive power.
</FN>
</TABLE>
DISCUSSION OF PROPOSALS RECOMMENDED BY BOARD
___________________
PROPOSAL 1
ELECTION OF DIRECTORS
___________________
General
The Board has nominated two persons for election as directors at the
Annual Meeting. Each of the nominees is currently serving on Mystic
Financial's Board of Directors. If you elect the nominees, they will hold
office until the Annual Meeting in 2003, or until their successors have
been elected.
We know of no reason why any nominee may be unable to serve as a
director. If any nominee is unable to serve, your proxy may vote for
another nominee proposed by the Board. If for any reason these nominees
prove unable or unwilling to stand for election, the Board will nominate
alternates or reduce the size of the Board of Directors to eliminate the
vacancy. The Board has no reason to believe that its nominees would prove
unable to serve if elected.
Nominees and Continuing Directors
<TABLE>
<CAPTION>
Position(s) Held with
Director Term Mystic Financial and
Nominees Age(1) Since(2) Expires Medford Co-operative Bank
-------- ------ -------- ------- -------------------------
<S> <C> <C> <C> <C>
John J. McGlynn 78 1966 2000 Director and Chairman of the Board
Robert H. Surabian 64 1967 2000 President, Chief Executive Officer
and a Director
<CAPTION>
Continuing Directors
--------------------
Julie Bernardin 57 1994 2001 Director
John A. Hackett 60 1983 2001 Director
Lorraine P. Silva 69 1983 2001 Director and Secretary
Frederick N. Dello Russo 56 1998 2002 Director
Richard M. Kazanjian 64 1984 2002 Director
John W. Maloney 60 1998 2002 Director
Robert B. Risman 68 1959 2001 Director Emeritus of
Medford Co-operative Bank
<FN>
___________________
<F1> As of June 30, 2000.
<F2> Includes service as a Director with Medford Co-operative Bank prior
to Mystic Financial's incorporation in 1997.
</FN>
</TABLE>
The principal occupation and business experience of each nominee for
election as director and each Continuing Director is set forth below.
Unless otherwise indicated, each of the following persons has held his or
her present position for the last five years.
Nominees
John J. McGlynn is the Director of Special Projects for the
Middlesex Sheriff's Department, which involves locating properties for the
establishment of community counseling centers. Mr. McGlynn is also the
retired Commissioner of the Public Employee Retirement Administration for
the Commonwealth of Massachusetts in which he was responsible for the
regulation of all the retirement systems in the Commonwealth, municipal,
state, teachers, counties and authorities. Mr. McGlynn is a former member
of the Pension Reserves Investment Management Board, an eight member board
which oversaw the investments of $7.7 billion in reserve pension funds.
Robert H. Surabian is the President and Chief Executive Officer of
Mystic Financial and Medford Co-operative Bank. He has been President
since 1979 and was named Chief Executive Officer in 1991.
Continuing Directors
Lorraine P. Silva was employed by Medford Co-operative Bank for 28
years and has been retired since 1988. Mrs. Silva is also the Secretary of
Mystic Financial.
John A. Hackett is the President and owner of J.J. Ruddy Insurance
Agency, Inc., Medford, Massachusetts, which he has owned for 38 years.
Julie Bernardin, M.Ed., has been the sole proprietor of JB
Consulting, Medford, Massachusetts, a sole proprietorship for over ten
years. Ms. Bernardin's practice includes executive and career coaching, as
well as consulting/training in communications and planning. In the past
year, her major non-profit clients included the Federal Government, the
City of Boston, and the Commonwealth of Massachusetts. Ms. Bernardin also
serves as project coordinator to develop and deliver training materials for
several clients.
Frederick N. Dello Russo has been the owner and operator of
McLaughlin-Dello Russo Funeral Services, Inc., Medford, Massachusetts since
1978 and the owner and operator of McLaughlin Funeral Home, Woburn,
Massachusetts since 1995.
Richard M. Kazanjian is a Principal of Consolidated Realty Trust,
Medford, Massachusetts, and a General Partner in Wellington Realty,
Medford, Massachusetts. Mr. Kazanjian is also a representative of Pruco
Securities, Needham, Massachusetts.
John W. Maloney is the owner and treasurer of Arlex Oil Corporation,
Lexington, Massachusetts, which has been in the business of heating homes
and businesses for over 60 years.
Director Emeritus
Robert B. Risman, Director Emeritus of Medford Co-operative Bank, has
been owner of Risman Real Estate, Medford, Massachusetts, since 1959, which
provides residential sales and property management services. As Director
Emeritus, Mr. Risman is a non-compensated and non-voting member of the
Board of Directors of Medford Co-operative Bank.
