Document:

Prepared by MERRILL CORPORATION

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]Prepared by MERRILL CORPORATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SANDERS

MORRIS HARRIS GROUP INC.

 

CAPITAL

INCENTIVE PROGRAM

 

(As

Amended and Restated Effective November 1, 2001)

 

TABLE OF CONTENTS

 

	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Section 1.

  	

  Background and Purpose of the Program

  	

   

  
	

   

  	

   

  	

   

  
	

  Section 2.

  	

  Definitions

  	

   

  
	

  (a)

  	

  Adopting Employer

  	

   

  
	

  (b)

  	

  Award Date

  	

   

  
	

  (c)

  	

  Bonus

  	

   

  
	

  (d)

  	

  Company

  	

   

  
	

  (e)

  	

  Consultant

  	

   

  
	

  (f)

  	

  Elective Deferral Agreement

  	

   

  
	

  (g)

  	

  Elective Deferral Contribution

  	

   

  
	

  (h)

  	

  Employment

  	

   

  
	

  (i)

  	

  Fair Market Value

  	

   

  
	

  (j)

  	

  Participant

  	

   

  
	

  (k)

  	

  Payout

  	

   

  
	

  (l)

  	

  Plan

  	

   

  
	

  (m)

  	

  Program

  	

   

  
	

  (n)

  	

  Program Year

  	

   

  
	

  (o)

  	

  RSA Agreement

  	

   

  
	

  (p)

  	

  Restricted Period

  	

   

  
	

  (q)

  	

  Restricted Stock

  	

   

  
	

  (r)

  	

  Restricted Stock Award

  	

   

  
	

  (s)

  	

  Salary

  	

   

  
	

  (t)

  	

  Vesting Date

  	

   

  
	

   

  	

   

  	

   

  
	

  Section 3.

  	

  Eligibility

  	

   

  
	

   

  	

   

  	

   

  
	

  Section 4.

  	

  Elective Deferral Agreement

  	

   

  
	

   

  	

   

  	

   

  
	

  Section 5.

  	

  Revocation of Participant’s Salary or Bonus

  Deferrals

  	

   

  
	

   

  	

   

  	

   

  
	

  Section 6.

  	

  Restricted Stock Awards

  	

   

  
	

  (a)

  	

  Authority of Committee

  	

   

  
	

  (b)

  	

  Number of Restricted Shares Awarded to

  Employees

  	

   

  
	

  (c)

  	

  Number of Restricted Shares Awarded to

  Consultants

  	

   

  
	

  (d)

  	

  Stock Certificate and Legend

  	

   

  
	

  (e)

  	

  Restrictions on Stock

  	

   

  
	

  (f)

  	

  Voting of Restricted Stock

  	

   

  
	

  (g)

  	

  Post-Termination Forfeiture for Cause

  	

   

  
	

   

  	

   

  	

   

  
	

  Section 7.

  	

  Amendment and Termination

  	

   

  
	

   

  	

   

  	

   

  
	

  Section 8.

  	

  General Provisions

  	

   

  
	

  (a)

  	

  No Limitation on other Compensation Plans

  or Employment

  	

   

  
	

  (b)

  	

  Indemnification

  	

   

  
	

  (c)

  	

  Assignment

  	

   

  
	

  (d)

  	

  Tax Withholding

  	

   

  
	

  (e)

  	

  Severability

  	

   

  
	

  (f)

  	

  Applicability of Plan

  	

   

  
	

   

  	

   

  	

   

  
	

  SCHEDULE A

  	

   

  	

   

  
	

   

  	

   

  	

   

  

 

SANDERS

MORRIS HARRIS GROUP INC.

CAPITAL

INCENTIVE PROGRAM

 

(As Amended and Restated Effective November 1,

2001)

 

 

Section 1.                Background and Purpose of the Program.

 

The name of this program is the SANDERS

MORRIS HARRIS GROUP INC. CAPITAL INCENTIVE PROGRAM (the “Program”). 

The Program is an amendment and restatement, effective as of

November 1, 2001, of the “Pinnacle Global Group, Inc. Capital Incentive

Program” which was originally effective January 1, 2001.  The Program was amended and restated to (i)

reflect the change in the name of the sponsoring employer from Pinnacle Global

Group, Inc. to Sanders Morris Harris Group Inc. and (ii) allow participation in

the Program by Consultants.

