Execution Copy

 

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

Table of Contents

PART 1. DEFINITIONS

 

1.1. ACCRUAL-BASED BENEFIT

1.2. ACCRUED BENEFIT

1.3. ACCRUED PERCENTAGE

1.4. ACTUARIAL EQUIVALENT

1.5. ANNUAL ANNUITY EQUIVALENT

1.6. BENEFICIARY

1.7. BOARD OR BOARD OF DIRECTORS

1.8. CALENDAR YEAR

1.9. CHANGE IN CONTROL

1.10. CODE

1.11. COMPENSATION

1.12. EFFECTIVE DATE

1.13. FINAL AVERAGE COMPENSATION

1.14. GOOD REASON

1.15. INSURANCE POLICY

1.16. NORMAL RETIREMENT BENEFIT

1.17. NORMAL RETIREMENT DATE

1.18. SBERA

1.19. TERMINATING EVENT

1.20. TRUST

1.21. TRUSTEE

 

PART 2. BENEFITS

 

2.1. TERMINATION OF SERVICE AT NORMAL RETIREMENT DATE

2.2. TERMINATION OF SERVICE BEFORE NORMAL RETIREMENT DATE

2.3. BENEFITS UPON CHANGE IN CONTROL

2.4. DEATH BENEFITS

2.5. DISABILITY

2.6. NO BENEFITS UPON DISCHARGE FOR CAUSE

2.7. DISCHARGE FOR CAUSE

 

PART 3. ADDITIONAL PROVISIONS

 

3.1. ALTERNATIVE FORMS OF BENEFIT PAYMENT

3.2. BENEFICIARY DESIGNATION PROCEDURE

3.3. ASSISTANCE IN PURCHASE OF LIFE INSURANCE

3.4. ALIENABILITY AND ASSIGNMENT PROHIBITION

3.5. BINDING OBLIGATION OF BANK AND ANY SUCCESSOR IN INTEREST

3.6. AMENDMENT

3.7. GENERAL

3.8. HEADINGS

3.9. APPLICABLE LAW

3.10. NAMED FIDUCIARY AND PLAN ADMINISTRATOR

3.11. CLAIMS PROCEDURE

3.12. ARBITRATION

3.13. ENTIRE AGREEMENT

3.14. INTERPRETATION

3.15. EMPLOYMENT

3.16. REGULATORY PROVISIONS

3.17. COMMUNICATIONS

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

This Agreement is made and entered into as of August 23, 2001 and effective as
of the Effective Date by and between Abington Savings Bank, a Bank organized and
existing under the laws of The Commonwealth of Massachusetts (the “Bank”) and a
wholly-owned subsidiary of Abington Bancorp, Inc. (the “Holding Company”), and
James P. McDonough, a key employee and executive of the Bank (the “Executive”).

WITNESSETH.

Whereas, the Executive is a valuable, key employee of the Bank, serving the Bank
as its Chief Executive Officer; and

Whereas, because of the Executive’s experience, knowledge of the affairs of the
Bank, and reputation and contacts in the banking industry, the Bank deems the
Executive’s continued employment with the Bank important for its future growth;
and

Whereas, it is the desire of the Bank and in its best interest that the
Executive’s services be retained; and

Whereas, in order to induce the Executive to continue in the employ of the Bank,
the Bank has entered into this Agreement to provide him or his beneficiaries
with certain benefits in accordance with the terms and conditions hereinafter
set forth; and

Whereas, the Bank has established a trust (as defined in Section 1.20, the
“Trust”) and desires to contribute to the Trust certain assets that shall be
held therein, subject to the terms of the Trust, until such time as benefits
have been paid to the Executive and his beneficiaries as specified herein;

Now, therefore, in consideration of services performed in the past and to be
performed in the future as well as of the mutual promises and covenants herein
contained, it is agreed as follows:

PART 1. DEFINITIONS

1.1.  Accrual-Based Benefit shall mean an amount equal to the aggregate of all
amounts accrued by the Bank or the Holding Company between the date of this
Agreement and the end of the Calendar Year in which the Executive’s employment
terminates for the cost of the benefits payable under this Agreement.

1.2.  Accrued Benefit shall mean the Executive's Normal Retirement Benefit
calculated on the basis of the Final Average Compensation as of the date (except
as otherwise provided in Section 2.3) on which the Executive's employment with
the Bank or Holding Company terminates, multiplied by the Accrued Percentage.

1.3.  Accrued Percentage.  The Accrued Percentage shall not exceed one hundred
percent (100%) and shall be determined as follows:

1.3.1. THE ACCRUED PERCENTAGE SHALL BE ONE HUNDRED PERCENT (100%) IF ANY OF THE
FOLLOWING SHALL OCCUR:

(A) THE EXECUTIVE TERMINATES HIS EMPLOYMENT WITH THE BANK OR HOLDING COMPANY FOR
GOOD REASON (AS SUCH TERM IS DEFINED IN SECTION 1.14); OR

(B) THE BANK OR HOLDING COMPANY TERMINATES THE EXECUTIVE'S EMPLOYMENT WITH THE
BANK OR HOLDING COMPANY FOR ANY REASON WHATSOEVER OTHER THAN FOR "CAUSE" (AS
SUCH TERM IS DEFINED IN, AND IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN,
SECTION 2.7); OR

(C) THE EXECUTIVE TERMINATES HIS EMPLOYMENT WITH THE BANK OR HOLDING COMPANY ON
OR AFTER THE DATE HE ATTAINS THE AGE OF SIXTY (60); OR

(D) A TERMINATING EVENT (AS SUCH TERM IS DEFINED IN SECTION 1.19) OCCURS WITHIN
THREE YEARS OF A CHANGE IN CONTROL (AS SUCH TERM IS DEFINED IN SECTION 1.9).

