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 andentered into as of August 23, 2001 and effective as of the Effective Date byand between Abington Savings Bank, a Bank organized and existing under the lawsof The Commonwealth of Massachusetts (the “Bank”) and a wholly-owned subsidiaryof Abington Bancorp, Inc. (the “Holding Company”), and James P. McDonough, akey employee and executive of the Bank (the “Executive”).

WITNESSETH.

**Whereas**, the Executiveis a valuable, key employee of the Bank, serving the Bank as its ChiefExecutive Officer; and

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

**Whereas**, it is thedesire of the Bank and in its best interest that the Executive’s services beretained; and

**Whereas**, in order toinduce the Executive to continue in the employ of the Bank, the Bank hasentered into this Agreement to provide him or his beneficiaries with certainbenefits in accordance with the terms and conditions hereinafter set forth; and

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

**Now**, **therefore**, inconsideration of services performed in the past and to be performed in thefuture as well as of the mutual promises and covenants herein contained, it isagreed as follows:

# **Part 1. Definitions**

1.1. ** ****Accrual-Based Benefit**shall meanan amount equal to the aggregate of all amounts accrued by the Bank or theHolding Company between the date of this Agreement and the end of the CalendarYear in which the Executive’s employment terminates for the cost of thebenefits payable under this Agreement.

1.2. ** ****AccruedBenefit**shall mean the Executive's Normal RetirementBenefit calculated on the basis of the Final Average Compensation as of thedate (except as otherwise provided in Section 2.3) on which theExecutive's employment with the Bank or Holding Company terminates, multipliedby the Accrued Percentage.

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

### 1.3.1. The Accrued Percentage shall be one hundred percent (100%) ifany of the following shall occur:

#### (a) The Executive terminateshis employment with the Bank or Holding Company for Good Reason (as such termis defined in Section 1.14); or

#### (b) The Bank or HoldingCompany terminates the Executive's employment with the Bank or Holding Companyfor any reason whatsoever other than for "Cause" (as such term isdefined 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 orafter the date he attains the age of sixty (60); or

#### (d) A Terminating Event (assuch term is defined in Section 1.19) occurs within three years of aChange in Control (as such term is defined in Section 1.9).

### 1.3.2. The AccruedPercentage shall be zero if the Bank or Holding Company terminates theExecutive’s employment for “Cause” (as such term is defined inSection 2.7).

### 1.3.3. In all other cases,the Accrued Percentage shall be determined by deducting from one hundredpercent (100%) a percentage determined by multiplying (x) 1/30 times (y) thenumber of whole and partial years between the date on which the Executive'semployment with the Bank or the Holding Company or a successor in interestterminated and the date on which the Executive would attain the age of 60.

1.4. ** ****Actuarial Equivalent**shall meana benefit of equivalent current value to the benefit which could otherwise havebeen provided to the Executive, computed on the basis of the discount rates,mortality tables and other assumptions then being used by SBERA in determiningthe actuarial equivalent of payments being made by SBERA to its Retirement Planbeneficiaries.

1.5. ** ****AnnualAnnuity Equivalent**** **for a 401(k) plan or other defined contribution planshall be equal to the annual benefit payable from a single life annuity on theExecutive’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, theamount 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 theExecutive’s behalf (which contributions shall not include the so-called“individual contributions” on the Executive’s behalf (it being understood thatsuch “individual” contributions are made by the Bank or the Holding Companypursuant to a salary reduction agreement with the Executive)) and (y) theamount which would have been earned on such contributions at an assumed rate ofseven percent (7%) per year.

1.6. ** ****Beneficiary** shallmean the person or persons designated by the Executive in accordance withSection 3.2 hereof to receive benefits under this Agreement after thedeath of the Executive.

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

1.8. ** ****CalendarYear**shall mean a calendar year from January 1 toDecember 31.

1.9. ** ****Change inControl**shall have the meaning defined in thatcertain Special Termination Agreement restated as of the 31st day ofJanuary, 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** shallmean all compensation reported on the Executive's Form W-2 (Wages, tips, othercompensation box) for a Calendar Year, including, but not limited to, anybonuses actually paid by the Bank or the Holding Company to the Executiveduring the Calendar Year but adding thereto any amount which is contributed bythe Bank or the Holding Company  on theExecutive’s behalf pursuant to a salary reduction agreement and which is notincludable 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 employeebenefits of any kind (e.g., reimbursements of moving and relocation expenses,insurance premiums, automobile, health, medical, and dental expenses, the costof group-term life insurance, compensation arising from the exercise of anonqualified stock option or from a stock grant, and any fringe benefit) whichis not excluded from gross income under Section 132 of the Code..

