MYSTIC FINANCIAL INC
EXHIBIT 10.1
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>myst-101.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>

                                                                 Exhibit 10.1

                            EMPLOYMENT AGREEMENT

      This Employment Agreement ("Agreement") is made and entered into
effective as of June 1, 2001, by and between Mystic Financial, Inc., a
publicly-held business corporation organized and operating under the laws of
the State of Delaware and having an office at 60 High Street, Medford,
Massachusetts 02155 ("Company") and Ralph W. Dunham, an individual residing
at 8 Peachtree Path, Andover, Massachusetts 01810 ("Executive").  Any
reference to "Bank" herein shall mean Medford Co-Operative Bank, a wholly-
owned subsidiary of the Company, or any successor thereto.

                            W i t n e s s e t h :

      Whereas, Executive has been elected to serve the Company in the
capacity of President and Chief Executive Officer and also has been elected
to serve as President and Chief Executive Officer of the Bank; and

      Whereas, the Company desires to assure for itself and for the Bank the
availability of Executive's services and the ability of Executive to perform
such services with a minimum of personal distraction in the event of a
pending or threatened Change of Control (as hereinafter defined); and

      Whereas, Executive is willing to serve the Company and the Bank on the
terms and conditions hereinafter set forth;

      Whereas, this Agreement is intended to supercede any and all prior
employment agreements between the Executive and the Company or the Executive
and the Bank;

      Now, Therefore, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, the Company and Executive
hereby agree as follows:

Section 1.   Employment.

      The Company agrees to continue to employ Executive, and Executive
hereby agrees to such continued employment, during the period and upon the
terms and conditions set forth in this Agreement.

Section 2.   Employment Period; Remaining Unexpired Employment Period.

      (a)   The terms and conditions of this Agreement shall be and remain
in effect during the period of employment established under this section 2
("Employment Period").  The Employment Period shall be for an initial term
of three (3) years beginning on the date of this Agreement and ending on the
third (3rd) anniversary date of this Agreement (each, an "Anniversary

<PAGE>


Date").  Upon each Anniversary Date of this Agreement, the Board of
Directors of the Company ("Board") shall review the terms of this Agreement
and the Executive's performance of services hereunder and may, in the
absence of objection from the Executive, approve an extension of the
Employment Agreement to a new three year term.  The "Remaining Unexpired
Employment Period" shall be the remaining period of the Employment Period
subject to such extensions as the Board may determine pursuant to this
paragraph unless modified by this Agreement.

      (b)   Nothing in this Agreement shall be deemed to prohibit the
Company at any time from terminating Executive's employment during the
Employment Period with or without notice for any reason; provided, however,
that the relative rights and obligations of the Company and Executive in the
event of any such termination shall be determined under this Agreement.

      (c)   Nothing in this Agreement shall be deemed to prohibit the
Executive at any time from terminating his employment during the Employment
Period with or without notice for any reason; provided, however, that the
relative rights and obligations of the Company and Executive in the event of
any such termination shall be determined under this Agreement.

Section 3.   Duties.

      Executive shall serve as President and Chief Executive Officer of the
Company and the Bank, and having such power, authority and responsibility
and performing such duties as are prescribed by or under the By-Laws of the
Company and the Bank and as are customarily associated with such positions.
Executive shall devote his full business time and attention (other than
during weekends, holidays, approved vacation periods, and periods of illness
or approved leaves of absence) to the business and affairs of the Company
and the Bank and shall use his best efforts to advance the interests of the
Company and the Bank.

Section 4.   Cash Compensation.

      In consideration for the services to be rendered by Executive
hereunder, the Company shall pay to him a salary at an initial annual rate
of ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000), payable in approximately
equal installments in accordance with the  Company's or Bank's customary
payroll practices for senior officers.  The Board shall review Executive's
annual rate of salary at such times during the Employment Period as it deems
appropriate, but not less frequently than once every twelve months, and may,
in its discretion, approve an increase in the Executive's annual rate of
salary.  In addition to salary, Executive may receive other cash
compensation from the Company or the Bank for services hereunder at such
times, in such amounts and on such terms and conditions as the Board, as
applicable, may determine from time to time.

<PAGE>  2


Section 5.   Employee Benefit Plans and Programs.