1.3.2. THE ACCRUED PERCENTAGE SHALL BE ZERO IF THE BANK OR HOLDING COMPANY
TERMINATES THE EXECUTIVE’S EMPLOYMENT FOR “CAUSE” (AS SUCH TERM IS DEFINED IN
SECTION 2.7).

1.3.3. IN ALL OTHER CASES, THE ACCRUED PERCENTAGE SHALL BE DETERMINED BY
DEDUCTING FROM ONE HUNDRED PERCENT (100%) A PERCENTAGE DETERMINED BY MULTIPLYING
(X) 1/30 TIMES (Y) THE NUMBER OF WHOLE AND PARTIAL YEARS BETWEEN THE DATE ON
WHICH THE EXECUTIVE'S EMPLOYMENT WITH THE BANK OR THE HOLDING COMPANY OR A
SUCCESSOR IN INTEREST TERMINATED AND THE DATE ON WHICH THE EXECUTIVE WOULD
ATTAIN THE AGE OF 60.

1.4.  Actuarial Equivalent shall mean a benefit of equivalent current value to
the benefit which could otherwise have been provided to the Executive, computed
on the basis of the discount rates, mortality tables and other assumptions then
being used by SBERA in determining the actuarial equivalent of payments being
made by SBERA to its Retirement Plan beneficiaries.

1.5.  Annual Annuity Equivalent for a 401(k) plan or other defined contribution
plan shall be equal to the annual benefit payable from a single life annuity on
the Executive’s life from a company holding at least an AA rating from Moody's,
Standard & Poor's or an equivalent rating service.  For purposes of this
Section 1.5, the amount available to invest in said annuity shall be assumed to
be the total of (x) the employer’s contributions to the defined contribution
plan on the Executive’s behalf (which contributions shall not include the
so-called “individual contributions” on the Executive’s behalf (it being
understood that such “individual” contributions are made by the Bank or the
Holding Company pursuant to a salary reduction agreement with the Executive))
and (y) the amount which would have been earned on such contributions at an
assumed rate of seven percent (7%) per year.

1.6.  Beneficiary shall mean the person or persons designated by the Executive
in accordance with Section 3.2 hereof to receive benefits under this Agreement
after the death of the Executive.

1.7.  Board or Board of Directors shall mean the Board of Directors of the Bank,
or, where the context requires, the Board of Directors of the Holding Company.

1.8.  Calendar Year shall mean a calendar year from January 1 to December 31.

1.9.  Change in Control shall have the meaning defined in that certain Special
Termination Agreement restated as of the 31st day of January, 1997 by and among
the Holding Company, the Bank, and the Executive.

1.10.  Code shall mean the Internal Revenue Code of 1986, as amended.

1.11. Compensation shall mean all compensation reported on the Executive's Form
W-2 (Wages, tips, other compensation box) for a Calendar Year, including, but
not limited to, any bonuses actually paid by the Bank or the Holding Company to
the Executive during the Calendar Year but adding thereto any amount which is
contributed by the Bank or the Holding Company  on the Executive’s behalf
pursuant to a salary reduction agreement and which is not includable in the
Executive's gross income under section 125, 402(e)(3), 402(h), or 403(b) of the
Code, and excluding therefrom any taxable employee benefits of any kind (e.g.,
reimbursements of moving and relocation expenses, insurance premiums,
automobile, health, medical, and dental expenses, the cost of group-term life
insurance, compensation arising from the exercise of a nonqualified stock option
or from a stock grant, and any fringe benefit) which is not excluded from gross
income under Section 132 of the Code..

1.12.  Effective Date.  The Effective Date of this Agreement shall be August 23,
2001.

1.13.  Final Average Compensation shall mean the average of the Compensation of
the Executive for the three Calendar Years (out of his final five Calendar Years
of employment with the Bank or the Holding Company) during which his
Compensation was the highest.

1.14.  Good Reason shall mean:

1.14.1. THE FAILURE OF THE BOARD OF DIRECTORS OF THE HOLDING COMPANY OR THE BANK
TO ELECT THE EXECUTIVE TO THE OFFICE OF CHIEF EXECUTIVE OFFICER, OR TO CONTINUE
THE EXECUTIVE IN SUCH OFFICES; OR

1.14.2. A REDUCTION (OTHER THAN CONCURRENTLY WITH ACROSS–THE–BOARD SALARY
REDUCTIONS BASED ON THE BANK’S FINANCIAL PERFORMANCE SIMILARLY AFFECTING ALL
SENIOR MANAGEMENT PERSONNEL OF THE BANK) IN THE EXECUTIVE’S ANNUAL BASE SALARY
AS IN EFFECT ON THE DATE HEREOF OR AS THE SAME MAY BE INCREASED FROM TIME TO
TIME; OR

1.14.3. A MATERIAL REDUCTION BY THE HOLDING COMPANY OR THE BANK IN THE AMOUNT
AND TYPE OF EMPLOYEE BENEFITS BEING PROVIDED TO THE EXECUTIVE BY THE HOLDING
COMPANY OR THE BANK AS OF THE DATE OF THIS AGREEMENT (OTHER THAN AS A RESULT OF
A COMPANY-WIDE PROGRAM TO RESTRUCTURE THE NATURE OF THE BENEFITS BEING PROVIDED
TO EMPLOYEES GENERALLY); OR

1.14.4. A SIGNIFICANT DIMINUTION IN THE NATURE OR SCOPE OF THE EXECUTIVE’S
RESPONSIBILITIES, AUTHORITIES, POWERS, FUNCTIONS OR DUTIES; OR

1.14.5. A MATERIAL BREACH BY THE HOLDING COMPANY OR THE BANK OF ANY OF THE
PROVISIONS OF THIS AGREEMENT WHICH FAILURE OR BREACH SHALL HAVE CONTINUED FOR
THIRTY (30) DAYS AFTER WRITTEN NOTICE FROM THE EXECUTIVE TO THE HOLDING COMPANY
OR THE BANK SPECIFYING THE NATURE OF SUCH FAILURE OR BREACH; OR