The Board of Directors unanimously recommends a vote "For" all
of the nominees for election as directors.
___________________
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
___________________
The Board of Directors has appointed Wolf & Company, P.C. as our
independent public auditors for Mystic Financial for the fiscal year ending
June 30, 2001, and we are asking stockholders to ratify the appointment. A
representative of Wolf & Company, P.C. is expected to be present at the
Annual Meeting and will be available to respond to appropriate questions.
The Board of Directors unanimously recommends a vote "For" the
ratification of the appointment of Wolf & Company, P.C.
as independent auditors for Mystic Financial.
INFORMATION ABOUT BOARD OF DIRECTORS AND MANAGEMENT
Board of Directors
Mystic Financial's Board of Directors currently consists of eight
members. Mystic Financial's Certificate of Incorporation and Bylaws
provide that the Board of Directors shall be divided into three classes, as
nearly equal in number as possible. The terms of two directors expire at
the Annual Meeting.
The Board of Directors oversees our business and monitors the
performance of our management. In accordance with our corporate governance
procedures, the Board of Directors does not involve itself in the day-to-
day operations of Mystic Financial. Mystic Financial's executive officers
and management oversee the day-to-day operations of Mystic Financial. The
directors fulfill their duties and responsibilities by attending regular
meetings of the Board which are held on a monthly basis. The directors
also discuss business and other matters with the Chairman of the Board and
the President, other key executives, and our principal external advisers
(legal counsel, auditors, financial advisors and other consultants).
The Board of Directors of Mystic Financial's Board of Directors met
14 times during the fiscal year ended June 30, 2000. Each incumbent
director attended at least 75% of the meetings of the Board of Directors
plus committee meetings on which that particular director served during
this period.
Committees of the Board
The Board of Directors of Mystic Financial has established the
following committees:
EXECUTIVE The Executive Committee provides advice and recommendations
COMMITTEE to the Board and considers strategic planning and industry
issues.
Directors Surabian, Hackett, Kazanjian and McGlynn serve as
members of the Committee.
The Executive Committee met 10 times in the 2000 fiscal
year.
COMPENSATION The Compensation Committee provides advice and
COMMITTEE recommendations to the Board in areas of employee salaries
and benefits and directors' compensation.
Directors Hackett, McGlynn and Silva serve as members of the
committee.
The Compensation Committee met 29 times in the 2000 fiscal
year.
AUDIT The Audit Committee oversees and monitors Mystic Financial's
COMMITTEE financial reporting process and internal control system,
reviews and evaluates the audit performed by Mystic
Financial's outside auditors and reports any substantive
issues found during the audit to the Board and reviews and
evaluates the internal audit program.
Directors Silva, Maloney, Bernardin, Kazanjian and Dello
Russo serve as members of the Committee.
The Audit Committee met two times in the 2000 fiscal year.
The Board of Directors, acting as the nominating committee, met in
August, 2000 to select the nominees for election as directors at the Annual
Meeting. See "Information About Stockholder Proposals" for a discussion of
the procedures for stockholder nominations for director.
Directors' Compensation
Director's Fees. Currently, each director of Medford Co-operative
Bank receives the following fees:
* fees of $400 per Board meeting attended;
* committee fees ranging from $125 to $950 per month;
* fees of $7,200 per year as a retainer.
The Chairman of the Board also receives an additional $6,000 annual
retainer. Total directors' meeting and committee fees for fiscal 2000 were
$157,372. Directors of Mystic Financial do not receive compensation for
their services as such but participate in Mystic Financial's stock option
plan and restricted stock plan.
Executive Officers
The following individuals are executive officers of Mystic Financial
and hold the offices set forth opposite their names.
<TABLE>
<CAPTION>
Name Position Held with Mystic Financial
---- -----------------------------------
<S> <C>
Robert H. Surabian President and Chief Executive Officer
Ralph W. Dunham Executive Vice President, Chief Financial Officer
and Treasurer
Lorraine P. Silva Secretary
</TABLE>
The Board of Directors elects the executive officers of Mystic
Financial and Medford Co-operative Bank, annually. The elected officers
hold office until their respective successors have been elected and
qualified, or until death, resignation or removal by the Board of
Directors. Mystic Financial has entered into Employment Agreements with
certain of its executive officers which set forth the terms of their
employment. See "-Employment Agreements."
Biographical information of executive officers of Mystic Financial
and Medford Co-operative Bank who are not directors is set forth below.