 

The Program permits the grants of Restricted

Stock Awards to key Employees and Consultants. 

The Program was adopted by the Committee and being made available

pursuant to the authority granted to the Committee under the Pinnacle Global Group, Inc.

1998 Incentive Plan, as it may be amended from time to time (the “Plan”), particularly Section 3 of the

Plan, “Restricted Stock,” which Plan is incorporated by reference herein in its

entirety.

 

The purpose of the Program is to enable

Sanders Morris Harris Group Inc.  (the “Company”) and its Subsidiaries to attract,

retain and motivate key Employees and Consultants to compensate them for their

contributions to the growth and profits of the Company, and to encourage their

ownership of Common Stock in the Company. 

The Program provides incentives to participating Employees and

Consultants which are linked directly to increases in stockholder value and

should, therefore, inure to the benefit of the stockholders of the Company.

 

 

Section 2.                Definitions.

 

All capitalized terms used in the Program,

unless otherwise defined herein, shall have the meanings ascribed to such terms

in the Plan.  The Program, in its

entirety, is incorporated by reference into the Plan.

 

(a)                Adopting Employer.  “Adopting Employer” means the Company and

each of its Subsidiaries which have been designated by the Committee as an

employer which has adopted the Program.

 

(b)                Award Date.  “Award Date” means (i) with respect to a

Restricted Stock Award relating to a Bonus deferral under the Program, the date

during a Program Year on which the Bonus would have been paid absent the

deferral election and (ii) with respect to a Restricted Stock Award relating to

a Salary deferral under the Program; the last day of each quarter during a

Program Year, i.e., March 31, June 30, September 30 and December

31.

 

(c)                Bonus.  “Bonus” means any amount attributable to

the Employee during a Program Year which is designated by the Adopting Employer

as bonus compensation.  In the event of

any disagreement, the Committee, in its sole discretion, shall determine

whether any particular type or item of compensation shall be deemed a “Bonus”

for purposes of the Program.

 

(d)                Company.   “Company” means Sanders Morris Harris Group

Inc., a corporation organized under the laws of the State of Texas, and

any successor in interest thereto.

 

(e)                Consultant.  “Consultant”

means an independent agent, consultant, contractor, an individual who has

agreed to become an Employee within the next six months, or any other

individual who is not an outside director or Employee of the Company (or any

Parent or Subsidiary) and who, in the opinion of the Committee, is in a position

to contribute to the growth or financial success of the Company (or any

Parent or Subsidiary), (ii) is a natural person and (iii) provides bona fide

services to the Company (or any Parent or Subsidiary), which services are not

in connection with the offer or sale of securities in a capital raising

transaction, and do not directly or indirectly promote or maintain a market for

the Company’s securities.

 

(f)                Elective Deferral Agreement.  “Elective Deferral Agreement” means a

written agreement entered into by and between the Adopting Employer and a

Participant for a Program Year, which agreement describes the terms and

conditions of such Participant’s arrangement to defer (i) up to one hundred

percent (100%) of his Bonus that may be awarded with respect to such Program

Year and/or (ii) up to fifty percent (50%) of his Salary that would otherwise

be paid to the Participant during the Program Year absent his deferral

election.  The Elective Deferral

Agreement shall be executed and dated by the Participant and shall specify the

amount of Bonus and/or Salary, by percentage or dollar amount, to be deferred

under the Program for the Program Year.

 

(g)                Elective

Deferral Contribution.

 “Elective Deferral Contribution”

means any amount of a Participant’s Salary and/or Bonus which he elects to

defer hereunder pursuant to an Elective Deferral Agreement and to have such

deferred amount applied to a Restricted Stock Award pursuant to Section 4.

 

If an Active Participant is authorized by his

Adopting Employer to take a paid leave of absence from Employment, the

Participant shall continue to be considered in Employment and his Elective

Deferral Contributions shall continue to be withheld during such paid leave of

absence.