1.14.6. THE EXECUTIVE’S DISABILITY (DETERMINED AS PROVIDED IN SECTION 2.5), DUE
TO PHYSICAL OR MENTAL ILLNESS, SO AS TO BE UNABLE TO PERFORM SUBSTANTIALLY ALL
OF HIS DUTIES AND RESPONSIBILITIES AS CHIEF EXECUTIVE OFFICER OF THE HOLDING
COMPANY OR THE BANK; OR

1.14.7. THE FAILURE OF THE HOLDING COMPANY OR THE BANK TO OBTAIN A SATISFACTORY
AGREEMENT FROM ANY SUCCESSOR THEREOF TO ASSUME AND AGREE TO PERFORM THIS
AGREEMENT.

In addition, “Good Reason” shall include the following events but only if they
shall occur within three years following a Change in Control:

1.14.8. THE FAILURE BY THE HOLDING COMPANY OR THE BANK TO CONTINUE TO PROVIDE
THE EXECUTIVE WITH BENEFITS SUBSTANTIALLY SIMILAR TO THOSE AVAILABLE TO THE
EXECUTIVE UNDER ANY OF THE LIFE INSURANCE, MEDICAL, HEALTH AND ACCIDENT, OR
DISABILITY PLANS OR ANY OTHER MATERIAL BENEFIT PLANS IN WHICH THE EXECUTIVE WAS
PARTICIPATING AT THE TIME OF THE CHANGE IN CONTROL, OR THE TAKING OF ANY ACTION
BY THE HOLDING COMPANY OR THE BANK WHICH WOULD DIRECTLY OR INDIRECTLY MATERIALLY
REDUCE ANY OF SUCH BENEFITS, OR THE FAILURE BY THE HOLDING COMPANY OR THE BANK
TO PROVIDE THE EXECUTIVE WITH THE NUMBER OF PAID VACATION DAYS TO WHICH THE
EXECUTIVE IS ENTITLED ON THE BASIS OF YEARS OF EMPLOYMENT WITH THE HOLDING
COMPANY OR THE BANK IN ACCORDANCE WITH THE NORMAL VACATION POLICIES IN EFFECT AT
THE TIME OF THE CHANGE IN CONTROL; OR

1.14.9. A REASONABLE DETERMINATION BY THE EXECUTIVE THAT, AS A RESULT OF A
CHANGE IN CONTROL, HE IS UNABLE TO EXERCISE THE RESPONSIBILITIES, AUTHORITIES,
POWERS, FUNCTIONS OR DUTIES EXERCISED BY THE EXECUTIVE IMMEDIATELY PRIOR TO SUCH
CHANGE IN CONTROL; OR

1.14.10. A REASONABLE DETERMINATION BY THE EXECUTIVE THAT, AS A RESULT OF A
CHANGE IN CONTROL, HIS WORKING CONDITIONS HAVE SIGNIFICANTLY WORSENED.

1.15.  Insurance Policy shall mean such insurance policy or policies (if any) as
the Bank or the Holding Company, in its sole and absolute discretion, may choose
to purchase to fund some or all of the benefits payable hereunder.

1.16.  Normal Retirement Benefit shall mean a single life annuity payable (as
provided hereinafter in this Section 1.16) as an annual supplemental retirement
benefit ("Supplemental Benefit").  The amount of such Supplemental Benefit shall
be calculated by (x) multiplying (i) 65% times (ii) the Executive’s Final
Average Compensation and by (y) subtracting from such result the following: (i)
one half of the annual amount payable (before earnings reductions) to the
Executive as a primary social security retirement benefit at age 65, (ii) the
annual pension payable to the Executive (excluding any pension payable to the
Executive that is attributable to the Executive's own contributions) from
defined benefit pension plans of the Bank or the Holding Company at his Normal
Retirement Date, as if such pension were paid as a single-life annuity, and
(iii) the Annual Annuity Equivalent (computed as of the Normal Retirement Date)
for any defined contribution plans (including 401(k) plans and the Holding
Company’s ESOP) maintained by either the Bank or the Holding Company during the
Executive’s employment.  The Normal Retirement Benefit shall be an annual
benefit in an amount equal to the Supplemental Benefit payable in equal monthly
installments commencing on the Normal Retirement Date and continuing for the
Executive's life, or a minimum of twenty years, whichever is longer.

1.17.  Normal Retirement Date shall mean the date on which the Executive attains
age sixty-five (65).

1.18.  SBERA shall mean the Savings Banks Employees Retirement Association.

1.19.  Terminating Event shall mean any of the following:

1.19.1. TERMINATION BY THE HOLDING COMPANY OR THE BANK OF THE EXECUTIVE’S
EMPLOYMENT FOR ANY REASON WHATSOEVER OTHER THAN (I) THE EXECUTIVE’S DEATH OR
(II) FOR “CAUSE” (AS SUCH TERM IS DEFINED IN, AND IN ACCORDANCE WITH THE
PROCEDURES SET FORTH IN, SECTION 2.7), OR

1.19.2. RESIGNATION OF THE EXECUTIVE FROM THE EMPLOY OF THE BANK AND THE HOLDING
COMPANY FOR GOOD REASON, WHILE THE EXECUTIVE IS NOT RECEIVING PAYMENTS OR
BENEFITS FROM THE HOLDING COMPANY OR THE BANK BY REASON OF THE EXECUTIVE’S
DISABILITY.

1.20.  Trust shall mean that certain  Trust Agreement established by the Bank
with the Trustee for the benefit of the Executive in connection with certain
supplemental retirement benefits.