      During the Employment Period, Executive shall be treated as an
employee of the Company and the Bank and shall be entitled to participate in
and receive benefits under any and all qualified or non-qualified
retirement, pension, savings, profit-sharing or stock bonus plans, any and
all group life, health (including hospitalization, medical and major
medical), dental, accident and long-term disability insurance plans, and any
other employee benefit and compensation plans (including, but not limited
to, any incentive compensation plans or programs, stock option and
appreciation rights plans and restricted stock plans) as may from time to
time be maintained by, or cover employees of, the Company or the Bank, in
accordance with the terms and conditions of such employee benefit plans and
programs and compensation plans and programs and consistent with the
Company's and Bank's customary practices.  Nothing paid to the Executive
under any such plan or arrangement will be deemed to be in lieu of other
compensation to which the Executive is entitled under this Agreement.

Section 6.   Indemnification and Insurance.

      (a)   During the Employment Period and for so long as the Executive is
subject for suit on claims related to his performance of the duties
described in section 3 of this Agreement, the Company shall cause Executive
to be covered by and named as an insured under any policy or contract of
insurance obtained by it or the Bank to insure its directors and officers
against personal liability for acts or omissions in connection with service
as an officer or director of the  Company or the Bank or service in other
capacities at the request of the  Company or the Bank.  The coverage
provided to Executive pursuant to this section 6 shall be of the same scope
and on the same terms and conditions as the coverage (if any) provided to
other officers or directors of the Company and the Bank.

      (b)   To the maximum extent permitted under applicable law, during the
Employment Period and for so long as the Executive is subject for suit on
claims related to his performance of the duties described in section 3 of
this Agreement, the  Company shall indemnify Executive against and hold him
harmless from any costs, liabilities, losses and exposures to the fullest
extent and on the most favorable terms and conditions that similar
indemnification is offered to any director or officer of the Company, the
Bank, or any subsidiary or affiliate thereof.

Section 7.   Outside Activities.

      Executive may serve as a member of the boards of directors of such
business, community and charitable organizations as he may disclose to and
as may be approved by the Board (which approval shall not be unreasonably
withheld); provided, however, that such service shall not materially
interfere with the performance of his duties under this Agreement.
Executive may also engage in personal business and investment activities
which do not materially interfere with the performance of his duties
hereunder; provided, however, that such activities are not prohibited under
any code of conduct or investment or securities trading policy established
by the Company and generally applicable to all similarly situated
executives.  The Executive shall be permitted to take

<PAGE>  3


continuing professional education courses necessary to meet applicable
licensing requiements to maintain current professional licenses as an
attorney and professional certified public accountant.  Executive may also
serve as an officer or director of the Bank on such terms and conditions as
the Company and the Bank may mutually agree upon, and such service shall not
be deemed to materially interfere with Executive's performance of his duties
hereunder or otherwise result in a material breach of this Agreement.  If
Executive is discharged or suspended, or is subject to any regulatory
prohibition or restriction, with respect to participation in the affairs of
the Bank, he shall continue to perform services for the Company in
accordance with this Agreement but shall not directly or indirectly provide
services to or participate in the affairs of the Bank in a manner
inconsistent with the terms of such discharge or suspension or any
applicable regulatory order.

Section 8.   Working Facilities and Expenses.

      Executive's principal place of employment shall be at the Company's
executive offices at the address first above written, or at such other
location within Middlesex County at which the Company shall maintain its
principal executive offices, or at such other location as the  Company and
Executive may mutually agree upon.  The Company shall provide or cause the
Bank to provide the Executive at his principal place of employment with a
private office, secretarial services, and other support services and
facilities suitable to his position with the Company and necessary or
appropriate in connection with the performance of his assigned duties under
this Agreement. The Company shall provide to the Executive for his exclusive
use an automobile owned or leased by the Company and appropriate to his
position, to be used in the performance of his duties hereunder, including
commuting to and from his personal residence.  The Company shall reimburse
Executive for his ordinary and necessary business expenses, including,
without limitation, all expenses associated with his business use of the
aforementioned automobile (including gasoline and insurance expenditures),
fees for memberships in such clubs and organizations as Executive and the
Company shall mutually agree are necessary and appropriate for business
purposes, and his travel and entertainment expenses incurred in connection
with the performance of his duties under this Agreement, in each case upon
presentation to the Company of an itemized account of such expenses in such
form as the Company may reasonably require.

Section 9.   Termination of Employment with Severance Benefits.