 

If an Active

Participant is authorized by his Adopting Employer for any reason to take an

unpaid leave of absence from Employment, the Participant shall continue to be

considered in Employment and the Participant shall be excused from making

Elective Deferral Contributions from his Salary until the Participant returns

to a paid Employment status.  Upon his

return, Elective Deferral Contributions shall resume for the remaining portion

of the Program Year in which the expiration or return occurs, based on the

Participant’s Elective Deferral Agreement as in effect for that Program Year,

i.e., the same percentage or dollar amount of Salary that was being withheld

prior to the unpaid leave of absence shall resume after return to active

service, but no make-up elective contributions can be made for the leave

period.  A leave of absence shall not

affect any Bonus deferral election made by the Participant under his Elective

Deferral Agreement.

 

(h)                Employment.  “Employment”

with respect to an Employee means employment as an Employee.  “Employment” with respect to a Consultant

means active service as a Consultant for an Adopting Employer.

 

(i)                Fair Market Value.  “Fair Market Value” means, as determined by

the Committee, the 20-day average of the closing sales prices for a Share of

the Company’s Common Stock, as reported on the National Association of

Securities Dealers Automated Quotation System (“NASDAQ”), ending as of the

business day immediately preceding the date on which the Share is being valued.

 

(j)                Participant. 

“Participant” means an Employee or Consultant who has (i) been selected

to participate in the Program pursuant to Section 3 and (ii) received a

Restricted Stock Award.

 

(k)                Payout. “Payout” means a fee or other form of

compensation that is payable by the Company to a Consultant.

 

(l)                Plan.  “Plan” means the Pinnacle Global Group, Inc.

1998 Incentive Plan, as it may be amended from time to time.

 

(m)                Program.  “Program” means this Sanders Morris Harris

Group Inc. Capital Incentive Program (fka the Pinnacle Global Group Inc.

Capital Incentive Program) as set forth herein, and as it may be amended from

time to time.  The Program is

incorporated into the Plan.

 

(n)                Program Year.  “Program Year” means the calendar year

commencing on January 1 and ending on December 31, with the first Program Year

commencing on January 1, 2001.

 

(o)                RSA Agreement.  “RSA Agreement” means a written

agreement entered into between the Company and the Participant setting forth

the terms and conditions pursuant to which a Restricted Stock Award is granted

under the Plan.

 

(p)                Restricted Period.  “Restricted Period” means the period of time

determined by the Committee and set forth in the RSA Agreement during which the

transfer of Restricted Stock by the Participant is restricted.

 

(q)                Restricted Stock.

 “Restricted Stock” means Shares of

the Company’s Common Stock that are granted to a Participant pursuant to a RSA

Agreement and have not yet vested thereunder.

 

(r)                Restricted Stock Award.

  “Restricted Stock Award” means a

grant of Restricted Stock as evidenced by a RSA Agreement.

 

(s)                Salary.  “Salary” means the gross remuneration that

is earned by the Employee or Consultant from an Adopting Employer for

compensatory services as reportable on the Employee’s IRS form W-2 or the

Consultant’s Form 1099, as the case may be, for a calendar year, including,

without limitation, commissions, and before such gross remuneration is reduced

for (if any) (i) deductions of payroll taxes and other standard deductions and

(ii) Elective Deferral Contributions hereunder, elective deferrals to a 401(k)

plan or a cafeteria plan, and other employee benefits deductions; provided,

however, the term “Salary” shall exclude any Bonuses (or other extraordinary

compensation), reimbursements of business, moving and other expenses, any

income resulting from stock option exercises, and any distributions from the

Program and any other qualified or non-qualified deferred compensation program.  The Committee, in its discretion, shall

determine whether any particular type or item of compensation shall be deemed

“Salary” for purposes of the Program.

 

(t)                Vesting Date.  “Vesting Date” means, with respect to a

Participant, the date on which the Restricted Stock Award, or a portion

thereof, becomes vested upon lapse of the Restricted Period.

 

 

Section 3.                Eligibility.

 

The Employees and Consultants who receive

grants of Restricted Stock Awards under the Program shall be selected from time

to time by the Committee, in its sole discretion, from among such persons.

 

This paragraph is only applicable to

Employees, and not Consultants, who have been selected as Participants.  Prior to the beginning of each Program Year

(or when an Employee is first designated as a Participant during a Program

Year), the Committee shall notify each designated Employee of his right to

authorize Elective Deferral Contributions for that Program Year (or remaining

portion thereof).  Each Employee who has

been designated as a Participant for any Program Year shall automatically

remain eligible to authorize Elective Deferral Contributions in that Program

Year and for succeeding Program Years if he remains an Employee, unless and

until it is determined by the Committee, in its sole discretion, that the

Employee is no longer a Participant.  An

Employee or former Employee (or in the event of his death, his beneficiary)

shall be considered a Participant hereunder so long as he has a Restricted Stock

Award that has not fully vested.