1.21.  Trustee shall mean the trustee appointed under the Trust.

PART 2. BENEFITS

2.1.  Termination of Service At Normal Retirement Date.  If the Executive
terminates service as an employee with the Bank on or after the Normal
Retirement Date (other than for “Cause”, which is provided for in Section 2.6),
he shall receive a Normal Retirement Benefit.  He shall commence to receive such
Normal Retirement Benefit on his Normal Retirement Date.

2.2.  Termination of Service Before Normal Retirement Date.  If the Executive’s
service as an employee of the Bank or the Holding Company terminates (other than
by reason of death (which is provided for in Section 2.4), other than for
“Cause” (which is provided for in Section 2.6), and other than by reason of
disability (which is provided for in Section 2.5)) before his Normal Retirement
Date, he shall be entitled to receive his Accrued Benefit .  He shall commence
to receive such Accrued Benefit at his Normal Retirement Date or, if he so
elects and the Board consents, he may commence to receive the Actuarial
Equivalent of such Accrued Benefit at an earlier date.  In the event that the
Executive requests permission to commence receiving the Actuarial Equivalent of
his Accrued Benefit before his Normal Retirement Date and the Board refuses to
grant permission for such early commencement of payments, the Executive may
request the Board to reconsider its decision.  If the Board has not agreed to
permit such early payment by a date which is thirty days after the request for
reconsideration was made, the Executive shall have the right to receive upon
written application to the Holding Company the Actuarial Equivalent of such
Accrued Benefit, less a penalty of 7%.  If the Executive begins to receive his
Accrued Benefit prior to attaining his Normal Retirement Date, the benefit shall
be the Actuarial Equivalent of the benefit that would have been payable if the
benefit had been paid at the Executive's Normal Retirement Date.

2.3.  Benefits Upon Change in Control.  If within three years following a Change
in Control and before the Normal Retirement Date a Terminating Event occurs with
respect to the Executive, the Executive will be entitled to receive his Normal
Retirement Benefit, calculated as if the following had occurred:  (a) the
Executive continued his employment with the Bank until the Normal Retirement
Date, (b) the annual rate of his base compensation with the Bank in effect at
the time of the termination of employment was increased, on a compound basis, by
6% on each May 1 occurring after the date of termination of employment and prior
to the Normal Retirement Date, and (c) the Executive’s annual compensation was
paid in twenty-six equal bi-weekly installments.  The Normal Retirement Benefit,
as so calculated, will generally be payable at the Normal Retirement Date,
provided that, with the consent of the Board of Directors, an Actuarial
Equivalent of such benefit may be paid (or commenced) to the Executive or former
Executive at an earlier date. In the event that the Executive requests
permission to commence receiving his Benefit before his Normal Retirement Date
and the Board refuses to grant permission for such early commencement of
payments, the Executive may request the Board to reconsider its decision.  If
the Board has not agreed to permit such early payment by a date which is 15 days
after the request for reconsideration is made, the Executive shall have the
right to receive upon written application to the Bank the Actuarial Equivalent
of such Normal Retirement Benefit, less a penalty of 7%.

2.3.1. UPON A CHANGE IN CONTROL, THE BANK SHALL, AS SOON AS POSSIBLE, BUT IN NO
EVENT LATER THAN 30 DAYS FOLLOWING THE CHANGE IN CONTROL, MAKE AN IRREVOCABLE
CONTRIBUTION TO THE TRUST IN AN AMOUNT THAT IS SUFFICIENT, AS DETERMINED BY AN
ACTUARY APPOINTED BY THE TRUSTEE, TO PAY THE EXECUTIVE OR HIS BENEFICIARY THE
FULL BENEFITS TO WHICH HE OR SHE WOULD BE ENTITLED PURSUANT TO THE TERMS OF THIS
AGREEMENT AS OF THE DATE ON WHICH THE CHANGE IN CONTROL OCCURRED, ASSUMING THAT
(X) THE ACCRUED PERCENTAGE WAS 100%, (Y) A TERMINATING EVENT HAD OCCURRED WITH
RESPECT TO THE EXECUTIVE AS OF THE DATE OF THE CHANGE IN CONTROL, AND (Z) THE
BOARD HAD AGREED TO PAY SUCH BENEFITS TO THE EXECUTIVE OR HIS BENEFICIARY, ON AN
ACTUARIAL EQUIVALENT BASIS, AS OF THE DATE OF THE CHANGE IN CONTROL.  WITHIN THE
SAME TIME PERIOD FOLLOWING A CHANGE IN CONTROL, THE BANK SHALL MAKE A FURTHER
IRREVOCABLE CONTRIBUTION TO THE TRUST IN AN AMOUNT SUFFICIENT TO PAY FOR THE
TRUSTEE’S FEES AND FOR ACTUARIAL, ACCOUNTING, LEGAL AND OTHER PROFESSIONAL OR
ADMINISTRATIVE SERVICES NECESSARY TO IMPLEMENT THE TERMS OF THIS AGREEMENT
FOLLOWING A CHANGE IN CONTROL.  SUCH AMOUNT SHALL BE DETERMINED BY THE TRUSTEE’S
ESTIMATE OF ITS FEES (AS PROVIDED IN THE TRUST AGREEMENT) AND BY ESTIMATES
OBTAINED BY THE TRUSTEE FROM THE INDEPENDENT ACTUARIES, ACCOUNTANTS, LAWYERS AND
OTHER APPROPRIATE PROFESSIONAL AND ADMINISTRATIVE PERSONNEL WHO PROVIDED SUCH
SERVICES TO THE TRUST OR THE BANK IMMEDIATELY BEFORE THE CHANGE IN CONTROL.

2.3.2. IF THE EXECUTIVE WOULD BE ENTITLED TO RECEIVE PAYMENT OF A BENEFIT UNDER
THIS SECTION 2.3 AND UNDER SECTION 2.2, THE PROVISIONS OF SECTION 2.2 SHALL NOT
APPLY AND THIS SECTION 2.3 SHALL BE CONTROLLING.