1.12. ** ****EffectiveDate**.  The Effective Date of this Agreement shallbe August 23, 2001.

1.13.  **Final Average Compensation** shall mean the average of theCompensation of the Executive for the three Calendar Years (out of his finalfive Calendar Years of employment with the Bank or the Holding Company) duringwhich his Compensation was the highest.

1.14.  **Good Reason**** **shallmean:

### 1.14.1. The failure of theBoard of Directors of the Holding Company or the Bank to elect the Executive tothe office of Chief Executive Officer, or to continue the Executive in suchoffices; or

### 1.14.2. A reduction (*other than*concurrently with across–the–board salary reductions based on theBank’s financial performance similarly affecting all senior managementpersonnel of the Bank) in the Executive’s annual base salary as in effect onthe date hereof or as the same may be increased from time to time; or

### 1.14.3. A material reductionby the Holding Company or the Bank in the amount and type of employee benefitsbeing provided to the Executive by the Holding Company or the Bank as of thedate of this Agreement (*other than* as a result of a company-wideprogram to restructure the nature of the benefits being provided to employeesgenerally); or

### 1.14.4. A significantdiminution in the nature or scope of the Executive’s responsibilities,authorities, powers, functions or duties; or

### 1.14.5. A material breach bythe Holding Company or the Bank of any of the provisions of this Agreementwhich failure or breach shall have continued for thirty (30) days after writtennotice from the Executive to the Holding Company or the Bank specifying thenature of such failure or breach; or

### 1.14.6. The Executive’sdisability (determined as provided in Section 2.5), due to physical ormental illness, so as to be unable to perform substantially all of his dutiesand responsibilities as Chief Executive Officer of the Holding Company or theBank; or

### 1.14.7. The failure of theHolding Company or the Bank to obtain a satisfactory agreement from anysuccessor 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 threeyears following a Change in Control:

### 1.14.8. The failure by theHolding Company or the Bank to continue to provide the Executive with benefitssubstantially similar to those available to the Executive under any of the lifeinsurance, medical, health and accident, or disability plans or any othermaterial benefit plans in which the Executive was participating at the time ofthe Change in Control, or the taking of any action by the Holding Company orthe Bank which would directly or indirectly materially reduce any of suchbenefits, or the failure by the Holding Company or the Bank to provide theExecutive with the number of paid vacation days to which the Executive isentitled on the basis of years of employment with the Holding Company or theBank in accordance with the normal vacation policies in effect at the time ofthe Change in Control; or

### 1.14.9. A reasonabledetermination by the Executive that, as a result of a Change in Control, he isunable to exercise the responsibilities, authorities, powers, functions orduties exercised by the Executive immediately prior to such Change in Control;or

### 1.14.10. A reasonabledetermination by the Executive that, as a result of a Change in Control, hisworking conditions have significantly worsened.

1.15.  **InsurancePolicy** shall mean such insurance policy orpolicies (if any) as the Bank or the Holding Company, in its sole and absolutediscretion, may choose to purchase to fund some or all of the benefits payablehereunder.

1.16.  **Normal Retirement Benefit**** **shall mean a single life annuitypayable (as provided hereinafter in this Section 1.16) as an annualsupplemental retirement benefit ("Supplemental Benefit").  The amount of such Supplemental Benefitshall be calculated by (x) multiplying (i) 65% times (ii) the Executive’s FinalAverage Compensation and by (y) subtracting from such result the following: (i)one half of the annual amount payable (before earnings reductions) to theExecutive as a primary social security retirement benefit at age 65, (ii) theannual pension payable to the Executive (excluding any pension payable to theExecutive that is attributable to the Executive's own contributions) fromdefined benefit pension plans of the Bank or the Holding Company at his NormalRetirement 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 HoldingCompany’s ESOP) maintained by either the Bank or the Holding Company during theExecutive’s employment.  The Normal RetirementBenefit shall be an annual benefit in an amount equal to the SupplementalBenefit payable in equal monthly installments commencing on the NormalRetirement Date and continuing for the Executive's life, or a minimum of twentyyears, whichever is longer.