Thomas G. Burke, age 53, has served as Senior Vice President and
Commercial Loan Officer of Medford Co-operative Bank since 1995. He is
responsible for all commercial lending and supervision of the commercial
loan department. Mr. Burke was employed at Medford Savings Bank from 1990
to 1995, where he was a Vice President and a Commercial Loan Officer.
Ralph W. Dunham, age 44, has served as Executive Vice President since
1997 and the Chief Financial Officer of Medford Co-operative Bank since
1988. He has also served as the Executive Vice President, Chief Financial
Officer and Treasurer of Mystic Financial since 1997. As Chief Financial
Officer, he is responsible for the overall financial management of Mystic
Financial and its subsidiaries, including asset/liability management,
investment management, development and recommendation of policies and
financial reporting. Mr. Dunham is an attorney and a certified public
accountant.
Deborah A. McNeill, age 45, has served as Senior Vice President and
Treasurer of Medford Co-operative Bank since 1996. She has been an
employee of Medford Co-operative Bank for 26 years. Her present duties
include directing and coordinating the operation of the accounting and
operations department.
Henry T. Sampson, Jr., age 52, has served as Senior Vice President of
Medford Co-operative Bank since 1992 and the Chief Residential Loan Officer
of Medford Co-operative Bank since 1993. Mr. Sampson is responsible for
all non-commercial lending and supervision of the lending department and
has been an employee of Medford Co-operative Bank for 21 years.
John M. O'Donnell, age 41, has served as Senior Vice President and
Commercial Loan Officer since December 1998. He joined Medford Co-
operative Bank in 1996 as Vice President, Commercial Loan Officer. He is
currently responsible for the commercial lending and retail activities at
Medford Co-operative Bank's Lexington Office. Prior to joining Medford Co-
operative Bank, Mr. O'Donnell was employed at Depositors Trust Company and
Co-operative Bank of Concord from 1986 to 1996 as Senior Vice President of
Lending.
Annette J. Hunt, age 41, has served as Senior Vice President since
November 1999 and Vice President/Branch Administrator of Medford Co-
operative Bank since 1997. She joined Medford Co-operative Bank in 1995 as
Vice President/Branch Manager of the Salem Street Office. She is currently
responsible for the overall operation of the Retail Division. Ms. Hunt was
formerly employed at Depositors Trust Company and Cooperative Bank of
Concord from 1978 to 1995 as Vice President/Branch Administrator.
Executive Compensation
The following table sets forth the compensation paid by Medford Co-
operative Bank for services rendered in all capacities during the fiscal
years ended June 30, 2000, 1999 and 1998 to Messrs. Surabian, Dunham, Burke
and O'Donnell. No other executive officer earned compensation in excess of
$100,000 during the fiscal year ended June 30, 2000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------------------
Annual Compensation(1) Awards Payouts
----------------------------------- -------------------- ----------------------
Other Restricted
Annual Stock LTIP All Other
Name and Principal Compensation Awards Options Payouts Compensation
Positions Year Salary($) Bonus($) ($) ($)(2) (#)(3) ($) ($)(4)
------------------ ---- --------- -------- ------------ ---------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert H. Surabian, President and 2000 $165,057 $32,500 - - - - $31,086
Chief Executive Officer 1999 $157,197 $30,500 - $294,904 61,121 - $40,125
1998 $153,360 $47,000 - - - - $ 8,112
Ralph W. Dunham, Chief Financial 2000 $108,946 $ 9,500 - - - - $23,373
Officer, Executive Vice President 1999 $105,608 $ 7,500 - $176,932 36,673 - $17,026
and Treasurer 1998 $ 98,633 $10,000 - - - - $ 5,367
Thomas G. Burke, Senior Vice 2000 $102,500 $ 9,000 - - - - $18,932
President and Commercial Loan 1999 $ 96,370 $ 7,000 - $ 36,188 5,000 - $20,058
Officer 1998 $ 88,920 $ 5,000 - - - - $ 2,576
John M. O'Donnell, Senior Vice 2000 $ 96,000 $14,000 - - - - $17,260
President and Commercial Loan 1999 $ 87,470 $ 6,500 - $ 36,188 5,000 - $17,610
Officer 1998 $ 79,615 $ 5,000 - - - - $ 1,922
<FN>
___________________
<F1> Under Annual Compensation, the amounts under "Bonus" include a
stipend of $17,500 to be paid annually for a ten year period by
Medford Co-operative Bank to the Chief Executive Officer to cover
premiums due on a life insurance policy owned by the Chief Executive
Officer.