      (a)   Executive shall be entitled to the severance benefits described
in section 9(b) herein in the event that his employment with the Company or
the Bank terminates during the Employment Period under any of the following
circumstances:

            (i)   Executive's voluntary resignation from employment with the
      Company within ninety (90) days following:

                  (A)   the failure of the Board to appoint or re-appoint or
            elect or re-elect Executive to the position stated in section 3
            of this Agreement (or a more senior office of the Company) or
            the failure of the Board of Directors of the Bank ("Bank Board")
            to appoint or re-appoint or elect or re-elect

<PAGE>  4


            Executive to the position stated in section 3 of this Agreement
            (or a more senior position of the Bank);

                  (B)   the failure of the stockholders of the  Company or
            the Bank to elect or re-elect Executive to the Board or a member
            of the Bank Board, or the failure of the Board or the Bank Board
            (or the nominating committee thereof) to nominate Executive for
            such election or re-election;

                  (C)   the expiration of a thirty (30) day period following
            the date on which Executive gives written notice to the Company
            or the Bank, as the case may be, of its material failure,
            whether by amendment of the Company's organization certificate
            or By-Laws, or the Bank's state charter or By-Laws, action of
            the Board, Bank Board or the Company's stockholders or
            otherwise, to vest in Executive the functions, duties, or
            responsibilities prescribed in section 3 of this Agreement,
            unless, during such thirty (30) day period, such failure is
            cured in a manner determined by Executive, in his discretion, to
            be satisfactory; or

                  (D)   the expiration of a thirty (30) day period following
            the date on which Executive gives written notice to the Company
            or the Bank, as the case may be, of its material breach of any
            term, condition or covenant contained in this Agreement
            (including, without limitation any reduction of Executive's rate
            of base salary in effect from time to time and any change in the
            terms and conditions of any compensation or benefit program in
            which Executive participates which, either individually or
            together with other changes, has a material adverse effect on
            the aggregate value of his total compensation package), unless,
            during such thirty (30) day period,  such failure is cured in a
            manner determined by Executive, in his discretion, to be
            satisfactory; or

            (ii)  subject to the provisions of section 10, the termination
      of Executive's employment with the Company for any other reason not
      described in section 9(a) other than a termination of the Executive's
      employment for "cause";

then, the Company shall provide (or cause the Bank or pay and provide) the
benefits and pay to Executive the amounts described in section 9(b).

      (b)   Upon the termination of Executive's employment with the Company
under circumstances described in section 9(a) of this Agreement, the Company
shall pay and provide (or cause the Bank to pay and provide) to Executive
(or, in the event of his death, to his estate):

            (i)   the portion, if any, of the compensation earned by the
      Executive through the date of the termination of his employment with
      the Company which remains unpaid as of such date, such payment to be
      made at the time and in the manner prescribed by law applicable to the
      payment of wages but in no event later than thirty (30) days after the
      Executive's termination of employment;

<PAGE>  5


            (ii)  the benefits, if any, to which he is entitled as a former
      employee under the employee benefit plans and programs and
      compensation plans and programs maintained by the Company and the Bank
      for their officers and employees; provided however, that these
      benefits shall not include the benefits provided under any severance
      plans maintained by the Company or the Bank that are payable in money;

            (iii) continued group life, health (including hospitalization,
      medical and major medical), dental, accident and long-term disability
      insurance benefits, in addition to that provided pursuant to section
      9(b)(ii), and after taking into account the coverage provided by any
      subsequent employer, if and to the extent necessary to provide for
      Executive, for the Remaining Unexpired Employment Period, coverage
      equivalent to the coverage to which he would have been entitled under
      such plans (as in effect on the date of his termination of employment,
      or, if his termination of employment occurs after a Change of Control,
      on the date of such Change of Control, whichever benefits are
      greater), if he had continued working for the Company during the
      Remaining Unexpired Employment Period at the highest annual rate of
      compensation achieved during that portion of the Employment Period
      which is prior to Executive's termination of employment with the
      Company; and

            (iv)  within thirty (30) days following his termination of
      employment with the  Company, a lump sum payment, in an amount equal
      to the present value of the salary that Executive would have earned if
      he had continued working for the  Company during the Remaining
      Unexpired Employment Period at the highest annual rate of salary
      achieved during that portion of the Employment Period which is prior
      to Executive's termination of employment with the Company, where such
      present value is to be determined using a discount rate equal to the
      applicable short-term federal rate prescribed under section 1274(d) of
      the Internal Revenue Code of 1986 ("Code"), compounded using the
      compounding period corresponding to the  Company's regular payroll
      periods for its officers, such lump sum to be paid in lieu of all
      other payments of salary provided for under this Agreement in respect
      of the period following any such termination.

