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ABINGTON BANCORP, INC./PA DEF 14A 2007

Documents found in this filing:

  1. Def 14A
  2. Graphic
  3. Graphic
  4. Graphic
  5. Graphic
t61288_def14a.htm


SCHEDULE 14A
United States
Securities and Exchange Commission
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. _____)>

Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
o
Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x
Definitive Proxy Statement
 
 
o
Definitive Additional Materials
   
o
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
   


Abington Bancorp, Inc.

(Name of Registrant as Specified in Its Charter)

n/a

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
x
No fee required.
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
     
 
(2)
Aggregate number of securities to which transaction applies:
     
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
     
 
(4)
Proposed maximum aggregate value of transaction:
     
 
(5)
Total fee paid:
     
o
Fee paid previously with preliminary materials.
     
o
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.  Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount previously paid:
     
 
(2)
Form, Schedule or Registration Statement No.:
     
 
(3)
Filing party:
     
 
(4)
Date filed:
     

 


GRAPHIC
 
December 28, 2007


Dear Shareholder:

You are cordially invited to attend the special meeting of shareholders of Abington Bancorp, Inc.  The meeting will be held at the Huntingdon Valley Country Club located at 2295 Country Club Drive, Huntingdon Valley, Pennsylvania 19006, on Wednesday, January 30, 2008 at 10:30 a.m., Eastern Time.

At the special meeting, you will be asked to consider and approve the adoption of the 2007 Stock Option Plan and consider and approve the adoption of the 2007 Recognition and Retention Plan and Trust Agreement.  Each of these matters is more fully described in the accompanying materials.

It is very important that you be represented at the special meeting regardless of the number of shares you own or whether you are able to attend the meeting in person.  We urge you to mark, sign, and date your proxy card today and return it in the envelope provided, even if you plan to attend the special meeting.  This will not prevent you from voting in person, but will ensure that your vote is counted if you are unable to attend.

Your continued support of and interest in Abington Bancorp, Inc. is sincerely appreciated.

 
Very truly yours,
 
     
  graphic  
 
Robert W. White
 
 
Chairman of the Board,President
 
 
and Chief Executive Officer
 
 

 
 
ABINGTON BANCORP, INC.
180 Old York Road
Jenkintown, Pennsylvania 19046
(215) 886-8280
 
 
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
 
     
TIME
10:30 a.m., Eastern Time, Wednesday, January 30, 2008.
     
PLACE
Huntingdon Valley Country Club
2295 Country Club Drive
Huntingdon Valley, Pennsylvania 19006.
     
ITEMS OF BUSINESS
(1)
To consider and approve the adoption of the 2007 Stock Option Plan;
     
  (2)
To consider and approve the adoption of the 2007 Recognition and Retention Plan and Trust Agreement; and
     
  (3)
To transact such other business, as may properly come before the meeting or at any adjournment thereof.  We are not aware of any other such business.
     
RECORD DATE
Holders of Abington Bancorp common stock of record at the close of business on December 17, 2007 are entitled to vote at the meeting.
     
PROXY VOTING
It is important that your shares be represented and voted at the meeting.  You can vote your shares by completing and returning the proxy card sent to you.  Most shareholders whose shares are held in “street” name can also vote their shares over the Internet or by telephone.  If Internet or telephone voting is available to you, voting instructions are printed on the proxy card sent to you.  You can revoke a proxy at any time prior to its exercise at the meeting by following the instructions in the accompanying proxy statement.
     
 
BY ORDER OF THE BOARD OF DIRECTORS
 
graphic
Edward W. Gormley
Corporate Secretary
     
Jenkintown, Pennsylvania
December 28, 2007
 

 
 
TABLE OF CONTENTS
 
 
 
Page
   
About the Special Meeting of Shareholders
1
   
Proposal to Adopt the 2007 Stock Option Plan (Proposal One)
3
   
 
General
3
     
 
Description of the Stock Option Plan
3
     
Proposal to Adopt the 2007 Recognition and Retention Plan and Trust Agreement (Proposal Two)
6
   