 

Section 4.                Elective Deferral Agreement.

 

This Section 4 is only applicable to

Employees (and not Consultants) who have been selected as Participants.

 

After an Employee has been notified that he

is eligible to authorize Elective Deferral Contributions for a Program Year,

such Employee must notify the Committee (or its delegate) of his deferral

election, if any, by completing and executing an Elective Deferral Agreement.  Any Elective Deferral Agreement that is not

completed and signed by the Employee, and received and accepted by the

Committee (or its delegate), on or prior to (a) the last day of the Program

Year immediately preceding the Program Year for which the Elective Deferral

Agreement will be effective, or (b) the first day of the first payroll period

for which the Elective Deferral Agreement will be effective if the Employee

first became a Participant during that Program Year, shall be treated as the

Employee’s election not to defer any Salary or Bonus hereunder for that Program

Year.

 

Notwithstanding the immediately preceding

paragraph, if after the commencement of a Program Year an Employee is

designated as a Participant for the first time then, in order to make a

deferral election hereunder, the Participant must complete and execute an

Elective Deferral Agreement and return it to the Committee (or its delegate)

within thirty (30) days from the effective date on which he first became

eligible to participate.  Such Elective

Deferral Agreement shall only apply to defer not-yet-earned Salary and Bonus

for services to be performed by the Participant (a) for the remainder of the

Program Year and (b) subsequent to receipt and acceptance of his Elective

Deferral Agreement by the Committee (or its delegate).

 

The amount of Salary deferred hereunder,

pursuant to the Participant’s authorization in his Elective Deferral Agreement,

shall be withheld on a pro rata basis from the Participant’s regular payments

of Salary for each pay period during the Program Year (or portion thereof

during which such Elective Deferral Agreement is in effect).  The dollar amount of a Bonus that the

Participant elects to defer pursuant to his Elective Deferral Agreement shall

be deferred in a lump sum on the date that the deferred portion of the Bonus

would have been paid to the Participant in the absence of his deferral

election.

 

In accordance with this Section 4 and

Section 7.6 of the Plan, the Committee shall permit a Participant to elect,

under the procedures described in this paragraph, to further defer (the

“Additional Deferral Election”) the vesting and receipt of shares of Restricted

Stock that would otherwise vest and be issuable to such Participant.  The Additional Deferral Election shall (i)

be in writing and in the form adopted by the Company, (ii) be made by the

Participant and received by the Company, at least one full year and a day,

prior to the date that the vesting restrictions on the shares of Restricted

Stock are scheduled to lapse or any additional one-year extension thereof as

described below (the “Twelve Month Vesting Date”), (iii) apply to all (and not

less than all) of the shares of Restricted Stock scheduled to vest on the

Twelve Month Vesting Date (the “Extended Restricted Shares”), and (iv) have the

effect of deferring the Vesting Date of the Extended Restricted Shares for 12

months after the Twelve Month Vesting Date (the “Extended Vesting Date”).  The Participant shall be permitted to make

successive annual one-year deferral elections with respect to all (but not less

than all) the Extended Restricted Shares provided that each such election

satisfies the requirements described above. 

Until the Extended Vesting Date, the Extended Restricted Shares shall be

subject to all restrictions described in the RSA Agreement for unvested shares

of Restricted Stock including, without limitation, all forfeiture provisions.

 

Section 5.                Revocation of Participant’s Salary or

Bonus Deferrals.

 

This Section

5 is only applicable to Employees (and not Consultants) who have been

selected as Participants.

 

The Participant’s Elective Deferral

Agreement, if any, shall continue in effect during the Program Year while he

remains a Participant unless and until he files with the Committee a written

notice of discontinuance of his Elective Deferral Agreement and such notice is

received and accepted by the Committee in its discretion.  The notice of discontinuance must be filed

and accepted at least thirty (30) days prior to the first day of a

subsequent  month.  The revocation of deferrals shall be

effective on the first day of the payroll period beginning in the designated

subsequent month.  A notice of

discontinuance shall be effective only with respect to Salary and Bonus amounts

(a) attributable to services not yet performed by the Participant and (b) not

earned by the Participant before the notice of discontinuance becomes

effective.  This determination shall be

made by the Committee.