2.4.  Death Benefits.  The provisions of this Section 2.4 shall expire and be of
no further force or effect from and after the Normal Retirement Date.  The
benefits payable under this Section 2.4 shall be in lieu of and in complete
substitutions for any and all benefits otherwise payable under this Agreement.

2.4.1.  Nature of Death Benefit.  If the Executive dies before commencing to
receive benefits under this Agreement and either (i) prior to the termination of
his employment with the Holding Company and the Bank or (ii) after the
Executive’s employment with the Bank and the Holding Company has been terminated
by reason of his having become disabled, then a death benefit shall be payable
to the Executive’s Beneficiary not later than sixty days following the death of
the Executive.  The death benefit shall be a single lump sum distribution
payable not later than 60 days after the date of his death and shall have two
components, as follows. The first component of the death benefit shall be an
amount equal to three times the Executive’s Final Average Compensation
(“Compensation-Based Benefit”), and the second component shall be an amount
equal to the Accrual-Based Benefit determined as of the date of the Executive’s
death.

2.4.2.  Split Dollar Agreement.  Although the Bank is under no obligation to
fund the benefits payable under this Agreement with any form of insurance, as of
the date of this Agreement the Bank has purchased an Insurance Policy and has
entered into that certain Split Dollar Agreement with the Executive of even date
herewith, providing for the endorsement of the Insurance Policy so as to provide
a death benefit to the Executive’s Beneficiary in an amount equal to the
Compensation-Based Benefit. Any amounts received by the Executive’s Beneficiary
with respect to the Insurance Policy shall be deducted from amounts otherwise
payable by the Bank to the Executive’s Beneficiary pursuant to this Section 2.4.

2.4.3.  Gross-Up of Payments.  In the event that no Insurance Policy is in place
at the time a death benefit is payable to the Executive’s Beneficiary (and as a
result, the Compensation-Based Benefit is treated as Income with Respect to a
Decedent pursuant to Section 691 of the Code or by any successor provision, by
reason of such benefit not being considered to be life insurance proceeds), the
Bank shall, in addition to the Compensation-Based Benefit, pay to the
Executive’s Beneficiary an amount necessary to ensure that, after the payment of
any federal, state, or local taxes imposed as a result of the treatment of the
Compensation-Based Benefit as Income with Respect to a Decedent, the Executive’s
Beneficiary receives and retains, free from liability for any taxes, a net
amount equal to the amount the Executive’s Beneficiary would have received and
retained had the Compensation-Based Benefit been considered to be life insurance
proceeds.  It is intended that the net after-tax Compensation Based Benefit
received by the Executive’s Beneficiary, after taking into account the payments
made pursuant to this Section 2.4.3, shall be equal to the net
Compensation-Based Benefit that the Executive’s Beneficiary would have received
if such benefit had not been treated as Income with Respect to a Decedent.

2.5.   Disability.  In the event that the Executive shall become "disabled" (as
defined below) while in the employ of the Holding Company and the Bank and prior
to his Normal Retirement Date, he shall become vested in his Accrued Benefit,
computed at the time of the Executive's disability with an Accrued Percentage of
100%.  He shall commence to receive such Accrued Benefit at his Normal
Retirement Date or, if he so elects and the Board consents, he may commence to
receive the Actuarial Equivalent of such Accrued Benefit at an earlier date.  In
the event that the Executive requests permission to commence receiving the
Actuarial Equivalent of the Accrued Benefit before his Normal Retirement Date
and the Board refuses to grant permission for such early commencement of
payments, the Executive may request the Board to reconsider its decision.  If
the Board has not agreed to permit such early payment by a date which is 15 days
after the request for reconsideration was made, the Executive shall have the
right to receive upon written application to the Holding Company the Actuarial
Equivalent of the Accrued Benefit, less a penalty of 7%.  Payments under this
Section 2.5 shall be in addition to any payments otherwise payable to the
Executive as a result of disability under any other plans or agreements in
effect from time to time.

2.5.1. The Executive shall be considered to be “disabled” when he is no longer
capable of performing the material aspects of his employment duties for the Bank
as a result of physical and/or mental impairment.  The Executive shall be
considered to be no longer “disabled” at such time as he returns to work in a
position with responsibilities comparable to those inherent in the position in
which he was employed on the date he became “disabled.”

2.5.2. IF THE EXECUTIVE RECOVERS FROM HIS DISABILITY AND RETURNS TO THE EMPLOY
OF THE BANK, HIS DISABILITY BENEFIT SHALL TERMINATE, AND UPON HIS SUBSEQUENT
TERMINATION OF SERVICE AS AN EMPLOYEE OF THE BANK OR HOLDING COMPANY HE SHALL BE
ENTITLED TO SUCH RETIREMENT OR TERMINATION BENEFITS AS HE WOULD OTHERWISE HAVE
BEEN ENTITLED TO IF HE HAD BEEN EMPLOYED BY THE BANK OR HOLDING COMPANY
THROUGHOUT HIS PERIOD OF DISABILITY, AS APPROPRIATELY ADJUSTED TO REFLECT ANY
BENEFITS PREVIOUSLY PAID UNDER THIS SECTION 2.5.  FOR PURPOSES OF THE ACCRUAL OF
BENEFITS UNDER THIS AGREEMENT, TIME SPENT ON DISABILITY SHALL BE DEEMED TO BE
TIME SPENT AS AN EMPLOYEE OF THE BANK OR HOLDING COMPANY.