The Company and Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that
the payments and benefits contemplated by this section 9(b) constitute
reasonable damages under the circumstances and shall be payable without any
requirement of proof of actual damage and without regard to Executive's
efforts, if any, to mitigate damages.  The Company and Executive further
agree that the Company may condition the payments and benefits (if any) due
under sections 9(b)(iii) and 9(b)(iv) on the receipt of Executive's
resignation from any and all positions which he holds as an officer,
director or committee member with respect to the Company, the Bank or any
subsidiary or affiliate of either of them.

<PAGE>  6


Section 10.   Termination without Additional Company Liability.

      In the event that Executive's employment with the Company shall
terminate during the Employment Period on account of:

            (a)   the discharge of the Executive for "cause," which, for
      purposes of this Agreement shall mean 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, or
      any material breach of this Agreement, in each case as measured
      against standards generally prevailing at the relevant time in the
      savings and community banking industry; provided, however, that no
      discharge for "cause" shall occur unless the grounds for such
      discharge are material as as measured against standards generally
      prevailing at the relevant time in the savings and community banking
      industry;

            (b)   Executive's voluntary resignation from employment with the
      Company for reasons other than those specified in section 9(a);or

            (c)    Executive's death;

then the Company shall have no further obligations under this Agreement,
other than the payment to Executive (or, in the event of his death, to his
estate) of the portion, if any, of the salary earned by the Executive
through the date of his termination of employment with the Company which
remains unpaid as of such date and the provision of such other benefits, if
any, to which he is entitled as a former employee under the employee benefit
plans and programs and compensation plans and programs maintained by, or
covering employees of, the Company or the Bank.

      For purposes of section 10(a), no act or failure to act, on the part
of Executive, shall be considered "willful" unless it is done, or omitted to
be done, by Executive in bad faith or without reasonable belief that
Executive's action or omission was in the best interests of the Company and
its affiliates.  Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon the written
advice of counsel for the Company shall be conclusively presumed to be done,
or omitted to be done, by Executive in good faith and in the best interests
of the Company.  The cessation of employment of Executive shall not be
deemed to be for "cause" within the meaning of section 10(a) unless and
until there shall have been delivered to Executive a copy of a resolution
duly adopted by the affirmative vote of three-fourths of the non-employee
members of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to Executive and Executive is
given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, Executive is guilty of
the conduct described in section 10(a) above, and specifying the particulars
thereof in detail.

<PAGE>  7


Section 11.   Termination Upon or Following a Change of Control.

      (a)   A Change of Control of the Company ("Change of Control") shall
be deemed to have occurred upon the happening of any of the following
events:

            (i)   approval by the stockholders of the Company of a
      transaction that would result in the reorganization, merger or
      consolidation of the Company, respectively, with one or more other
      persons, other than a transaction following which:

                  (A)   at least 51% of the equity ownership interests of
            the entity resulting from such transaction are beneficially
            owned (within the meaning of Rule 13d-3 promulgated under the
            Securities Exchange Act of 1934, as amended "Exchange Act") in
            substantially the same relative proportions by persons who,
            immediately prior to such transaction, beneficially owned
            (within the meaning of Rule 13d-3 promulgated under the Exchange
            Act) at least 51% of the outstanding equity ownership interests
            in the Company; and

                  (B)   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;

            (ii)  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;

            (iii) a complete liquidation or dissolution of the Company, or
      approval by the stockholders of the  Company of a plan for such
      liquidation or dissolution;

            (iv)  the occurrence of any event if, immediately following such
      event, at least 50% of the members of the Board of the Company do not
      belong to any of the following groups:

                  (A)   individuals who were members of the Board of the
            Company on the date of this Agreement; or

                  (B)   individuals who first became members of the Board of
            the Company after the date of this Agreement either:

<PAGE>  8


                        (I)   upon election to serve as a member of the
                  Board 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

                        (II)  upon election by the stockholders of the
                  Company to serve as a member of the Board of the Company,
                  but only if nominated for election by affirmative vote of
                  three-quarters of the members of the Board of the Company,
                  or of a nominating committee thereof, in office at the
                  time of such first nomination;

            provided, however, that such individual's election or nomination
            did not result from an actual or threatened election contest
            (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

            (v)   any event which would be described in section 11(a)(i),
      (ii), (iii) or (iv) if the term "Bank" were substituted for the term
      "Company" each time the term appears therein.

In no event, however, shall a Change of Control be deemed to have occurred
as a result of any acquisition of securities or assets of the Company, the
Bank, or a subsidiary of either of them, by the Company, the Bank, or a
subsidiary of either of them, or by any employee benefit plan maintained by
any of them.  For purposes of this section 11(a), the term "person" shall
have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the
Exchange Act.