1.17.  **NormalRetirement Date**shall mean the date on which theExecutive attains age sixty-five (65).

1.18.  **SBERA** shall meanthe Savings Banks Employees Retirement Association.

1.19.  **TerminatingEvent**shall mean any of the following:

### 1.19.1. Termination by theHolding Company or the Bank of the Executive’s employment for any reasonwhatsoever *otherthan* (i) the Executive’s death or (ii) for “Cause” (assuch term is defined in, and in accordance with the procedures set forth in,Section 2.7), or

### 1.19.2. Resignation of theExecutive from the employ of the Bank and the Holding company for Good Reason,while the Executive is not receiving payments or benefits from the HoldingCompany or the Bank by reason of the Executive’s disability.

1.20.  **Trust** shall mean that certain ** **TrustAgreement established by the Bank with the Trustee for the benefit of theExecutive 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 anemployee 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 NormalRetirement Benefit.  He shall commenceto receive such Normal Retirement Benefit on his Normal Retirement Date.

2.2. ** ****Terminationof Service Before Normal Retirement Date**.  Ifthe Executive’s service as an employee of the Bank or the Holding Companyterminates (other than by reason of death (which is provided for inSection 2.4), other than for “Cause” (which is provided for inSection 2.6), and other than by reason of disability (which is providedfor in Section 2.5)) before his Normal Retirement Date, he shall beentitled to receive his Accrued Benefit .  He shall commence to receive such Accrued Benefit at his NormalRetirement Date or, if he so elects and the Board consents, he may commence toreceive the Actuarial Equivalent of such Accrued Benefit at an earlierdate.  In the event that the Executiverequests permission to commence receiving the Actuarial Equivalent of hisAccrued Benefit before his Normal Retirement Date and the Board refuses togrant permission for such early commencement of payments, the Executive mayrequest the Board to reconsider its decision. If the Board has not agreed to permit such early payment by a date whichis thirty days after the request for reconsideration was made, the Executiveshall have the right to receive upon written application to the Holding Companythe Actuarial Equivalent of such Accrued Benefit, less a penalty of 7%.  If the Executive begins to receive hisAccrued Benefit prior to attaining his Normal Retirement Date, the benefitshall be the Actuarial Equivalent of the benefit that would have been payableif 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 andbefore the Normal Retirement Date a Terminating Event occurs with respect tothe Executive, the Executive will be entitled to receive his Normal RetirementBenefit, calculated as if the following had occurred:  (a) the Executive continued his employment with the Bankuntil the Normal Retirement Date, (b) the annual rate of his basecompensation with the Bank in effect at the time of the termination ofemployment was increased, on a compound basis, by 6% on each May 1 occurringafter the date of termination of employment and prior to the Normal RetirementDate, and (c) the Executive’s annual compensation was paid in twenty-sixequal bi-weekly installments.  TheNormal Retirement Benefit, as so calculated, will generally be payable at theNormal Retirement Date, provided that, with the consent of the Board ofDirectors, 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 theExecutive requests permission to commence receiving his Benefit before hisNormal Retirement Date and the Board refuses to grant permission for such earlycommencement of payments, the Executive may request the Board to reconsider itsdecision.  If the Board has not agreedto permit such early payment by a date which is 15 days after the request for reconsiderationis made, the Executive shall have the right to receive upon written applicationto the Bank the Actuarial Equivalent of such Normal Retirement Benefit, less apenalty of 7%.

### 2.3.1. Upon a Change inControl, the Bank shall, as soon as possible, but in no event later than 30days following the Change in Control, make an irrevocable contribution to theTrust in an amount that is sufficient, as determined by an actuary appointed bythe Trustee, to pay the Executive or his Beneficiary the full benefits to whichhe or she would be entitled pursuant to the terms of this Agreement as of thedate on which the Change in Control occurred, assuming that (x) theAccrued Percentage was 100%, (y) a Terminating Event had occurred withrespect 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 hisBeneficiary, on an Actuarial Equivalent basis, as of the date of the Change inControl.  Within the same time periodfollowing a Change in Control, the Bank shall make a further irrevocablecontribution to the Trust in an amount sufficient to pay for the Trustee’s feesand for actuarial, accounting, legal and other professional or administrativeservices necessary to implement the terms of this Agreement following a Changein Control.  Such amount shall bedetermined by the Trustee’s estimate of its fees (as provided in the TrustAgreement) and by estimates obtained by the Trustee from the independent actuaries,accountants, lawyers and other appropriate professional and administrativepersonnel who provided such services to the Trust or the Bank immediatelybefore the Change in Control.