<F2> Pursuant to the RRP, Mr. Surabian, Mr. Dunham, Mr. Burke and Mr.
O'Donnell were awarded 24,448, 14,668, 3,000 and 3,000 shares of
restricted stock, respectively, as of March 24, 1999, which vest in
20% increments on December 31st of each year. The first installment
vested on December 31, 1999. Dividends attributable to such shares
are held in the trust fund of the RRP and are distributed as soon as
it is administratively feasible. The dollar amounts shown in the
table for 1999 are based on the fair market value of a share of
common stock on March 24, 1999, which was $12.0625. In the case of
death, disability, or change in control while in service, all
restricted stock awards become immediately vested.
<F3> Represents shares of common stock as to which the named individual
has the right to acquire beneficial ownership pursuant to the
exercise of stock options. Such options were granted on March 24,
1999 pursuant to the Mystic Financial, Inc. 1999 Stock Option Plan,
and vest in 20% increments on December 31st of each year. The first
installment vested on December 31, 1999.
<F4> Includes benefits for Messrs. Surabian, Dunham, Burke and O'Donnell
as follows:
<CAPTION>
Year Mr. Surabian Mr. Dunham Mr. Burke Mr. O'Donnell
---- ------------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
401(k) Matching Contributions 2000 $ 7,420 $ 3,743 $ 3,342 $ 2,746
1999 $11,358 $ 4,555 $ 2,841 $ 2,154
1998 $ 8,112 $ 5,367 $ 2,576 $ 1,922
ESOP Contributions 2000 $ 6,000 $19,630 $15,590 $14,514
1999 $ 7,791 $12,471 $17,218 $15,456
1998 - - - -
</FN>
</TABLE>
Also, with respect to Mr. Surabian, includes $17,666 and $20,976
representing nonqualified supplemental ESOP and 401(k) plan benefits
credited on his behalf under the Benefit Restoration Plan described
below for 2000 and 1999, respectively.
Report of the Compensation Committee
The following Report of Mystic Financial's Compensation Committee is
provided in accordance with the rules and regulations of the SEC. Pursuant
to such rules and regulations, this Report shall not be deemed "soliciting
material," filed with the SEC subject to Regulation 14A or 14C of the SEC
or subject to the liabilities of Section 18 of the Exchange Act.
Mystic Financial, Inc. was formed in 1997 for the purpose of becoming
the holding company for Medford Co-operative Bank in a stock conversion
that took effect in January 1998. For the fiscal year ended June 30, 2000,
substantially all of the business of Mystic Financial was conducted through
Medford Co-operative Bank. During such fiscal year, Mystic Financial's
Chief Executive Officer ("CEO") and other executive officers served as the
CEO and executive officers, respectively, of Medford Co-operative Bank and
performed substantially all of their services in connection with the
management and operation of Medford Co-operative Bank. As a result, all
compensation of the CEO and all other executive officers for such period
was paid by Medford Co-operative Bank and determined by the Board of
Directors of Medford Co-operative Bank on the recommendation of its
compensation committee.
Compensation Committee Report on Executive Compensation
The Compensation Committee of Mystic Financial (the "Compensation
Committee") annually reviews and recommends changes to the compensation
levels of the executive officers to the Board of Directors. The
Compensation Committee continues to review the compensation program to
better reflect Mystic Financial's public company status. It is intended
that the executive compensation program will enable Mystic Financial and
Medford Co-operative Bank to attract, develop and retain strong executive
officers who are capable of maximizing Mystic Financial's performance for
the benefit of its stockholders.
It is Mystic Financial's policy to cause its executive officers to be
compensated, either directly or through its affiliates, using a combination
of cash compensation, consisting of a base salary and discretionary bonus
payments, participation in Medford Co-operative Bank's fringe benefit plans
and participation in Mystic Financial's ESOP. These elements are intended
to provide an overall compensation package that is commensurate with Mystic
Financial's financial resources, that aligns the executives' financial
interests with those of Mystic Financial's stockholders and that is
responsive to the immediate and long-term needs of the executive officers
and their families. The compensation practices of other community banks in
the Boston and New England area are considered in establishing the overall
level of compensation and the components of the compensation package;
however, it has not been a goal or policy to set compensation at levels
designed to achieve a predetermined percentile ranking among an identified
group of peer institutions.
The board of directors of Mystic Financial accepted without
modification all of the Compensation Committee's recommendations on
executive compensation. The Compensation Committee reviews salary and
bonus levels annually in December. The composition of Medford Co-operative
Bank's compensation committee is the same as that of Mystic Financial's
Compensation Committee.