 
General
6
     
 
Description of the Recognition and Retention Plan
6
     
Director and Management Compensation
8
   
 
Compensation Discussion and Analysis
8
     
 
Summary Compensation Table
12
     
 
Grants of Plan-Based Awards
13
     
 
Outstanding Equity Awards at Fiscal Year-End
13
     
 
Option Exercises and Stock Vested
13
     
 
Employment Agreements
14
     
 
Potential Payments Upon Termination of Employment or Change in Control
15
     
 
Benefit Plans
20
     
 
Compensation Committee Interlocks and Insider Participation
21
     
 
Report of the Compensation Committee for Fiscal 2006
22
     
 
Directors’ Compensation
22
     
Beneficial Ownership of Common Stock by Certain Beneficial Owners and Management
24
   
Shareholder Proposals
26
   
Other Matters
26
   
Appendix A – 2007 Stock Option Plan
A-1
   
Appendix B – 2007 Recognition and Retention Plan and Trust Agreement
B-1



PROXY STATEMENT
OF
ABINGTON BANCORP, INC.

 
ABOUT THE SPECIAL MEETING OF SHAREHOLDERS
 

This proxy statement is furnished to holders of common stock of Abington Bancorp, Inc., the parent holding company of Abington Bank.  On June 27, 2007, we completed our second-step conversion and the reorganization of Abington Bank from the mutual holding company structure to the stock holding company structure.  Our Board of Directors is soliciting proxies to be used at the special meeting of shareholders to be held at the Huntingdon Valley Country Club, located at 2295 Country Club Drive, Huntingdon Valley, Pennsylvania 19006, on Wednesday, January 30, 2008 at 10:30 a.m., Eastern Time, and any adjournment thereof, for the purposes set forth in the Notice of Special Meeting of Shareholders.  This proxy statement is first being mailed to shareholders on or about December 28, 2007.


At our special meeting, shareholders will act upon the matters outlined in the notice of meeting, including the adoption of the 2007 Stock Option Plan and the 2007 Recognition and Retention Plan and Trust Agreement.


Only our shareholders of record as of the close of business on the record date for the meeting, December 17, 2007, are entitled to vote at the meeting.  On the record date, we had 24,449,526 shares of common stock issued and outstanding and no other class of equity securities outstanding.  For each issued and outstanding share of common stock you own on the record date, you will be entitled to one vote on each matter to be voted on at the meeting, in person or by proxy.


After you have carefully read this proxy statement, indicate on your proxy card how you want your shares to be voted.  Then sign, date and mail your proxy card in the enclosed prepaid return envelope as soon as possible.  This will enable your shares to be represented and voted at the special meeting.


Your broker may not vote on the adoption of the 2007 Stock Option Plan and the 2007 Recognition and Retention Plan if you do not furnish instructions for such proposals.  You should use the proxy card provided by the institution that holds your shares to instruct your broker to vote your shares or else your shares will be considered “broker non-votes.”

Broker non-votes are shares held by brokers or nominees as to which voting instructions have not been received from the beneficial owners or the persons entitled to vote those shares and the broker or nominee does not have discretionary voting power under rules applicable to broker-dealers. Under these rules, the proposals to adopt the 2007 Stock Option Plan and the 2007 Recognition and Retention Plan and Trust Agreement are not items on which brokerage firms may vote in their discretion on behalf of their clients if such clients have not furnished voting instructions within ten days of the special meeting.


All shareholders are invited to attend the special meeting.  Shareholders of record can vote in person at the special meeting.  If your shares are held in “street name,” then you are not the shareholder of record and you must ask your broker or other nominee how you can vote at the special meeting.
 
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Yes.  If you are a shareholder of record, there are three ways you can change your vote or revoke your proxy after you have sent in your proxy card.

 
First, you may send a written notice to our Corporate Secretary, Edward W. Gormley, Abington Bancorp, Inc., 180 Old York Road, Jenkintown, Pennsylvania 19046, in advance of the meeting stating that you would like to revoke your proxy.
     
 
Second, you may complete and submit a new proxy card before the special meeting.  Any earlier executed proxies will be revoked automatically.
     
 
Third, you may attend the special meeting and vote in person.  Any earlier executed proxy will be revoked.  However, attending the special meeting without voting in person will not revoke your proxy.

If your shares are held in “street” name and you have instructed a broker or other nominee to vote your shares, you must follow directions you receive from your broker or other nominee to change your vote.