      (b)   In the event of a Change of Control, Executive shall be entitled
to the payments and benefits contemplated by section 9(b) with the Remaining
Unexpired Employment Period being a fixed term of three (3) years in the
event of his termination employment with the Company under any of the
circumstances described in section 9(a) of this Agreement or under any of
the following circumstances:

            (i)   resignation, voluntary or otherwise, by Executive at any
      time during the Employment Period following his demotion, loss of
      title, office or significant authority or responsibility, or following
      any reduction in any element of his package of compensation and
      benefits;

            (ii)  resignation, voluntary or otherwise, by Executive at any
      time during the Employment Period following any relocation of his
      principal place of employment or any change in working conditions at
      such principal place of employment which Executive, in his reasonable
      discretion, determines to be embarrassing, derogatory or otherwise
      adverse;

<PAGE>  9


            (iii) resignation, voluntary or otherwise, by Executive at any
      time during the Employment Period following the failure of any
      successor to the  Company in the Change of Control to include
      Executive in any compensation or benefit program maintained by it or
      covering any of its executive officers, unless Executive is already
      covered by a substantially similar plan of the Company which is at
      least as favorable to him; or

            (iv)  resignation, voluntary or otherwise, for any reason
      whatsoever following the effective date of the Change of Control.

Section 12.   Termination Due to Disability.

      The Company may terminate the Executive's employment upon a
determination, by separate votes of a majority of the members of the Board
acting in reliance on the written advice of an independent, third-party
physician acceptable to both the Board and the Executive, that the Executive
is suffering from a physical or mental impairment which, at the date of the
determination, has prevented the Executive from performing his assigned
duties on a substantially full-time basis for a period of at least one
hundred and eighty (180) days during the period of one (1) year ending with
the date of the determination or is likely to result in death or prevent the
Executive from performing his assigned duties on a substantially full-time
basis for a period of at least one hundred and eighty (180) days during the
period of one (1) year beginning with the date of the determination.  In
such event:

            (a)   The Company shall pay and deliver to the Executive (or in
      the event of his death before payment, to his estate and surviving
      dependents and beneficiaries, as applicable) the benefits described in
      sections 9(b)(i) and 9(b)(ii) of this Agreement.

            (b)   In addition to the benefits described in sections 9(b)(i)
      and 9(b)(ii) of this Agreement, the Company shall continue to pay the
      Executive his base salary, at the annual rate in effect for him
      immediately prior to the termination of his employment, during a
      period ending on the earliest of: (i) the expiration of one hundred
      and eighty (180) days after the date of termination of his employment;
      (ii) the date on which long-term disability insurance benefits are
      first payable to him under any long-term disability insurance plan
      covering employees of the Bank or the Company (the "LTD Eligibility
      Date"); (iii) the date of his death; and (iv) the expiration of the
      Remaining Unexpired Employment Period (the "Initial Continuation
      Period").  If the end of the Initial Continuation Period is neither
      the LTD Eligibility Date nor the date of his death, the Company shall
      continue to pay the Executive his base salary, at an annual rate equal
      to sixty percent (60%) of the annual rate in effect for him
      immediately prior to the termination of his employment, during an
      additional period ending on the earliest of the LTD Eligibility Date,
      the date of his death and the expiration of the Remaining Unexpired
      Employment Period.

<PAGE>  10


A termination of employment due to disability under this section 12 shall be
effected by notice of termination given to the Executive by the Company and
shall take effect on the later of the effective date of termination
specified in such notice or the date on which the notice of termination is
deemed given to the Executive.

Section 13.   Tax Indemnification.

      (a)   This section 13 shall apply if Executive's employment is
terminated upon or following (i) a Change of Control (as defined in section
11 of this Agreement); or (ii) a change "in the ownership or effective
control" of the Company or the Bank or "in the ownership of a substantial
portion of the assets" of the Company or the Bank within the meaning of
section 280G of the Code.  If this section 13 applies, then, if for any
taxable year, Executive shall be liable for the payment of an excise tax
under section 4999 of the Code with respect to any payment in the nature of
compensation made by the Company, the Bank or any direct or indirect
subsidiary or affiliate of the Company or the Bank to (or for the benefit
of) Executive, it shall be the sole obligation and responsibility of the
Company to pay to Executive an amount equal to X, determined under the
following formula:

                                    E x P
             X   =   ------------------------------------
                     1 - [(FI x (1 - SLI)) + SLI + E + M]

             where

             E   =   the rate at which the excise tax is assessed under
                     section 4999 of the Code;

             P   =   the amount with respect to which such excise tax is
                     assessed, determined without regard to this section 13;

             FI  =   the highest marginal rate of income tax applicable to
                     Executive under the Code for the taxable year in
                     question;

             SLI =   the sum of the highest marginal rates of income tax
                     applicable to Executive under all applicable state and
                     local laws for the taxable year in question; and

             M   =   the highest marginal rate of Medicare tax applicable to
                     Executive under the Code for the taxable year in
                     question.