Base Salary and Bonus
For the year ended June 30, 2000, base salaries of all executive
officers were set at levels determined, in the subjective judgment of the
Compensation Committee, to be commensurate with the executive officers'
customary respective duties and responsibilities and to enable them to
maintain appropriate standards of living within their communities. The
Compensation Committee has also utilized discretionary bonus payments to
ensure that compensation levels remain competitive with those of similar
institutions in Medford Co-operative Bank's market area and to reflect cost
of living increases. Fringe benefit programs, consisting of life,
disability and group health insurance coverages, are designed to provide
for the health and welfare of the executives and their families as well as
for their long-term financial needs. Mystic Financial also pays its CEO a
stipend to cover premiums on an insurance policy owned by the CEO. The
determination of the CEO's compensation for the fiscal year ended June 30,
2000 was based on the same general principles applied to other executive
officers.
Mystic Financial currently uses stock based compensation so that
management's interests are aligned with stockholders' interests in the
enhancement of stockholders' value. In this regard, Mystic Financial, with
the approval of stockholders, implemented its 1999 Stock Option Plan and
its 1999 Recognition and Retention Plan on March 24, 1999. In addition,
all executive officers participated in Mystic Financial's ESOP for the
fiscal year ended June 30, 2000. Each executive officer has an individual
account within the ESOP Trust, which is invested primarily in Mystic
Financial, Inc. Common Stock with the result that a portion of each
executive officer's long-term retirement savings is tied to the performance
of Medford Co-operative Bank and Mystic Financial. These important stock-
based incentive compensation plans assist Medford Co-operative Bank and
Mystic Financial in attracting and retaining senior executive personnel of
outstanding caliber who will contribute to Mystic Financial's success.
In addition to the compensation paid to executive officers as
described above, executive officers received certain benefits pursuant to
the 401(k) Plan and the Pension Plan. In addition, the CEO will receive
certain benefits under Mystic Financial's nonqualified benefit restoration
plan that are otherwise limited by Internal Revenue Service caps on
qualified plans.
COMPENSATION COMMITTEE OF
MYSTIC FINANCIAL, INC.
John A. Hackett
John J. McGlynn
Lorraine P. Silva
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Hackett, McGlynn and
Ms. Silva. There are no other interlocks, as defined under the rules and
regulations of the SEC, between members of the Compensation Committee or
executive officers of Mystic Financial and corporations with respect to
which such persons are affiliated, or otherwise.
Performance Graph
The following graph compares Mystic Financial's total cumulative
stockholder return from January 8, 1998, the date of Mystic Financial's
initial public offering, to June 30, 2000, to the total return for the
Nasdaq National Market Composite Index and the total return for the Nasdaq
Bank Stock Index, which is an index for publicly traded institutions that
trade on Nasdaq.
<TABLE>
<CAPTION>
1/8/98 6/30/98 12/31/98 6/30/99 12/31/99 6/30/00
------ ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Mystic Financial, Inc. 100.00 140.03 119.15 117.81 111.39 125.40
Nasdaq Market Composite Index 100.00 121.83 141.65 173.52 163.31 156.71
Nasdaq Bank Stock Index 100.00 112.17 93.17 94.65 85.73 75.90
<FN>
___________________
Assumes $100 Invested on January 8, 1998
</FN>
</TABLE>
There can be no assurance that stock performance will continue into the
future with the same or similar trends depicted in the graph above.
Certain Employee Benefits and Employment Agreements
Employment Agreements with Mystic Financial and Two Senior
Executives. Mystic Financial entered into separate Employment Agreements
with Messrs. Surabian and Dunham (the "Senior Executives"), on behalf of
both Mystic Financial and Medford Co-operative 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 Mystic Financial and Medford Co-operative Bank will be able to
maintain a stable and competent senior executive management team. The
continued success of Mystic Financial and Medford Co-operative 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 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;
* Entitlement to participation in pension, savings, incentive and
welfare benefit plans; and
* Eligibility for fringe benefits applicable to executive personnel,
such as fees for club and organization memberships.
Termination and Benefits Payable upon Termination. Mystic Financial
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 Mystic Financial and Medford Co-operative Bank
for reasons other than for cause, death or disability, or in the event of
the Senior Executive's resignation from Mystic Financial and Medford Co-
operative 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 Mystic Financial, 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 Mystic Financial (or Medford Co-operative 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,
Mystic Financial'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 Mystic Financial or
Medford Co-operative 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 Mystic Financial or Medford Co-operative
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 Mystic Financial or Medford Co-
operative Bank, upon stockholder approval of a merger or consolidation or a
change of the majority of the board of directors of Mystic Financial or
Medford Co-operative Bank, or liquidation or sale of substantially all the
assets of Mystic Financial or Medford Co-operative Bank.