### 2.3.2. If the Executivewould be entitled to receive payment of a benefit under this Section 2.3and under Section 2.2, the provisions of Section 2.2 shall not applyand this Section 2.3 shall be controlling.

2.4. ** ****DeathBenefits**. The provisions of this Section 2.4 shall expire and be of nofurther force or effect from and after the Normal Retirement Date.  The benefits payable under thisSection 2.4 shall be in lieu of and in complete substitutions for any andall benefits otherwise payable under this Agreement.

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

2.4.2. ** Split DollarAgreement**.  Although the Bank is under no obligation tofund the benefits payable under this Agreement with any form of insurance, asof the date of this Agreement the Bank has purchased an Insurance Policy andhas entered into that certain Split Dollar Agreement with the Executive of evendate herewith, providing for the endorsement of the Insurance Policy so as toprovide a death benefit to the Executive’s Beneficiary in an amount equal tothe Compensation-Based Benefit. Any amounts received by the Executive’sBeneficiary with respect to the Insurance Policy shall be deducted from amountsotherwise payable by the Bank to the Executive’s Beneficiary pursuant to thisSection 2.4.

2.4.3. ** ****Gross-Up of Payments**.  Inthe event that no Insurance Policy is in place at the time a death benefit ispayable to the Executive’s Beneficiary (and as a result, the Compensation-BasedBenefit is treated as Income with Respect to a Decedent pursuant toSection 691 of the Code or by any successor provision, by reason of suchbenefit not being considered to be life insurance proceeds), the Bank shall, inaddition to the Compensation-Based Benefit, pay to the Executive’s Beneficiaryan amount necessary to ensure that, after the payment of any federal, state, orlocal taxes imposed as a result of the treatment of the Compensation-BasedBenefit as Income with Respect to a Decedent, the Executive’s Beneficiaryreceives and retains, free from liability for any taxes, a net amount equal tothe amount the Executive’s Beneficiary would have received and retained had theCompensation-Based Benefit been considered to be life insurance proceeds.  It is intended that the net after-taxCompensation Based Benefit received by the Executive’s Beneficiary, aftertaking into account the payments made pursuant to this Section 2.4.3,shall be equal to the net Compensation-Based Benefit that the Executive’sBeneficiary would have received if such benefit had not been treated as Incomewith Respect to a Decedent.

2.5.   **Disability**.  Inthe event that the Executive shall become "disabled" (as definedbelow) while in the employ of the Holding Company and the Bank and prior to hisNormal Retirement Date, he shall become vested in his Accrued Benefit, computedat the time of the Executive's disability with an Accrued Percentage of100%.  He shall commence to receive suchAccrued Benefit at his Normal Retirement Date or, if he so elects and the Boardconsents, he may commence to receive the Actuarial Equivalent of such AccruedBenefit at an earlier date.  In theevent that the Executive requests permission to commence receiving theActuarial Equivalent of the Accrued Benefit before his Normal Retirement Dateand the Board refuses to grant permission for such early commencement ofpayments, the Executive may request the Board to reconsider its decision.  If the Board has not agreed to permit suchearly payment by a date which is 15 days after the request for reconsiderationwas made, the Executive shall have the right to receive upon writtenapplication to the Holding Company the Actuarial Equivalent of the AccruedBenefit, less a penalty of 7%.  Paymentsunder this Section 2.5 shall be in addition to any payments otherwisepayable to the Executive as a result of disability under any other plans oragreements in effect from time to time.

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

### 2.5.2. If the Executiverecovers from his disability and returns to the employ of the Bank, hisdisability benefit shall terminate, and upon his subsequent termination ofservice as an employee of the Bank or Holding Company he shall be entitled tosuch retirement or termination benefits as he would otherwise have beenentitled to if he had been employed by the Bank or Holding Company throughouthis period of disability, as appropriately adjusted to reflect any benefitspreviously paid under this Section 2.5. For purposes of the accrual of benefits under this Agreement, time spenton disability shall be deemed to be time spent as an employee of the Bank orHolding Company.