With respect to any payment in the nature of compensation that is made to
(or for the benefit of) Executive under the terms of this Agreement, or
otherwise, and on which an excise tax under section 4999 of the Code will be
assessed, the payment determined under this section 13(a) shall be made to
Executive on the earlier of (i) the date the Company, the Bank or any direct
or indirect subsidiary or affiliate of the Company or the Bank is required
to withhold such tax, or (ii) the date the tax is required to be paid by
Executive.

<PAGE>  11


      (b)   Notwithstanding anything in this section 13 to the contrary, in
the event that Executive's liability for the excise tax under section 4999
of the Code for a taxable year is subsequently determined to be different
than the amount determined by the formula (X + P) x E, where X, P and E have
the meanings provided in section 13(a), Executive or the Company, as the
case may be, shall pay to the other party at the time that the amount of
such excise tax is finally determined, an appropriate amount, plus interest,
such that the payment made under section 13(a), when increased by the amount
of the payment made to Executive under this section 13(b) by the  Company,
or when reduced by the amount of the payment made to the Company under this
section 13(b) by Executive, equals the amount that should have properly been
paid to Executive under section 13(a).  The interest paid under this section
13(b) shall be determined at the rate provided under section 1274(b)(2)(B)
of the Code.  To confirm that the proper amount, if any, was paid to
Executive under this section 13, Executive shall furnish to the  Company a
copy of each tax return which reflects a liability for an excise tax payment
made by the  Company, at least 20 days before the date on which such return
is required to be filed with the Internal Revenue Service.

Section 14.   Protective Covenants

      (a)   Non-Competition.  The Executive hereby covenants and agrees
that, in the event of his termination of employment with the Company prior
to the expiration of the Employment Period, for a period of one year
following the date of his termination of employment with the Company or the
Bank, he shall not, without the written consent of the Company, become an
officer, employee, consultant, director or trustee of any savings bank,
savings and loan association, savings and loan holding company, bank or bank
holding company, any other entity engaged in the business of accepting
deposits or making loans, or any direct or indirect subsidiary or affiliate
of any such entity  having its principal office located in Middlesex County;
provided, however, that this section 14(a) shall not apply if the Executive
is entitled to the benefits described in sections 9(b)(iii) and 9(b)(iv) due
to a change of control under section 11 hereof or due to a termination that
is not for cause.  For purposes of this section 14(a), termination for cause
shall mean termination for personal dishonesty, 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, or
any material breach of this Agreement, in each case as measured against
standards generally prevailing at the relevant time in the savings and
community banking industry; provided, however, that no termination for
"cause" shall occur unless the grounds for such discharge are material as as
measured against standards generally prevailing at the relevant time in the
savings and community banking industry.

      (b)   Confidentiality.  Unless he obtains the prior written consent of
the Company, the Executive shall keep confidential and shall refrain from
using for the benefit of himself, or any person or entity other than the
Company or any entity which is a subsidiary of the Company or of which the
Company is a subsidiary, any material document or information obtained from
the Company, or from its parent or subsidiaries, in the course of his
employment with any of them concerning their properties, operations or
business (unless such document or information is readily ascertainable from
public or published information or trade sources or has otherwise been made
available to the public through no fault of her own) until the same ceases
to be material (or becomes so ascertainable or available); provided,
however, that nothing in this section 14(b) shall prevent the

<PAGE>  12


Executive, with or without the Company's consent, from participating in or
disclosing documents or information in connection with any judicial or
administrative investigation, inquiry or proceeding to the extent that such
participation or disclosure is required under applicable law.