Either Medford Co-operative Bank or Mystic Financial 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 Mystic Financial 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 Mystic Financial or Medford Co-operative 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 Mystic Financial and
Medford Co-operative Bank. Mystic Financial'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, Mystic Financial amended Mr. Surabian's
Employment Agreement to provide him with a special benefit in the event of
his retirement from the service of Mystic Financial 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 Mystic Financial and Medford Co-operative
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 Mystic Financial 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 Mystic Financial's Common Stock
determined over the twelve calendar quarters immediately preceding Mr.
Surabian's retirement. The supplemental benefit would be payable from
Mystic Financial's general assets.
Employment Agreements between Medford Co-operative Bank and Two
Commercial Lending Officers. Medford Co-operative Bank entered into
separate Employment Agreements with each of Mr. Thomas G. Burke and Mr.
John O'Donnell, who both currently serve Medford Co-operative Bank as
Commercial Loan Officers ("Loan Officers"), effective as of January 8,
1998. The purpose of these Employment Agreements is to secure the Loan
Officers' continued availability and attention to Medford Co-operative
Bank's affairs.
Term. Both Agreements have three year terms that may be extended by
Medford Co-operative Bank's board of directors, after a performance review
of the Loan Officer, for an additional year.
Salary and Benefits. The benefits of Employment Agreements provide:
* Annual review of base salary;
* Entitlement to participation in pension, savings, incentive and
welfare benefit plans; and
* Eligibility for fringe benefits applicable to executive personnel,
such as fees for club and organization memberships.
Termination and Benefits Payable upon Termination. In the event that
a Loan Officer's employment with Medford Co-operative Bank is terminated
for reasons other than for cause, death or disability or in the event that
the Loan Officer resigns from employment with Medford Co-operative Bank
following a "change in control" (as defined above), the Loan Officer would
be entitled to a lump sum cash payment in an amount equal to the present
value of the remaining base salary payments due for the remaining term of
the Agreement, as severance pay. In the event that severance is payable to
a Loan Officer due to his termination of employment following a change in
control of Medford Co-operative Bank, for purpose of computing the lump sum
severance amount payable, the remaining term of each Loan Officer's
Employment Agreement will be deemed to be three years. The Agreements also
provide for Medford Co-operative Bank to continue the Loan Officer's life,
health and disability insurance coverages for the remaining term of the
Employment Agreement, as an additional severance benefit.
Benefits
Employee Stock Ownership Plan and Trust. Mystic Financial has
established, and Medford Co-operative Bank has adopted, an ESOP and related
trust, effective as of January 1, 1998. Substantially all employees of
Medford Co-operative Bank or Mystic Financial 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
Mystic Financial in its conversion to stock form with funds borrowed from
Mystic Financial. Although contributions to the ESOP are discretionary,
Mystic Financial or Medford Co-operative 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. Mystic
Financial and Medford Co-operative 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.
Mystic Financial 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, attainment of age 65, disability or
separation from service. As of June 30, 2000, 46,579 shares have been
allocated to participant's ESOP accounts.
In connection with the establishment of the ESOP, the Board of
Directors appointed the Compensation Committee to administer the ESOP and
appointed HSBC Bank USA (formerly, Marine Midland Bank) as the ESOP's
trustee. The Compensation Committee may instruct the 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.
Pension Plan. The Pension Plan provides a benefit for all eligible
Medford Co-operative Bank employees. The benefit is equal to (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.
Medford Co-operative Bank funds the Pension Plan on an actuarial basis and
the trustee holds all assets in trust.
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 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, 1999, the
annual compensation for calculating benefits may not exceed $160,000
(as adjusted for subsequent years pursuant to Code provisions). The
portion of the benefits shown above attributable to annual
compensation in excess of $160,000 will be provided to Mr. Surabian
under the Benefit Restoration Plan described below.
</FN>
</TABLE>
The following table sets forth the years of credited service
determined as of December 31, 1999, the end of the 1999 plan year, for Mr.
Surabian, Mr. Dunham, Mr. Burke and Mr. O'Donnell. The accrued benefit of
each Mr. Surabian Mr. Dunham, Mr. Burke and Mr. O'Donnell 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 21 1
Mr. Dunham 11 10
Mr. Burke 4 7
Mr. O'Donnell 3 3
</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. Medford Co-operative 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, Medford Co-operative 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 Medford Co-
operative 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, Mystic Financial
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. Mystic Financial has
established 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 Mystic Financial and subject to the claims of its general
creditors. Earnings on the trust's assets would be taxable to Mystic
Financial.