### 2.5.3. In the event there isdisagreement as to whether the provisions of this Section 2.5 areapplicable, the Bank and the Executive (or his personal representative) eachshall select a physician.  If thephysicians are in disagreement, they shall select a third physician.  A majority opinion of the three physiciansas 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 hissurviving spouse or Beneficiary, as the case may be) for the reasonable andnecessary fees and costs directly attributable to such procedure.

2.6. ** ****No Benefits Upon Discharge for Cause**.  Should the Executive be discharged forCause in accordance with the procedures set forth in Section 2.7 at anytime (before or after his Normal Retirement Date), all Benefits under Part 2 ofthis Agreement shall be forfeited.  If adispute arises as to discharge for “Cause”, such dispute shall be resolved byarbitration 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 dishonestywith respect to the Holding Company or the Bank or any subsidiary or affiliatethereof; conviction of a crime involving moral turpitude; or gross and willfulfailure to perform (*other than* on account of a medicallydeterminable disability which renders the Executive incapable of performingsuch services) a substantial portion of the Executive’s duties andresponsibilities as an officer of the Holding Company or the Bank, whichfailure continues for more than thirty days after written notice given to theExecutive pursuant to a two-thirds vote of all of the members of the Board thenin office, such vote to set forth in reasonable detail the nature of suchfailure.  Notwithstanding the foregoing,the Executive shall not be deemed to have been discharged for “Cause” unlessand until there shall have been delivered to him a copy of a certification bythe Clerk of the Holding Company or the Bank that two-thirds of the entireBoard of Directors of the Holding Company or the Bank found in good faith thatthe Executive was guilty of conduct which is deemed to be Cause as defined inthis Section 2.7 and specifying the particulars thereof, after reasonablenotice to the Executive setting forth in reasonable detail the nature of suchCause and an opportunity for him, together with his counsel, to be heard before the Board in accordancewith the provisions of Section 2.7.2.

2.7.2.**Board Termination Procedure**.  Ineach case, in determining Cause the alleged acts or omissions of the Executiveshall be measured against standards prevailing in the banking industrygenerally and the ultimate existence of Cause must be confirmed by not lessthan 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 burdento prove the alleged facts and omissions and the prevailing nature of thestandards the Bank shall have alleged are violated by such acts and/oromissions of the Executive. In the event of such a confirmation by two-thirdsor more of the Board, the Holding Company or the Bank shall notify theExecutive that the Bank intends to terminate the Executive’s employment forCause under this Section 2.7 (the “Confirmation Notice”). The ConfirmationNotice shall specify the acts or omissions upon the basis of which the Boardhas confirmed the existence of Cause and must be delivered to the Executivewithin ninety (90) days after a majority of the Board (excluding, ifapplicable, the Executive) has actual knowledge of the events giving rise tosuch purported termination. If the Executive notifies the Bank in writing (the“Opportunity Notice”) within thirty (30) days after the Executive has receivedthe Confirmation Notice, the Executive (together with counsel) shall beprovided one opportunity to meet with the Board (or a sufficient quorumthereof) to discuss such acts or omissions. Such meeting shall take place atthe principal offices of the Holding Company or the Bank or such other locationas agreed to by the Executive and the Bank. During the period commencing on thedate the Bank receives the Opportunity Notice and ending on the date nextsucceeding the date on which such meeting between the Board (or a sufficientquorum thereof) and the Executive is scheduled to occur and not withstandinganything to the contrary in this Agreement, the Executive shall be suspendedfrom employment with the Holding Company or the Bank (with pay to the extentnot prohibited by applicable law), and the Board may, during such suspensionperiod, reasonably limit the Executive’s access to the principal offices of theHolding Company or the Bank or any of its assets. If the Board properly setsthe 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 ofCause at such meeting or if the Executive fails to attend such meeting for anyreason, the Executive’s employment by the Holding Company and/or the Bankshall, immediately upon the closing of such meeting and the delivery to theExecutive of the Notice of Termination, be terminated for Cause. If theExecutive does not respond in writing to the Confirmation Notice in the mannerand within the time period specified in this Section 2.7.2, theExecutive’s employment with the Holding Company and/or the Bank shall, on thethirty–first day after the receipt by the Executive of the ConfirmationNotice, 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 thisAgreement (and nothing contained in this Section 2.7) shall in any waylimit the right of the Holding Company or the Bank to discharge the Executivewith or without Cause or to limit the access of the Executive to the premisesor assets of the Bank or the Holding Company.