      (c)   Solicitation.  The Executive hereby covenants and agrees that,
for a period of one year following his termination of employment with the
Company or the Bank, he shall not, without the written consent of the
Company and the Bank, either directly or indirectly:

            (i)   solicit, offer employment to, or take any other action
      intended, or that a reasonable person acting in like circumstances
      would expect, to have the effect of causing any officer or employee of
      the Company, the Bank or any of their respective subsidiaries or
      affiliates to terminate his or her employment and accept employment or
      become affiliated with, or provide services for compensation in any
      capacity whatsoever to, any savings bank, savings and loan
      association, bank, bank holding company, savings and loan holding
      company, or other institution engaged in the business of accepting
      deposits, making loans or doing business and having its principal
      office located in Middlesex County;

            (ii)  provide any information, advice or recommendation with
      respect to any such officer or employee of any savings bank, savings
      and loan association, bank, bank holding company, savings and loan
      holding company, or other institution engaged in the business of
      accepting deposits, making loans or doing business within the counties
      specified in section 14(a); that is intended, or that a reasonable
      person acting in like circumstances would expect, to have the effect
      of causing any officer or employee of the Company, the Bank, or any of
      their respective subsidiaries or affiliates to terminate his
      employment and accept employment or become affiliated with, or provide
      services for compensation in any capacity whatsoever to, any savings
      bank, savings and loan association, bank, bank holding company,
      savings and loan holding company, or other institution engaged in the
      business of accepting deposits, making loans or doing business and
      having its principal office located in Middlesex County;

           (iii) solicit, provide any information, advice or recommendation
      or take any other action intended, or that a reasonable person acting
      in like circumstances would expect, to have the effect of causing any
      customer of the Company to terminate an existing business or
      commercial relationship with the Company.

      (d)   Survival of the Section 14 Provisions.  The provisions of this
section 14 shall survive the termination or expiration of this Agreement,
and the existence of any claim or cause of action of the Executive against
the Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of such covenant.

<PAGE>  13


Section 15.   No Effect on Employee Benefit Plans or Programs.

      The termination of Executive's employment during the term of this
Agreement or thereafter, whether by the Company or by Executive, shall have
no effect on the rights and obligations of the parties hereto under the
Company's or Bank's qualified or non-qualified retirement, pension, savings,
thrift, profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long-term
disability insurance plans or such other employee benefit plans or programs,
or compensation plans or programs, as may be maintained by, or cover
employees of, the Company or the Bank from time to time.

Section 16.   Company Stock Rights.

      (a)   At the election of the Company made within thirty (30) days
following the Executive's termination of employment with the Company, the
Company may request the surrender of options or appreciation rights issued
to Executive under any stock option and appreciation rights plan or program
maintained by, or covering employees of, the  Company or the Bank, in
exchange for which the Company agrees to pay a lump sum payment in an amount
equal to the product of:

            (A)   the excess of (I) the fair market value of a share of
      stock of the same class as the stock subject to the option or
      appreciation right, determined as of the date of termination of
      employment, over (II) the exercise price per share for such option or
      appreciation right, as specified in or under the relevant plan or
      program; multiplied by

            (B)   the number of shares with respect to which options or
      appreciation rights are being surrendered.

      (b)   At the election of the Company made within thirty (30) days
following the Executive's termination of employment with the Company, the
Company may request the surrender of any unvested shares awarded to
Executive under any restricted stock plan maintained by, or covering
employees of, the Company or the Bank, in exchange for which the Company
agrees to pay a lump sum payment in an amount equal to the product of:

            (A)   the fair market value of a share of stock of the same
      class of stock granted under such plan, determined as of the date of
      Executive's termination of employment; multiplied by

            (B)   the number of shares which are being surrendered.

Section 17.   Successors and Assigns.

      This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees,
and the Company and its successors and assigns, including any successor by
merger or consolidation or a statutory receiver or any other person or firm

<PAGE>  14


or corporation to which all or substantially all of the assets and business
of the  Company may be sold or otherwise transferred.  Failure of the
Company to obtain from any successor its express written assumption of the
Company's obligations hereunder at least sixty (60) days in advance of the
scheduled effective date of any such succession shall be deemed a material
breach of this Agreement.

Section 18.   Notices.

      Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent,
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:

      If to Executive:

            Mr. Ralph W. Dunham
            8 Peach Tree Path
            Andover, Massachusetts 01810

      If to the Company:

            Mystic Financial, Inc.
            60 High Street
            Medford, Massachusetts  02155

            Attention:  Board of Directors - Non-Employee Directors

            with a copy to:

            Thacher Proffitt & Wood
            1700 Pennsylvania Avenue, N.W., Suite 800
            Washington, D.C.  20006

            Attention:   Richard A. Schaberg, Esq.

Section 19.   Indemnification for Attorneys' Fees.