 

If a Participant files a written notice of

discontinuance of his Elective Deferral Agreement, he may not enter into a new

Elective Deferral Agreement, and he cannot revoke such notice of

discontinuance, for the remainder of the Program Year.  Such Participant will be eligible to make a

new Elective Deferral Contribution effective as of the first day of the next

Program Year if, and only if, he is designated as a Participant for that

Program Year pursuant to Section 3. 

No such designation of future participation is required to be made by

the Committee pursuant to Section 3. 

Only a complete and total cessation of Elective Deferral Contributions

shall be permitted hereunder during a Program Year; therefore, requested

changes by a Participant during a Program Year to either increase or reduce his

Elective Deferral Contributions shall not be permitted (unless the reduction is

to zero) if such change is to be effective before the first day of the next

Program Year.

 

Section 6.                Restricted Stock Awards.

 

(a)                Authority of Committee.  Restricted Stock Awards shall be determined

by the Committee and granted to Participants at such time or times as the

Committee may determine, in its sole discretion, pursuant to the terms and

conditions of the Program.  The

Committee shall have the full and unilateral authority to construe and

interpret the Program and make all determinations hereunder in its discretion.

 

(b)                Number

of Restricted Shares Awarded to Employees.  The number of shares of Restricted Stock to

be awarded to an Employee who is a Participant will be determined by a formula

or formulas approved by the Committee in its discretion.  The Committee, in its discretion, may change

the formula from time to time.  In order

to reflect the impact of the restrictions on the value of the Restricted Stock,

as well as the possibility of forfeiture of Restricted Stock, the Fair Market Value

of the Common Stock (determined in the manner described below) shall be

discounted at a rate of thirty-three and one-third percent (33_%) in

determining the number of shares of Restricted Stock to be awarded.  The Committee may, when deemed appropriate

in its sole discretion, provide for an alternative discount rate.

 

The dollar value of a Restricted Stock Award

will be divided by the discounted Fair Market Value to determine the number of

shares of Common Stock in the Restricted Stock Award.  The value of fractional shares will be paid to the Participant in

cash.  Unless otherwise determined by

the Committee in its discretion, Restricted Stock Awards shall be granted as of

each Award Date based on the formula prescribed by the Committee pursuant to the

foregoing provisions of this Section 6, and the aggregate amount of the

Participant’s Elective Deferral Contributions that were deferred (i) as of

the Award Date with respect to the Bonus deferral and (ii) as of the quarter

ending as of the Award Date with respect to the Salary deferral.

 

(c)                Number

of Restricted Shares Awarded to Consultants.   The number of shares of Restricted Stock to

be awarded to a Consultant who is a Participant, and the terms and conditions

of such grant, will be determined by the Committee in its discretion.

 

(d)                Stock

Certificate and Legend.  Unless the Committee determines otherwise, a

Participant shall not have any rights with respect to his Restricted Stock

Award, unless and  until he has executed

a RSA Agreement and has delivered a fully executed copy thereof to the

Company.  Each Participant who is

awarded Restricted Stock shall be issued a stock certificate in respect of such

shares of Restricted Stock.  Each

certificate registered in the name of a Participant shall bear an appropriate

legend referring to the terms, conditions, and restrictions applicable to such

Restricted Stock Award, substantially in the following form:

 

“The transferability of the certificate and

the shares of stock represented hereby are subject to the terms and conditions

(including forfeiture) of the Pinnacle Global Group Inc. 1998 Incentive Plan

and Capital Incentive Program and a Restricted Stock Award Agreement entered

into between the registered owner and Pinnacle Global Group Inc.  Copies of such Plan, Program and Agreement

are on file in the offices of Pinnacle Global Group Inc.”

 

The Committee shall require that any stock

certificate issued in the name of a Participant evidencing shares of Restricted

Stock be held in the custody of the Company until the restrictions thereon have

lapsed and as a condition of such issuance of a certificate for Restricted

Stock, that the Participant deliver a stock power, endorsed in blank, relating

to the shares covered by such certificate. 