2.5.3. IN THE EVENT THERE IS DISAGREEMENT AS TO WHETHER THE PROVISIONS OF THIS
SECTION 2.5 ARE APPLICABLE, THE BANK AND THE EXECUTIVE (OR HIS PERSONAL
REPRESENTATIVE) EACH SHALL SELECT A PHYSICIAN.  IF THE PHYSICIANS ARE IN
DISAGREEMENT, THEY SHALL SELECT A THIRD PHYSICIAN.  A MAJORITY OPINION OF THE
THREE PHYSICIANS AS TO DISABILITY SHALL BE BINDING ON ALL THE PARTIES HERETO. 
THE PARTIES AGREE THAT THE BANK WILL, REGARDLESS OF THE OUTCOME OF THIS
PROCEDURE, REIMBURSE THE EXECUTIVE (OR HIS SURVIVING SPOUSE OR BENEFICIARY, AS
THE CASE MAY BE) FOR THE REASONABLE AND NECESSARY FEES AND COSTS DIRECTLY
ATTRIBUTABLE TO SUCH PROCEDURE.

2.6.  No Benefits Upon Discharge for Cause.  Should the Executive be discharged
for Cause in accordance with the procedures set forth in Section 2.7 at any time
(before or after his Normal Retirement Date), all Benefits under Part 2 of this
Agreement shall be forfeited.  If a dispute arises as to discharge for “Cause”,
such dispute shall be resolved by arbitration as set forth in Section 3.12 of
this Agreement.

2.7.  Discharge for Cause.

2.7.1. Cause.  The term “Cause” shall mean the Executive’s deliberate dishonesty
with respect to the Holding Company or the Bank or any subsidiary or affiliate
thereof; conviction of a crime involving moral turpitude; or gross and willful
failure to perform (other than on account of a medically determinable disability
which renders the Executive incapable of performing such services) a substantial
portion of the Executive’s duties and responsibilities as an officer of the
Holding Company or the Bank, which failure continues for more than thirty days
after written notice given to the Executive pursuant to a two-thirds vote of all
of the members of the Board then in office, such vote to set forth in reasonable
detail the nature of such failure.  Notwithstanding the foregoing, the Executive
shall not be deemed to have been discharged for “Cause” unless and until there
shall have been delivered to him a copy of a certification by the Clerk of the
Holding Company or the Bank that two-thirds of the entire Board of Directors of
the Holding Company or the Bank found in good faith that the Executive was
guilty of conduct which is deemed to be Cause as defined in this Section 2.7 and
specifying the particulars thereof, after reasonable notice to the Executive
setting forth in reasonable detail the nature of such Cause and an opportunity
for him,  together with his counsel, to be heard before the Board in accordance
with the provisions of Section 2.7.2.

2.7.2. Board Termination Procedure.  In each case, in determining Cause the
alleged acts or omissions of the Executive shall be measured against standards
prevailing in the banking industry generally and the ultimate existence of Cause
must be confirmed by not less than two-thirds of the Board at a meeting prior to
any termination therefor; provided, however, that it shall be the Holding
Company’s or the Bank’s burden to prove the alleged facts and omissions and the
prevailing nature of the standards the Bank shall have alleged are violated by
such acts and/or omissions of the Executive. In the event of such a confirmation
by two-thirds or more of the Board, the Holding Company or the Bank shall notify
the Executive that the Bank intends to terminate the Executive’s employment for
Cause under this Section 2.7 (the “Confirmation Notice”). The Confirmation
Notice shall specify the acts or omissions upon the basis of which the Board has
confirmed the existence of Cause and must be delivered to the Executive within
ninety (90) days after a majority of the Board (excluding, if applicable, the
Executive) has actual knowledge of the events giving rise to such purported
termination. If the Executive notifies the Bank in writing (the “Opportunity
Notice”) within thirty (30) days after the Executive has received the
Confirmation Notice, the Executive (together with counsel) shall be provided one
opportunity to meet with the Board (or a sufficient quorum thereof) to discuss
such acts or omissions. Such meeting shall take place at the principal offices
of the Holding Company or the Bank or such other location as agreed to by the
Executive and the Bank. During the period commencing on the date the Bank
receives the Opportunity Notice and ending on the date next succeeding the date
on which such meeting between the Board (or a sufficient quorum thereof) and the
Executive is scheduled to occur and not withstanding anything to the contrary in
this Agreement, the Executive shall be suspended from employment with the
Holding Company or the Bank (with pay to the extent not prohibited by applicable
law), and the Board may, during such suspension period, reasonably limit the
Executive’s access to the principal offices of the Holding Company or the Bank
or any of its assets. If the Board properly sets the date of such meeting and if
the Board (or a sufficient quorum thereof) attends such meeting and in good
faith does not rescind its confirmation of Cause at such meeting or if the
Executive fails to attend such meeting for any reason, the Executive’s
employment by the Holding Company and/or the Bank shall, immediately upon the
closing of such meeting and the delivery to the Executive of the Notice of
Termination, be terminated for Cause. If the Executive does not respond in
writing to the Confirmation Notice in the manner and within the time period
specified in this Section 2.7.2, the Executive’s employment with the Holding
Company and/or the Bank shall, on the thirty–first day after the receipt by the
Executive of the Confirmation Notice, be terminated for Cause under this
Section 2.7.

                                2.7.3. No Limitation on Authority of Board.  As
is provided in Section 3.15, nothing contained in this Agreement (and nothing
contained in this Section 2.7) shall in any way limit the right of the Holding
Company or the Bank to discharge the Executive with or without Cause or to limit
the access of the Executive to the premises or assets of the Bank or the Holding
Company.