The presence at the meeting, in person or by proxy, of the holders of a majority of votes that all shareholders are entitled to cast on a particular matter will constitute a quorum.  Proxies received but marked as abstentions and “broker non-votes” will be included in the calculation of the number of votes considered to be present at the meeting.


The recommendations of the Board of Directors are set forth under the description of each proposal in this proxy statement.  In summary, the Board of Directors recommends that you vote FOR the adoption of the 2007 Stock Option Plan and FOR the adoption of the 2007 Recognition and Retention Plan and Trust Agreement.

The proxy solicited hereby, if properly signed and returned to us and not revoked prior to its use, will be voted in accordance with your instructions.  If no contrary instructions are given, each proxy signed and received will be voted in the manner recommended by the Board of Directors and, upon the transaction of such other business as may properly come before the meeting, in accordance with the best judgment of the persons appointed as proxies.  Proxies solicited hereby may be exercised only at the special meeting and any adjournment of the special meeting and will not be used for any other meeting.


The affirmative vote of a majority of the total shares outstanding and entitled to vote at the special meeting is required for approval of the proposals to adopt the 2007 Stock Option Plan and adopt the 2007 Recognition and Retention Plan and Trust Agreement.  Because of the required vote, abstentions and “broker non-votes” will have the same effect as a vote against these proposals.  And for the same reason, the failure of any Abington Bancorp shareholder to vote by proxy or in person at the special meeting will also have the effect of a vote against the proposals to adopt the stock plans.
 
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PROPOSAL TO ADOPT THE 2007 STOCK OPTION PLAN (Proposal One)
 


On November 28, 2007, the Board of Directors adopted the 2007 Stock Option Plan, which is designed to attract and retain qualified officers, employees and non-employee directors, provide officers, employees and non-employee directors with a proprietary interest in Abington Bancorp as an incentive to contribute to our success and reward officers, employees and non-employee directors for outstanding performance.  The Stock Option Plan provides for the grant of incentive stock options intended to comply with the requirements of Section 422 of the Internal Revenue Code and non-qualified or compensatory stock options (the incentive stock options and the non-qualified (compensatory) options are together called, the “options”).  Options will be available for grant to officers, employees and directors of Abington Bancorp and any subsidiary except that non-employee directors will be eligible to receive only awards of non-qualified options.  The Board of Directors believes that the Stock Option Plan is in the best interest of Abington Bancorp and our shareholders.  If shareholder approval is obtained, options to acquire shares of common stock will be awarded to officers, employees and non-employee directors of Abington Bancorp and Abington Bank with an exercise price equal to the fair market value of the common stock on the date of grant.


The following description of the Stock Option Plan is a summary of its terms and is qualified in its entirety by reference to the Stock Option Plan, a copy of which is attached hereto as Appendix A.


Number of Shares Covered by the Stock Option Plan.>  A total of 1,302,990 shares of common stock have been reserved for future issuance pursuant to the Stock Option Plan which is equal to 5.3% of the currently outstanding common stock.  The Stock Option Plan provides that grants to each officer or employee and each non-employee director shall not exceed 25% and 5% of the shares of common stock available under the Stock Option Plan, respectively.  Option grants made to non-employee directors in the aggregate may not exceed 30% of the number of shares available under the Stock Option Plan.  In the event of a stock split, subdivision, stock dividend or any other capital adjustment, the number of shares of common stock under the Stock Option Plan, the number of shares to which any option grant relates and the exercise price per share under any option shall be adjusted to reflect such increase or decrease in the total number of shares of common stock outstanding or such capital adjustment.

Stock Options.>  Under the Stock Option Plan, the Board of Directors or the committee appointed by the Board will determine which employees, including officers, and non-employee directors (including advisory or emeritus directors) will be granted options, whether such options will be incentive or compensatory options (in the case of options granted to employees), the number of shares subject to each option, the exercise price of each option and whether such options may be exercised by delivering other shares of common stock.  Under the Stock Option Plan, the per share exercise price of both an incentive and a compensatory stock option must at least equal the fair market value of a share of common stock on the date the option is granted (110% of fair market value in the case of incentive stock options granted to individuals who beneficially own 10% or more of the issued and outstanding shares of Abington Bancorp common stock).