As soon as practicable after the restrictions have lapsed with respect

to shares of Restricted Stock, the Company shall issue, and deliver to the

Participant, a stock certificate registered in the name of the Participant free

of the restrictive legend set forth above.

 

(e)                Restrictions on Stock.  The shares of Restricted Stock awarded

pursuant to this Section 6 shall be subject to the following

restrictions and conditions:

 

(i)                Subject

to the provisions of the Program and the RSA Agreement, during the Restricted

Period, the Participant shall not be permitted to sell, transfer, pledge or

assign shares of Restricted Stock awarded under the Program.  The Committee may, in its sole discretion,

provide for the lapse of any such restrictions in installments and accelerate

or waive any such restrictions in whole or in part based on such factors and

such circumstances as the Committee may determine, in its sole discretion,

including, but not limited to, the Participant’s Retirement, termination, death

or Disability.  The terms, conditions

and restrictions applicable to shares of Restricted Stock granted to an Employee

in the event of the Employee’s termination of Employment, death, Disability,

Retirement, and/or Leave of Absence are set forth on Schedule A attached

hereto and incorporated in its entirety herein by this reference, which terms,

conditions and restrictions remain subject to amendment from time to time by

the Committee in its discretion.  With

respect to Restricted Stock granted to a Consultant, the terms, conditions and

restrictions applicable to the Restricted Stock shall be determined by the

Committee in its discretion and set forth in the RSA Agreement.

 

(ii)                Unless

the Committee in its sole discretion shall determine otherwise and so prescribe

in the RSA Agreement as of the grant date of any Restricted Stock Award, the

Participant shall have the right to direct the vote of his shares of Restricted

Stock during the Restricted Period, in accordance with Section 6(f)

below.  During the Restricted Period,

the Participant shall have the right to receive any regular dividends on such

shares of Restricted Stock.  During the

Restricted Period, the Committee shall, in its sole discretion, determine the

Participant’s rights with respect to extraordinary dividends or distributions

on the shares of Restricted Stock.

 

(iii)                Shares

of Common Stock shall be delivered to the Participant in certificate form

promptly after the Vesting Date.

 

(f)                Voting of Restricted Stock.  Unless the Committee, in its sole

discretion, shall determine otherwise at or prior to the grant date of any

Restricted Stock Award, during the Restricted Period the shares of Restricted

Stock shall be voted by the Company’s senior administrative officer in charge

of administering the Plan, or such other person as the Committee may designate

(the “Plan Administrator”),

provided that, the Plan Administrator shall vote such shares in accordance with

instructions received from Participants (unless to do so would constitute a

violation of applicable law as determined by the Plan Administrator).  Shares as to which no instructions are

received shall be voted by the Plan Administrator in his sole discretion

(unless to do so would constitute a violation of applicable law as determined

by the Plan Administrator).

 

(g)                Post-Termination

Forfeiture for Cause.  In any instance where the vesting of a

Restricted Stock Award extends past the termination date of a Participant’s

Employment, either pursuant to the terms of the Program or by action of the

Committee, the non-vested portion of the Restricted Stock Award shall be

forfeited if, in the determination of the Committee, at any time within such

remaining Restricted Period,  the

Participant engages in any of the conduct described in the definition of

“Cause” under the Plan.

 

 

Section 7.                Amendment and Termination.

 

The Program may be amended or terminated at

any time and from time to time by the Committee; provided, however, no amendment shall be permitted to the

extent it conflicts with the Plan as may be determined by the Board; provided, further, the Program and Plan

shall be construed as mutually consistent to the maximum possible extent.

 

 

Section 8.                General Provisions.

 

(a)                No

Limitation on other Compensation Plans or Employment.  Nothing contained in the Program shall

prevent the Adopting Employer from adopting other or additional compensation

arrangements, subject to stockholder approval if such approval is required; and

such arrangements may be either generally applicable or applicable only in

specific cases.  The adoption of the

Program shall not confer upon any Employee or Consultant any right to continued

Employment, nor shall it interfere in any way with the right of an Adopting

Employer to terminate the Employment of such person at any time.