PART 3. ADDITIONAL PROVISIONS

             3.1. Alternative Forms of Benefit Payment.  The Executive shall
have the right upon becoming subject to the Plan to elect the form of payment in
which his benefit is to be paid.  Such election shall be submitted in writing to
the Executive Vice President or Treasurer of the Bank.  In any Calendar Year
prior to the year in which amounts become payable hereunder, and at least six
months prior to the Executive’s termination of employment, the Executive may
change the form of payment he has elected. In lieu of the annuity form of
payment otherwise provided in this Agreement, upon request the Executive may
obtain an Actuarially Equivalent form of payment; provided that such form is a
permitted form of benefit under the SBERA Pension Plan.  Acceptable forms of
payment presently include:

•        Lump Sum (but only with the permission of the Board)

•        Life Annuity

•        Joint and 50% Survivor Annuity or Joint and 100% Survivor Annuity

             3.2. Beneficiary Designation Procedure.  The Executive may
designate one or more Beneficiaries to receive specified percentages of any
death benefit payments to be paid hereunder.  The Executive shall designate any
such Beneficiaries in writing and shall submit such writing to the Executive
Vice President or Treasurer of the Bank.  Only designated Beneficiaries alive at
the Executive’s death shall be entitled to share in the benefit payments. 
Absent a contrary specification by the Executive in writing submitted to the
Chairman or Treasurer of the Bank, each Beneficiary alive at the Executive’s
death (or, in the case of the Beneficiary’s death after the Executive’s death,
the Beneficiary’s estate) shall share equally in death benefit payments.  If no
designated Beneficiary is alive at the Executive’s death, his surviving spouse
shall be entitled to all death benefit payments.  If the Executive dies leaving
neither a designated Beneficiary nor a surviving spouse, his estate shall be
entitled to any death benefit payments. Except to the extent specifically
provided in this Section 3.2, the Executive may not, without the written consent
of the Bank, assign to any individual, trust or other organization, any right
title or interest in the Insurance Policy nor any rights, options, privileges or
duties created under this Agreement.

             3.3. Assistance in Purchase of Life Insurance.  If the Bank elects
to invest in an Insurance Policy, the Executive shall assist the Bank by freely
submitting to a physical exam and supplying such additional information
necessary to obtain such insurance or annuities.

             3.4. Alienability and Assignment Prohibition.  Neither the
Executive, his surviving spouse nor any other Beneficiary under this Agreement
shall have any power or right to transfer, assign, anticipate, hypothecate,
mortgage, commute, modify or otherwise encumber in advance any of the benefits
payable hereunder nor shall any of said benefits be subject to seizure for the
payment of any debts, judgments, alimony or separate maintenance owed by the
Executive or his Beneficiary, nor be transferable by operation of law in the
event of bankruptcy, insolvency or otherwise.  In the event the Executive or any
Beneficiary attempts assignment, commutation, hypothecation, transfer or
disposal of the benefits hereunder, the Bank’s liabilities shall forthwith cease
and terminate.

             3.5. Binding Obligation of Bank and any Successor in Interest. 
This Agreement shall bind the Executive and the Bank, their heirs, successors,
personal representatives and assigns. The Bank expressly agrees that it shall
not merge or consolidate into or with another bank or sell substantially all of
its assets to another bank, firm or person until such bank, firm or person
expressly agrees, in writing, to assume and discharge the duties and obligations
of the Bank under this Agreement.

             3.6. Amendment.  During the lifetime of the Executive, this
Agreement may be amended only with the mutual written assent of the Executive
and the Bank.

             3.7. General.  The benefits provided by the Bank to the Executive
pursuant to this Agreement are in the nature of a fringe benefit and shall in no
event be construed to affect or limit the Executive’s current or prospective
salary increases, cash bonuses or profit-sharing distributions or credits or his
right to participate in or be covered by any qualified or non-qualified pension,
profit-sharing, group, bonus or other supplemental compensation or fringe
benefit plan.

             3.8. Headings.  Headings and subheadings in this Agreement are
inserted for reference and convenience only and shall not be deemed a part of
this Agreement.

             3.9. Applicable Law.  This Agreement shall be governed by, and
construed and enforced in accordance with, the substantive laws of The
Commonwealth of Massachusetts without regard to its principles of conflicts of
laws.

             3.10. Named Fiduciary and Plan Administrator.  The “Named Fiduciary
and Plan Administrator” of this plan shall be Abington Savings Bank until
another administrator is chosen by the Board.  As Named Fiduciary and Plan
Administrator, the Bank shall be responsible for the management, control and
administration of the benefits to be provided under this Agreement.  The Named
Fiduciary may delegate to others certain aspects of the management and operation
responsibilities of the plan including the employment of advisors and the
delegation of ministerial duties to qualified individuals.

             3.11. Claims Procedure.  In the event a dispute arises over
benefits under this Agreement and benefits are not paid to the Executive (or to
his Beneficiary in the case of the Executive’s death) and such claimants feel
they are entitled to receive such benefits, then a written claim must be made to
the Plan Administrator named above within sixty (60) days from the date payments
are refused.  The Plan Administrator shall review the written claim, and if the
claim is denied, in whole or in part, they shall provide in writing within sixty
(60) days of receipt of such claim their specific reasons for such denial,
reference to the provisions of this Agreement upon which the denial is based and
any additional material or information necessary to perfect the claim. Such
written notice shall further indicate the additional steps to be taken by
claimants if a further review of the claim denial is desired.  A claim shall be
deemed to have been denied if the Plan Administrator fails to take any action
within the aforesaid sixty-day period.

If claimants desire a second review, they shall notify the Plan Administrator in
writing within ninety (90) days of the first claim denial.  Claimants may review
this Agreement or any documents relating thereto and submit any written issues
and comments they may feel appropriate.  In its sole discretion, the Plan
Administrator shall then review the second claim and provide a written decision
within sixty (60) days of receipt of such claim. This decision shall likewise
state the specific reasons for the decision and shall include reference to
specific provisions of this Agreement upon which the decision is based.