Stock Option Plan. Mystic Financial has a Stock Option Plan in
effect which was approved by the stockholders at a Special Meeting on March
24, 1999. The purpose of the Stock Option Plan is to encourage the
retention of key employees and directors by facilitating their purchase of
a stock interest in Mystic Financial. The Stock Option Plan is not subject
to ERISA and is not a tax-qualified plan. Mystic Financial has reserved an
aggregate of 257,355 shares of common stock for issuance upon the exercise
of stock options granted under the Plan.
The members of the Board's Compensation Committee who are
disinterested directors ("Option Committee") administer the Stock Option
Plan. In general, both "incentive stock options" and non-qualified stock
options to purchase common stock may be granted to eligible officers,
employees and outside directors, subject to the restrictions of the
Internal Revenue Code. The Option Committee has discretion under the Stock
Option Plan to establish certain material terms of the options granted to
officers and employees provided such grants are made in accordance with the
Plan's requirements. All options granted to outside directors are by
automatic formula grant and the Option Committee has no discretion over the
material terms of these grants. As of June 30, 2000, each outside director
of Mystic Financial had been granted a non-qualified stock option to
purchase an aggregate of 10,696 shares of common stock at an exercise price
of $12.0625.
All stock options granted under the Plan generally vest in 20%
increments over a five year period on December 31st each year, subject to
automatic full vesting upon the optionee's death, disability or on the
effective date of a change in control of Mystic Financial. Mystic
Financial believes the use of a vesting schedule will encourage each option
recipient to remain in the service of Mystic Financial (or an affiliate)
and contribute to its profitability in order to enjoy the full economic
benefit of the Option. Mystic Financial pays all costs and expenses of the
Stock Option Plan. Mystic Financial has reserved the right to amend or
terminate the Plan, in whole or in part, subject to the requirements of all
applicable laws.
The following table shows the number of shares exercisable by Mr.
Surabian, Mr. Dunham, Mr. Burke and Mr. O'Donnell as of June 30, 2000.
There were no "in-the-money" options at June 30, 2000 and no officers
exercised any options during the fiscal year ended June 30, 2000.
Fiscal Year End Options/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares Acquired Value Realized Fiscal Year-End Fiscal Year-end
on Exercise on Exercise (#) ($)
Name(1) (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable (1)
------- --------------- -------------- ------------------------- -----------------------------
<S> <C> <C> <C> <C>
Robert H. Surabian - - 12,224/48,897 N/A
Ralph W. Dunham - - 7,334/29,339 N/A
Thomas G. Burke - - 1,000/4,000 N/A
John M. O'Donnell - - 1,000/4,000 N/A
<FN>
___________________
<F1> All options at June 30, 2000 were "out of money" options, i.e. the
exercise price of the options was greater than the closing price of
Mystic Financial's common stock on June 30, 2000.
</FN>
</TABLE>
Recognition and Retention Plan. The RRP was adopted by the Board of
Directors of Mystic Financial and approved by its stockholders at a Special
Meeting held on March 24, 1999. Similar to the Stock Option Plan, the RRP
functions as a long-term incentive compensation program for eligible
officers, employees and outside directors of Mystic Financial, Medford Co-
operative Bank and other affiliates. The members of the Board's
Compensation Committee who are disinterested directors ("RRP Committee")
administer the RRP. Mystic Financial pays all costs and expenses of
administering the RRP.
As required by the terms of the RRP, Mystic Financial has established
a trust ("Trust") and has contributed $1,294,495 to the Trust in order to
fund the purchase of 102,942 shares of Common Stock, the maximum number of
restricted stock awards ("Restricted Stock Awards") that may be granted
under the RRP. The Trust completed the purchase of these shares in
September, 1999. Shares of Common Stock subject to a Restricted Stock
Award are held in the Trust until the Award vests at which time the shares
of Common Stock attributable to the portion of the Award that have vested
are distributed to the Award holder. An Award recipient is entitled to
exercise voting rights and receive cash dividends with respect to the
shares of Common Stock subject to his Award, whether or not the underlying
shares have vested.