 

(b)                Indemnification.  No member of the Board or the Committee, nor

any officer or employee of an Adopting Employer acting on behalf of the Board

or the Committee, shall be personally liable for any action, determination, or

interpretation taken or made in good faith with respect to the Program, and all

members of the Board and the Committee and each and any officer or employee of

an Adopting Employer acting on their behalf shall, to the extent permitted by

law, be fully indemnified and protected by the Company in respect of any such

action, determination or interpretation.

 

(c)                Assignment.  A Participant’s rights and interest under

the Program may not be assigned or transferred in whole or in part either

directly or by operation of law or otherwise (except in the event of a

Participant’s death or as provided in Section 6(d)) including, without

limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in

any other manner, and no such right or interest of any Participant shall be

subject to any obligation or liability of such Participant.  Upon the death of a Participant, the

Participant’s estate shall succeed to the rights of the Participant with

respect to any Restricted Stock Awards previously granted to such Participant.

 

(d)                Tax Withholding.  The Company and its Subsidiaries shall have

the right to deduct from any payment made under the Program any federal, state

or local income or other taxes which are required by law to be withheld with

respect to such payment.  It shall be a

condition to the obligation of the Company to issue Common Stock upon the lapse

of the Restricted Period that the Participant (or his beneficiary in the event

of death) pay to the Company, upon its demand, such amount as requested by the

Company for the purpose of satisfying any liability to withhold any taxes.  If the amount requested is not paid, the

Company may refuse to issue Shares. 

Unless the Committee shall in its sole discretion determine otherwise,

payment for taxes required to be withheld may be made in whole or in part, in

accordance with rules adopted by the Committee from time to time, (i) in cash,

in United States dollars, (ii) by having the Company sell or withhold Shares of

Common Stock otherwise issuable pursuant to the Program having a Fair Market

Value equal to such tax liability, or (iii) by tendering to the Company shares

of Common Stock owned by the Participant (or his beneficiary in the event of

his death), including Common Stock owned jointly with the Participant’s spouse

(with spousal consent), and acquired at least six (6) months prior to such

tender (excluding shares of Restricted Stock awarded hereunder or under any

other restricted stock program of the Company) and having a Fair Market Value

equal to such tax liability.

 

(e)                Severability.  If any term or provision of this Program or

the application thereof to any person or circumstances shall, to any extent, be

invalid or unenforceable, then the remainder of the Program, or the application

of such term or provision to persons or circumstances other than those as to

which it is held invalid or unenforceable, shall not be affected thereby, and

each term and provision hereof shall be valid and be enforced to the fullest

extent permitted by applicable law.

 

(f)                Applicability of Plan.  The terms and provisions of the Plan shall

be applicable to the Program, except to the extent expressly set forth under

this Program and which do not conflict with the Plan; provided, however, the definitions in

Schedule A shall control in the event of any discrepancy with the terms of the

Plan.  The Plan, Program and RSA

Agreement shall be construed as mutually consistent to the maximum possible

extent.  In addition, for purposes of

the Plan, this Program, together with the related RSA Agreement, shall

constitute the “Incentive Agreement.”

 

 

IN WITNESS WHEREOF, this amended and restated

Program is hereby approved and executed by each member of the Compensation

Committee on this ______ day of November, 2001, to be effective as of

November 1, 2001.

 

	

   

  	

  SANDERS MORRIS HARRIS GROUP INC.

  
	

   

  	

  COMPENSATION COMMITTEE

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  W. Blair Waltrip

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  John H. Styles

  
	

   

  	

   

  

 

SCHEDULE A

to

the

SANDERS

MORRIS HARRIS GROUP INC.

CAPITAL

INCENTIVE PROGRAM

 

In the event of a Participant’s termination

of Employment, death, Disability, Retirement, Early Retirement, and/or Leave of

Absence, the following terms, conditions and restrictions shall apply to all

Restricted Stock Awards granted to all Employees who are Participants under the

Program, except as may be expressly provided otherwise in the Participant’s RSA

Agreement in the sole discretion of the Committee.  Capitalized terms used, but not otherwise defined below or in Section 2

of the Program, shall have the meanings set forth in the Plan.

 

1                Definitions.  For purposes of the Program and this Schedule A, the following

terms shall have the following meanings:

 

(a)                “Early Retirement” shall mean no longer

being occupied within one’s business or profession, and terminating active

Employment after attaining at least age fifty-five (55) and having completed at

least five (5) years of service in Employment with the Company and its

Subsidiaries.