      The Company shall indemnify, hold harmless and defend Executive
against reasonable attorneys' fees and expenses incurred by him in
connection with or arising out of any mediation, action, suit or proceeding
in which he may be involved, as a result of his efforts, in good faith, to
defend or enforce the terms of this Agreement; provided, however, that
Executive shall have

<PAGE>  15


substantially prevailed on the merits pursuant to a judgment, decree or
order of a court of competent jurisdiction or of an arbitrator in an
arbitration proceeding, or of a mediator in a mediation proceeding, or in a
settlement.  For purposes of this Agreement, any settlement agreement which
provides for payment of any amounts in settlement of the Company's
obligations hereunder shall be conclusive evidence of Executive's
entitlement to indemnification hereunder, and any such indemnification
payments shall be in addition to amounts payable pursuant to such settlement
agreement, unless such settlement agreement expressly provides otherwise.

Section 20.   Severability.

      A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.

Section 21.   Waiver.

      Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition.  A waiver of any provision of this Agreement must be
made in writing, designated as a waiver, and signed by the party against
whom its enforcement is sought.  Any waiver or relinquishment of any right
or power hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.

Section 22.   Counterparts.

      This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one
and the same Agreement.

Section 23.   Governing Law.

      This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States and, to the extent
that federal law is inapplicable, in accordance with the internal laws of
the Commonwealth of Massachusetts applicable to contracts entered into
among parties all of whom are citizens and residents of the Commonwealth of
Massachusetts and to be performed entirely within the Commonwealth of
Massachusetts, irrespective of the actual citizenship or residency of the
parties.

Section 24.   Headings and Construction.

      The headings of sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section.
Any reference to a section number shall refer to a section of this
Agreement, unless otherwise stated.

<PAGE>  16


Section 25.   Entire Agreement; Modifications.

      This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all
prior agreements, understandings or representations relating to the subject
matter hereof.  No modifications of this Agreement shall be valid unless
made in writing and signed by the parties hereto.

Section 26.   Non-duplication.

      In the event that Executive shall perform services for the Bank or any
other direct or indirect subsidiary of the Company, any compensation or
benefits provided to Executive by such other employer shall be applied to
offset the obligations of the  Company hereunder, it being intended that
this Agreement set forth the aggregate compensation and benefits payable to
Executive for all services to the Company and all of its direct or indirect
subsidiaries, including the Bank.

Section 27.   Required Regulatory Provisions.

      Notwithstanding anything herein contained to the contrary, any
payments to Executive by the Company, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and
any regulations promulgated thereunder.

Section 28.   Company and Affiliates.

      The Company may satisfy its obligations under this Agreement either
directly or indirectly through one or more direct or indirect subsidiaries
or affiliates.  The Executive agrees that this Agreement requires that the
Executive make his services available to the Company, the Bank and their
respective direct or indirect subsidiaries or affiliates as determined by
the respective Boards of Directors of the Company and the Bank within the
terms and conditions set forth in this Agreement.

Section 29.   Resolutions of Disputes.

      If any dispute arising out of, under, or in connection with, this
Agreement cannot be settled through negotiation by the parties hereto, the
Company and the Executive hereby agree that such dispute shall be settled
through mediation in accordance with the Commercial Mediation Rules of the
American Arbitration Association in a proceeding to be held in Boston,
Massachusetts.  Except as provided in section 19 hereof, the payment of all
costs, fees and expenses, including all

<PAGE>  17


attorneys' fees and expenses, incurred by each party in any mediation
proceeding shall be the responsibility of such party.

      In Witness Whereof, the Company has caused this Agreement to be
executed and Executive has hereunto set his hand, all as of the day and year
first above written.


                                       ------------------------------------
                                       Ralph W. Dunham


ATTEST:                                Mystic Financial, Inc.


By  --------------------               By  --------------------------------
Secretary                              Name:
                                       Title:


[Seal]

<PAGE>  18


COMMONWEALTH OF MASSACHUSETTS   )
                                : ss.:
COUNTY OF MIDDLESEX             )

      On this ________ day of ____________________, 2001, before me
personally came Ralph W. Dunham, to me known, and known to me to be the
individual described in the foregoing instrument, who, being by me duly
sworn, did depose and say that he resides at the address set forth in said
instrument, and that he signed his name to the foregoing instrument.


                                       ------------------------------------
                                                  Notary Public


COMMONWEALTH OF MASSACHUSETTS   )
                                : ss.:
COUNTY OF MIDDLESEX             )

      On this ________ day of ____________________, 2001, before me
personally came _____________________________, to me known, who, being by me
duly sworn, did depose and say that he resides at _________________________,
that he is a member of the Board of Directors of Mystic Financial, Inc., the
Delaware corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such seal; that it was so affixed by order of
the Board of Directors of said corporation; and that he signed his name
thereto by like order.


                                       ------------------------------------
                                                  Notary Public

<PAGE>  19



</TEXT>
</DOCUMENT>
