CENTRAL BANK
SOMERVILLE, MASSACHUSETTS
INCENTIVE PLAN
TABLE OF CONTENTS
Introduction and Highlights of Page
Incentive Plan for Fiscal 2004.......................................... 1- 2
Incentive Plan
Section I - Definitions.................................................... 3
Section II - Participation.................................................. 4
Section III - Activating the Plan............................................ 4
Section lV - Calculations of Awards......................................... 4
Section V - Distribution of Awards......................................... 5
Section VI - Plan Administration............................................ 5
Section VII - Amendment, Modification, Suspension or
Termination............................................... 5
Section VIII - Effective Date................................................ 6
Section IX - Employer Relations with Participants.......................... 6
Section X - Governing Law................................................. 6
Section XI - President's Discretion........................................ 6
Fiscal 2004 Performance Goals........................................Appendix A
Distribution of Awards...............................................Appendix B
CENTRAL BANK
SOMERVILLE, MASSACHUSETTS
INTRODUCTION AND HIGHLIGHTS OF
INCENTIVE PLAN FOR FISCAL 2004
Thomas Warren and Associates has been retained by the Central Bank to develop an
incentive plan. It is important to examine the benefits which accrue to the
organization through the operation of the incentive plan.
o Provides Motivation: The opportunity for incentive awards provides
executives with the impetus to "stretch" for challenging, yet
attainable, goals.
o Provides Retention: by enhancing the bank's competitive compensation
posture.
o Provides Management Team Building: by making the incentive award
dependent on the attainment of bank goals, a "team orientation" is
fostered among the participant group.
o Provides Competitive Compensation Strategy: The implementation of
incentive arrangements is common in the banking industry today.
CENTRAL BANK
SOMERVILLE, MASSACHUSETTS
The highlights of the incentive plan included in the following pages are as
follows:
1. The recommended plan is competitive compared with similar sized banks
and the banking industry in general.
2. The Board of Directors controls all aspects of the Plan
3. All exempt employees level IV and higher are participants, with the
exception of the Infinex employees.
4. The financial criteria necessary for plan operation consists of ROAA
and individual objectives goals.
5. Incentive distributions range form 0% of base salary (did not meet
goal) to 30% of base salary (maximum performance of plan).
6. Award distribution would be made during the fiscal 2005 for fiscal
2004 performance.
7. The categories of incentive plan participants are as follows:
Position: Range of Bonus Awards:
CEO 0% - 30%
Senior Vice Presidents 0% - 25%
Vice Presidents 0% - 20%
Middle Management Officers 0% - 15%
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CENTRAL BANK
SOMERVILLE, MASSACHUSETTS
The Board of Directors of Central Bank has established this Incentive Plan. The
purpose of the plan is to meet and exceed financial goals and to promote a
superior level of performance relative to the Bank's competition in its market
area. Through payment of incentive compensation beyond base salaries, the plan
provides reward for meeting and exceeding the bank's financial goals as well as
recognition of individual achievements for plan participants.
SECTION I - DEFINITIONS
Various terms used in the plan are defined as follows:
Base Salary: the base salary earned during the plan year, excluding any
bonuses, commissions, contributions to employee benefit programs, or other
compensation not designated as salary.
Board of Directors: The Board of Directors of Central Bank.
President & CEO: President and CEO of Central Bank.
Management Performance Goals: Those pre-set objectives and goals that are
required to activate distribution of awards under the plan.
Compensation Committee: The Compensation Committee of the Board of
Directors of the Bank.
Plan Participant: An eligible employee of the Bank designated by the
President & CEO and approved by the Compensation Committee for
participation for the Plan year. Infinex employees will not participate in
the plan.
Plan Year: The Bank's fiscal year.
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SECTION II - ELIGIBILITY TO PARTICIPATE
To be eligible for an award under the plan, a plan participant must be in the
service of the Bank on September 30, 2003 and at the close of the fiscal year.
If a bonus plan participant leaves the employ of the Bank during the plan year,
he/she is not eligible to receive an award. However, if the active service with
the Bank of a participant in the plan is terminated by death, disability,
retirement, or if the participant is on an approved leave of absence, the
President may recommend an award to such a participant based on the proportion
of the plan year that he/she was in active service with the Bank. Part time
employees will participate in the Plan.
SECTION III - ACTIVATING THE PLAN
The operation of the plan is predicated on attaining or exceeding the ROAA
performance goal. The performance goal for the plan year is set forth in
Appendix A.
SECTION IV - CALCULATION OF AWARDS
The Compensation Committee designates a rate of distribution for the executive
award. The actual rate of distribution is based upon Bank performance. The full
Board of Directors will approve the plan and annual amendments.
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SECTION V - DISTRIBUTION OF AWARDS
Distribution of awards will be made during the first quarter following the plan
year after the May Board meeting. In the event of death, any approved award as
outlined in Section II for distribution will become payable to the designated
beneficiary of the participant as recorded under the Bank's group life insurance
program, or in the absence of a valid designation, to the participant's estate.
SECTION VI - PLAN ADMINISTRATION
The Compensation Committee shall, with respect to the plan, have full power and
authority to construe, interpret and manage, control and administer this plan,
and to pass and decide upon cases in conformity with the objectives of the plan
under such rules as the Board of Directors of the Bank may establish.
Any decision made or action taken by the Bank, the Board of Directors, or the
Compensation Committee arising out of, or in connection with, the
administration, interpretation, and effect of the plan shall be at their
absolute discretion and will be conclusive and binding on all parties.
No member of the Board of Directors, Compensation Committee, or employee of the
Bank shall be liable for any act or action hereunder, whether of omission or
commission, by a plan participant or employee or by any agent to whom duties in
connection with the administration of the plan have been delegated in accordance
with the provision of the plan.
SECTION VII - AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION
The Bank reserves the right, by and through its Board of Directors to amend,
modify, suspend, reinstate or terminate all or part of the plan at the end of
any plan year. The Board of Directors will give prompt written notice to each
participant of any amendment, suspension or termination or any material
modification of the plan. The plan will be modified should any unusual event
occur such as an acquisition and /or sale of branch, etc.
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SECTION VIII - EFFECTIVE DATE OF THE PLAN
The initial effective date of the plan shall be April 1, 2001 and the April 1 of
each fiscal year for succeeding plan years.
SECTION IX - EMPLOYER RELATION WITH PARTICIPANTS
Neither establishment nor the maintenance of the plan shall be construed as
conferring any legal rights upon any participant or any person for a
continuation of employment, nor shall it interfere with the right of an employer
to discharge any participant or otherwise deal with him/her without regard to
the existence of the plan.
SECTION X - GOVERNING LAW
Except to the extent pre-empted under federal law, the provisions of the plan
shall be construed, administered and enforced in accordance with the domestic
internal law of the Commonwealth of Massachusetts.
In the event of relevant changes in the Internal Revenue Code, related rulings
and regulations, or changes imposed by other regulatory agencies affecting the
continued appropriateness of the plan and awards made hereunder, the Board may,
at its sole discretion, accelerate or change the manner of payments of any
unpaid awards or amend the provisions of the plan.
SECTION XI - PRESIDENT'S DISCRETION
The President and CEO will review the amounts to be awarded to individual
participants in the incentive plan. No award will be made to a participant whose
normal performance appraisal does not meet acceptable standards. The President
may recommend to the Board of Directors an adjustment to a bonus award for an
individual if his/her performance warrants. Board of Directors may adjust the
President and CEO bonus award.
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