             3.12. Arbitration.  Any controversy or claim arising out of or
relating to the Agreement, or the breach thereof, or any failure to agree where
agreement of the parties is necessary pursuant hereto, including the
determination of the scope of this agreement to arbitrate, shall be resolved by
the following procedures:

3.12.1. THE PARTIES AGREE TO SUBMIT ANY DISPUTE TO FINAL AND BINDING ARBITRATION
ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION (THE “AAA”), PURSUANT TO
THE COMMERCIAL ARBITRATION RULES OF THE AAA AS IN EFFECT AT THE TIME OF
SUBMISSION.  THE ARBITRATION SHALL BE HELD IN BOSTON, MASSACHUSETTS BEFORE A
SINGLE, NEUTRAL, INDEPENDENT, AND IMPARTIAL ARBITRATOR (THE “ARBITRATOR”).

3.12.2. UNLESS THE PARTIES HAVE AGREED UPON THE SELECTION OF THE ARBITRATOR
BEFORE THEN, THE AAA SHALL APPOINT THE ARBITRATOR WITHIN THIRTY (30) DAYS AFTER
THE SUBMISSION TO THE AAA FOR BINDING ARBITRATION.  THE ARBITRATION HEARINGS
SHALL COMMENCE WITHIN FIFTEEN (15) DAYS AFTER THE SELECTION OF THE ARBITRATOR. 
EACH PARTY SHALL BE LIMITED TO TWO PRE-HEARING DEPOSITIONS EACH LASTING NO
LONGER THAN TWO (2) HOURS.  THE PARTIES SHALL EXCHANGE DOCUMENTS TO BE USED AT
THE HEARING NO LATER THAN TEN (10) DAYS PRIOR TO THE HEARING DATE.  EACH PARTY
SHALL HAVE NO LONGER THAN THREE (3) HOURS TO PRESENT ITS POSITION, AND THE
ENTIRE PROCEEDINGS BEFORE THE ARBITRATOR SHALL BE ON NO MORE THAN TWO (2)
HEARING DAYS WITHIN A TWO WEEK PERIOD.  THE AWARD SHALL BE MADE NO MORE THAN TEN
(10) DAYS FOLLOWING THE CLOSE OF THE PROCEEDING.  THE ARBITRATOR’S AWARD SHALL
NOT INCLUDE CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES.  THE ARBITRATOR’S
AWARD SHALL BE A FINAL AND BINDING DETERMINATION OF THE DISPUTE AND SHALL BE
FULLY ENFORCEABLE IN ANY COURT OF COMPETENT JURISDICTION.  EXCEPT IN A
PROCEEDING TO ENFORCE THE RESULTS OF THE ARBITRATION, NEITHER PARTY NOR THE
ARBITRATOR MAY DISCLOSE THE EXISTENCE, CONTENT, OR RESULTS OF ANY ARBITRATION
HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF BOTH PARTIES.

             3.13. Entire Agreement.  This Agreement constitutes the entire
agreement between the parties pertaining to its subject matter and supersedes
all prior and contemporaneous agreements, understandings, negotiations, prior
draft agreements, and discussions of the parties, whether oral or written. This
Agreement specifically supersedes and replaces in its entirety that certain
Supplemental Executive Retirement Agreement, made and entered into as of the
26th day of March, 1998 by and between the Bank and the Executive.

             3.14. Interpretation.  When a reference is made in this Agreement
to Sections or Exhibits, such reference shall be to a Section of or Exhibit to
this Agreement unless otherwise indicated.  References to Sections include
subsections, which are part of the related Section (e.g., a section numbered
“Section 5.5.1” would be part of “Section 5.5” and references to “Section 5.5”
would also refer to material contained in the subsection described as “Section
5.5.1”). The recitals hereto constitute an integral part of this Agreement.  The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.  Whenever
the words “include”, “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation”.  The phrases
“the date of this Agreement”, “the date hereof” and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to the date set
forth in the Preamble to this Agreement.

             3.15. Employment.  No provision of this Agreement shall be deemed
to restrict or limit any existing employment agreement by and between the
Holding Company or the Bank and the Executive, nor shall any conditions herein
create specific employment rights to the Executive nor limit the right of the
Holding Company or the Bank to discharge the Executive with or without Cause. 
In a similar fashion, no provision shall limit the Executive’s rights to
voluntarily terminate his employment at any time.  The benefits provided by this
Agreement are not part of any salary reduction plan or any arrangement deferring
a bonus or salary increase.  The Executive has no option to take any current
payment or bonus in lieu of these benefits.

             3.16. Regulatory Provisions.  The Executive confirms that he is
aware of the fact that the Federal Deposit Insurance Corporation has the power
to preclude the Bank from making payments to the Executive under this Agreement
under certain circumstances.  The Executive agrees that the Bank shall not be
deemed to be in breach of this Agreement if it is precluded from making a
payment otherwise payable hereunder by reason of regulatory requirements binding
on the Bank.

             3.17. Communications.  All notices and other communications
hereunder shall be in writing and shall given by hand, sent by facsimile
transmission with confirmation of receipt requested, sent via a reputable
overnight courier service with confirmation of receipt requested, or mailed by
registered or certified mail (postage prepaid and return receipt requested) to
the parties at the their respective addresses set forth below (or at such other
address for a party as shall be specified by like notice), and shall be deemed
given on the date on which delivered by hand or otherwise on the date of receipt
as confirmed:

To the Bank or Holding Company:

Abington Savings Bank

536 Washington Street

Abington, Massachusetts 02351

Attention: Treasurer

 

To the Executive:

James P. McDonough

41 Gardner Way

Hanover, Massachusetts 02339

 

In Witness Whereof, the parties have executed this Agreement as an instrument
under seal, as of the date first written above.

 

 

Abington Savings Bank

 

 

 

 

 

 

 

 

By:

 

 

 

Witness

 

 

Title

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Witness

 

 

James P. McDonough

 

 

 

 

 

 

The undersigned hereby guarantees the

obligations of Abington Savings Bank

under the foregoing agreement

Abington Bancorp, Inc.

By:                                                                         

Title:                                                                      

 

[Seal]