 

(b)                “Leave of Absence” shall mean a temporary

cessation from active Employment, as authorized in each individual case by the

Adopting Employer, in connection with military leave, personal leave or family

and medical leave, but such term shall not include such a cessation resulting

from or in connection with a Disability.

 

(c)                “Retirement” shall mean no longer being

occupied in one’s business or profession and terminating Employment after

attaining a number of years of service in Employment with the Company and its

Subsidiaries which number, when added together with the Employee’s age, shall

not be less than seventy–five (75).

 

2                Termination of Employment. The following

provisions supplement and remain subject to the Program:

 

(a)                Voluntary Termination.  In the event of a voluntary termination of

Employment, other than pursuant to Retirement, all Shares of Restricted Stock

shall be forfeited to the extent not vested on the termination date.

 

(b)                Involuntary Termination for Cause.  In the event of an involuntary termination

of Employment for Cause, all Shares of Restricted Stock shall be forfeited to

the extent not vested on the termination date.

 

(c)                Involuntary Termination other than for Cause.  If a Participant is involuntarily terminated

from Employment other than for Cause, such Participant shall receive in return

the number of shares of unvested Restricted Stock such that the total number of

Shares of Restricted Stock received by the Participant with respect to the

corresponding Restricted Stock Award (included previously vested shares) shall

equal the sum of (i) sixty-six and two-third percent (66_%) of the total number

Shares of Restricted Stock represented by the Restricted Stock Award and (ii) a

pro-rata portion of the remaining thirty-three and one-third percent (33_%) of

the total number of Shares of Restricted Stock represented by the Restricted

Stock Award.  For purposes of this

paragraph, a “pro-rata portion” shall mean a fraction, the numeration of which

is the total number of full calendar months of Participant’s Employment during

the three-year Restricted Period related to a given Restricted Stock Award and

the denominor of which is 36.  No fractional

shares of Restricted Stock shall be issuable under this paragraph, but rather

the value of such fractional shares shall be paid to the Participant in cash.

 

(d)                Death. 

Upon the death of a Participant, the Restricted Period shall immediately

lapse and such Shares of Restricted Stock shall become fully vested.

 

(e)                Disability.  In the event of a Participant’s Disability prior to the

termination of Employment, the Restricted Period shall continue as scheduled in

the RSA Agreement provided (i) the Participant continues to meet the definition

of Disability and has not voluntarily terminated his Employment or (ii) the

Disability is discontinued and the Participant resumes active Employment upon

the earlier to occur of (A) the end of the Disability period or (B) twelve (12)

months after the onset of the Disability. 

If the Disability continues for more than 12 months and the Participant

remains in Employment during that 12-month period (except for an involuntary

termination due to such Disability), then the Restricted Period shall lapse on

the  12-month anniversary of the onset

of the Disability on which date the Restricted Stock shall be fully

vested.  In the event that the Participant’s

Employment is involuntarily terminated due to Disability, as determined by the

Committee in its discretion, the Restricted Stock shall be fully vested on his

termination date.

 

(f)                Retirement.  A Participant who meets the conditions for Retirement shall

become fully vested in his Shares of Restricted Stock upon lapse of the Restricted

Period, i.e., the vesting schedule applicable to such Shares shall continue to

apply as if the Participant was still in active Employment.

 

(g)                Early Retirement.  A Participant who meets the conditions for Early Retirement shall

become fully vested, as of his termination date, in two-thirds (2/3) of his

Shares of Restricted Stock, if any, that were not vested as of such termination

date, and the remaining one-third (1/3) of such non-vested Shares shall be

forfeited as of such date.

 

(h)                Leave of Absence.  In the event a Participant takes an authorized Leave of Absence,

the Restricted Period will be extended for a period equal to the length of the

Leave of Absence provided the Participant resumes active Employment within

twelve (12) months of the commencement date of the Leave of Absence, and

remains in active Employment for a period equal to (i) three (3) months or (ii)

the length of the Leave of Absence, whichever is shorter.  If the Participant remains on the Leave of

Absence for more than 12 months, all non-vested Shares of Restricted Stock as

of the date he began the Leave of Absence shall be forfeited.

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