EX-10 3 central10k_033102ex10-14.txt EXHIBIT 10.14 CENTRAL BANK SOMERVILLE, MASSACHUSETTS INCENTIVE PLAN TABLE OF CONTENTS INTRODUCTION AND HIGHLIGHTS OF PAGE INCENTIVE PLAN FOR FISCAL 2003.......................................... 1- 2 INCENTIVE PLAN SECTION I - DEFINITIONS................................................. 3 SECTION II - PARTICIPATION.............................................. 4 SECTION III - ACTIVATING THE PLAN....................................... 4 SECTION IV - 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 CENTRAL BANK SOMERVILLE, MASSACHUSETTS INTRODUCTION AND HIGHLIGHTS OF INCENTIVE PLAN FOR FISCAL 2003 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. 1 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 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 2004 for fiscal 2003 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% 2 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 at the end of the plan year, excluding any bonuses, contributions to employee benefit programs, or other compensation not designed 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. 3 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 at the start and 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 and exceeding the bank 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. 4 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. 5 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 their performance warrants. Board of Directors may adjust the President and CEO bonus award. 6