# **Part3**. AdditionalProvisions

**            **3.1.**Alternative Forms of BenefitPayment**.  The Executive shall have the right uponbecoming subject to the Plan to elect the form of payment in which his benefitis to be paid.  Such election shall besubmitted in writing to the Executive Vice President or Treasurer of theBank.  In any Calendar Year prior to theyear in which amounts become payable hereunder, and at least six months priorto the Executive’s termination of employment, the Executive may change the formof payment he has elected. In lieu of the annuity form of payment otherwiseprovided in this Agreement, upon request the Executive may obtain an ActuariallyEquivalent form of payment; *provided* that such form is a permittedform of benefit under the SBERA Pension Plan. Acceptable forms of payment presently include:

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

•        Life Annuity

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

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

**            **3.3.**Assistance in Purchase ofLife Insurance**.  Ifthe Bank elects to invest in an Insurance Policy, the Executive shall assistthe Bank by freely submitting to a physical exam and supplying such additionalinformation necessary to obtain such insurance or annuities.

             3.4.**Alienability and AssignmentProhibition**. Neither the Executive, his surviving spouse nor any other Beneficiary underthis Agreement shall have any power or right to transfer, assign, anticipate,hypothecate, mortgage, commute, modify or otherwise encumber in advance any ofthe benefits payable hereunder nor shall any of said benefits be subject toseizure for the payment of any debts, judgments, alimony or separatemaintenance owed by the Executive or his Beneficiary, nor be transferable byoperation of law in the event of bankruptcy, insolvency or otherwise.  In the event the Executive or anyBeneficiary attempts assignment, commutation, hypothecation, transfer ordisposal of the benefits hereunder, the Bank’s liabilities shall forthwithcease and terminate.

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

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

             3.7. **General**.  The benefits provided by the Bank to theExecutive pursuant to this Agreement are in the nature of a fringe benefit andshall in no event be construed to affect or limit the Executive’s current orprospective salary increases, cash bonuses or profit-sharing distributions orcredits or his right to participate in or be covered by any qualified ornon-qualified pension, profit-sharing, group, bonus or other supplementalcompensation or fringe benefit plan.

             3.8.**Headings**.  Headings and subheadings inthis Agreement are inserted for reference and convenience only and shall not bedeemed a part of this Agreement.

             3.9.**Applicable Law**.  This Agreement shall be governed by, andconstrued and enforced in accordance with, the substantive laws of TheCommonwealth of Massachusetts without regard to its principles of conflicts oflaws.

             3.10.**Named Fiduciary and PlanAdministrator**.  The“Named Fiduciary and Plan Administrator” of this plan shall be Abington SavingsBank 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 ofthe benefits to be provided under this Agreement.  The Named Fiduciary may delegate to others certain aspects of themanagement and operation responsibilities of the plan including the employmentof advisors and the delegation of ministerial duties to qualified individuals.

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

If claimants desire a secondreview, 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 theretoand submit any written issues and comments they may feel appropriate.  In its sole discretion, the PlanAdministrator shall then review the second claim and provide a written decisionwithin sixty (60) days of receipt of such claim. This decision shall likewisestate the specific reasons for the decision and shall include reference tospecific provisions of this Agreement upon which the decision is based.

             3.12. **Arbitration**.  Any controversy or claim arising out of or relatingto the Agreement, or the breach thereof, or any failure to agree whereagreement of the parties is necessary pursuant hereto, including thedetermination of the scope of this agreement to arbitrate, shall be resolved bythe following procedures:

### 3.12.1. The parties agree tosubmit any dispute to final and binding arbitration administered by theAmerican Arbitration Association (the “AAA”), pursuant to theCommercial Arbitration Rules of the AAA as in effect at the time ofsubmission.  The arbitration shall beheld in Boston, Massachusetts before a single, neutral, independent, andimpartial arbitrator (the “Arbitrator”).