Restricted Stock Awards are granted under the RRP on a discretionary
basis to eligible officers and executives selected by the RRP Committee and
are awarded to outside directors pursuant to the terms of the RRP. As of
March 24, 1999, each outside director who has completed at least three
years of service has been granted a Restricted Stock Award with respect to
4,971 shares of Common Stock. Each outside director with less than three
years of service has been granted a restricted stock award with respect to
2,200 shares of Common Stock. All outstanding Restricted Stock Awards vest
and become distributable at the rate of 20% per year, over a five year
period that commenced on December 31, 1999, subject to automatic full
vesting on the date of the Award holder's death, disability or upon a
change in control of Mystic Financial.
Mystic Financial may amend or terminate the RRP, in whole or in part,
at any time, subject to the requirements of all applicable laws.
Transactions with Certain Related Persons
Medford Co-operative Bank has made loans or extended credit to
executive officers and directors and also to certain persons related to
executive officers and directors. All such loans were made by Medford Co-
operative Bank in the ordinary course of business, on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with the general public, nor did they
involve more than the normal risk of collectibility or present other
unfavorable features. The outstanding principal balance of such loans to
directors, executive officers and their associates totaled $1.9 million or
7.4% of Medford Co-operative Bank's total equity at June 30, 2000.
Mystic Financial intends that all transactions in the future between
Mystic Financial and its executive officers, directors, holders of 10% or
more of the shares of any class of its common stock and affiliates thereof,
will contain terms no less favorable to Mystic Financial than could have
been obtained by it in arm's-length negotiations with unaffiliated persons
and will be approved by a majority of independent outside directors of
Mystic Financial not having any interest in the transaction.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Mystic Financial's
executive officers and directors, and persons who own more than 10% of the
Common Stock to file with the SEC reports of ownership and changes of
ownership. Officers, directors and greater than 10% stockholders are
required by SEC regulation to furnish Mystic Financial with copies of all
Section 16(a) forms they file. Based solely on its review of the copies of
such forms received by it, or written representations from certain
reporting persons, Mystic Financial believes that all filing requirements
applicable to its executive officers, directors and greater than 10%
beneficial owners for the fiscal year ended June 30, 2000 were complied
with.
ADDITIONAL INFORMATION
Information About Stockholder Proposals
If you wish to submit proposals to be included in our proxy statement
for the 2001 Annual Meeting of Stockholders, we must receive them by May
16, 2001, 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 Mystic Financial'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 Mystic Financial.
* Your notice must contain specific information required in our Bylaws.
By Order of the Board of Directors,
/s/ Lorraine P. Silva
Lorraine P. Silva
Secretary
Medford, Massachusetts
September 12, 2000
To assure that your shares are represented at the Annual Meeting, please
complete, sign, date and promptly return the accompanying proxy card in the
postage-paid envelope provided.
Mystic Financial, Inc. REVOCABLE PROXY
This Proxy is solicited on behalf of the Board of Directors of
Mystic Financial, Inc.
for the Annual Meeting of Stockholders to be held on October 18, 2000.
The undersigned stockholder of Mystic Financial, Inc. hereby appoints
Frederick N. Dello Russo, Richard M. Kazanjian, and John W. Maloney, 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 August 24, 2000, at the 2000 Annual
Meeting of Stockholders (the "Annual Meeting") to be held at 10:00 a.m.,
Eastern Time, on October 18, 2000, or at any adjournment or postponement
thereof, upon the matters described in the accompanying Notice of the 2000
Annual Meeting of Stockholders and Proxy Statement, dated September 12,
2000, and upon such other matters as may properly come before the Annual
Meeting. The undersigned hereby revokes all prior proxies.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is given,
this Proxy will be voted FOR the election of all nominees listed in Item 1
and FOR the proposal listed in Item 2.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
The Board of Directors unanimously recommends a vote "FOR" all of the
nominees named in Item 1 and a vote "FOR" the proposal in Item 2.
Please mark your vote as indicated in this example [x]
I will attend the Annual Meeting [ ]
1. Election of two Directors. FOR WITHHOLD
Nominees: John J. McGlynn, All nominees for all
and Robert H. Surabian for (except as nominees
terms of three years each. otherwise [ ]
indicated)
[ ]
Instruction: TO WITHHOLD AUTHORITY to vote for any individual nominee,
write that nominee's name in the space provided:
______________________________________________
2. Ratification of the appointment of FOR AGAINST ABSTAIN
Wolf & Company, P.C. as [ ] [ ] [ ]
independent auditors for the fiscal
year ending June 30, 2001.
The undersigned hereby acknowledges receipt of the Notice of the 2000
Annual Meeting of Stockholders and the Proxy Statement, dated September 12,
2000 for the 2000 Annual Meeting.
__________________________________
__________________________________
(Signature(s)
Dated: _____________________, 2000
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.