### 3.12.2. Unless the partieshave agreed upon the selection of the Arbitrator before then, the AAA shallappoint the Arbitrator within thirty (30) days after the submission to the AAAfor binding arbitration.  The arbitrationhearings shall commence within fifteen (15) days after the selection of theArbitrator.  Each party shall be limitedto two pre-hearing depositions each lasting no longer than two (2) hours.  The parties shall exchange documents to beused 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 theArbitrator shall be on no more than two (2) hearing days within a two weekperiod.  The award shall be made no morethan ten (10) days following the close of the proceeding.  The Arbitrator’s award shall not includeconsequential, exemplary, or punitive damages. The Arbitrator’s award shall be a final and binding determination of thedispute and shall be fully enforceable in any court of competentjurisdiction.  Except in a proceeding toenforce the results of the arbitration, neither party nor the Arbitrator maydisclose the existence, content, or results of any arbitration hereunderwithout the prior written consent of both parties.

             3.13.**Entire Agreement**.  This Agreement constitutes the entireagreement between the parties pertaining to its subject matter and supersedesall prior and contemporaneous agreements, understandings, negotiations, prior draftagreements, and discussions of the parties, whether oral or written. ThisAgreement specifically supersedes and replaces in its entirety that certainSupplemental Executive Retirement Agreement, made and entered into as of the 26thday of March, 1998 by and between the Bank and the Executive.

             3.14.**Interpretation**.  When a reference is made in this Agreementto Sections or Exhibits, such reference shall be to a Section of or Exhibit tothis Agreement unless otherwise indicated. References to Sections include subsections, which are part of therelated 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 materialcontained in the subsection described as “Section 5.5.1”). The recitals heretoconstitute an integral part of this Agreement. The headings contained in this Agreement are for reference purposes onlyand 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 bythe words “without limitation”.  Thephrases “the date of this Agreement”, “the date hereof” and terms of similarimport, unless the context otherwise requires, shall be deemed to refer to thedate set forth in the Preamble to this Agreement.

             3.15.**Employment**.  Noprovision of this Agreement shall be deemed to restrict or limit any existingemployment agreement by and between the Holding Company or the Bank and theExecutive, nor shall any conditions herein create specific employment rights tothe Executive nor limit the right of the Holding Company or the Bank todischarge the Executive with or without Cause. In a similar fashion, no provision shall limit the Executive’s rights tovoluntarily terminate his employment at any time.  The benefits provided by this Agreement arenot part of any salary reduction plan or any arrangement deferring a bonus orsalary increase.  The Executive has nooption to take any current payment or bonus in lieu of these benefits.

             3.16.**Regulatory Provisions**.  The Executive confirms thathe is aware of the fact that the Federal Deposit Insurance Corporation has thepower to preclude the Bank from making payments to the Executive under this Agreementunder certain circumstances.  TheExecutive agrees that the Bank shall not be deemed to be in breach of thisAgreement if it is precluded from making a payment otherwise payable hereunderby reason of regulatory requirements binding on the Bank.

             3.17.**Communications**.  All notices and other communicationshereunder shall be in writing and shall given by hand, sent by facsimiletransmission with confirmation of receipt requested, sent via a reputableovernight courier service with confirmation of receipt requested, or mailed byregistered or certified mail (postage prepaid and return receipt requested) tothe parties at the their respective addresses set forth below (or at such otheraddress for a party as shall be specified by like notice), and shall be deemedgiven on the date on which delivered by hand or otherwise on the date ofreceipt 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 partieshave executed this Agreement as an instrument under seal, as of the date firstwritten above.
|    |   | **Abington Savings Bank** |
|---------|--------|---------------------------|
|    |   |                      |
|    |   |                      |
|    |   | By:                       |   |   |   |
| Witness |   |                      | Title |   |   |
|    |   |                      |   |   |   |
|    |   |                      |   |   |   |
|    |   |                      |   |   |   |
| Witness |   |                      | James  P. McDonough |   |   |

 

 

 

 

The undersigned herebyguarantees the

obligations of AbingtonSavings Bank

under the foregoingagreement

**AbingtonBancorp, Inc**.

By:                                                                          

Title:                                                                       

 

[Seal]