 
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Duration of Options. >Each stock option or portion thereof will be exercisable at any time on or after it vests and is exercisable until the earlier of either:  (1) ten years after its date of grant or (2) six months after the date on which the optionee’s employment or service terminates, unless the committee or the Board of Directors determines at the date of grant to extend such period of exercise for a period of up to three years from such termination.  Unless stated otherwise at the time an option is granted, (a) if an optionee terminates his employment or service with Abington Bancorp or a subsidiary company as a result of disability or retirement without having fully exercised his options, the optionee will have three years following his termination due to disability or retirement to exercise such options, and (b) if an optionee terminates his employment or service with Abington Bancorp following a change in control of Abington Bancorp without having fully exercised his options, the optionee shall have the right to exercise such options during the remainder of the original ten year term of the option.  However, failure to exercise incentive stock options within 90 days after the date on which the optionee’s employment terminates may result in adverse tax consequences to the optionee.  If an optionee dies while serving as an employee or a non-employee director or terminates employment or service as a result of disability or retirement and dies without having fully exercised his options, the optionee’s executors, administrators, legatees or distributees of his estate will have the right to exercise such options during the one year period following his death.  In no event may any option be exercisable more than ten years from the date it was granted.

Transferability.  >Stock options generally are non-transferable except by will or the laws of descent and distribution, and during an optionee’s lifetime, may be exercisable only by the optionee or his guardian or legal representative.  However, an optionee who holds non-qualified options may transfer such options to his or her immediate family, including the optionee’s spouse, children, stepchildren, parents, grandchildren and great grandchildren, or to a duly established trust for the benefit of one or more of these individuals.  Options so transferred may thereafter be transferred only to the optionee who originally received the grant or to an individual or trust to whom the optionee could have initially transferred the option. Options which are so transferred will be exercisable by the transferee according to the same terms and conditions as applied to the optionee.

Paying for Shares.>  Payment for shares purchased upon the exercise of options may be made (a) in cash or by check, (b) by delivery of a properly executed exercise notice, together with irrevocable instructions to a broker to sell the shares and then to properly deliver to Abington Bancorp the amount of sale proceeds to pay the exercise price, all in accordance with applicable laws and regulations or (c) if permitted by the committee or the Board of Directors, by delivering shares of common stock (including shares acquired pursuant to the previous exercise of an option) with a fair market value equal to the total purchase price of the shares being acquired pursuant to the option. With respect to subclause (c) in the preceding sentence, the shares of common stock delivered to pay the purchase price must have either been (1) purchased in open market transactions or (2) issued by Abington Bancorp pursuant to a plan thereof, in both cases more than six months prior to the exercise date of the option.


Federal Income Tax Consequences.>  Under current provisions of the Internal Revenue Code, the federal income tax treatment of incentive stock options and compensatory stock options is different.  Regarding incentive stock options, an optionee who meets certain holding period requirements will not recognize income at the time the option is granted or at the time the option is exercised, and a federal income tax deduction generally will not be available to Abington Bancorp at any time as a result of such grant or exercise.  An optionee, however, may be subject to the alternative minimum tax upon exercise of an incentive stock option.  With respect to compensatory stock options, the difference between the fair market value of the shares on the date of exercise and the option exercise price generally will be treated as compensation income upon exercise, and Abington Bancorp will be entitled to a deduction in the amount of income so recognized by the optionee.

Section 162(m) of the Internal Revenue Code generally limits the deduction for certain compensation in excess of $1.0 million per year paid by a publicly-traded corporation to its chief executive officer and the four other most highly compensated executive officers (“covered executives”).  Certain types of compensation, including compensation based on performance goals, are excluded from the $1.0 million deduction limitation.  In order for compensation to qualify for this exception:  (a) it must be paid solely on account of the attainment of one or more preestablished, objective performance goals; (b) the performance goal must be established by a compensation committee consisting solely of two or more outside directors, as defined; (c) the material terms under which the compensation is to be paid, including performance goals, must be disclosed to, and approved by, shareholders in a separate vote prior to payment; and (d) prior to payment, the compensation committee must certify that the performance goals and any other material terms were in fact satisfied (the “certification requirement”).
 
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Treasury regulations provide that compensation attributable to a compensatory stock option is deemed to satisfy the requirement that compensation be paid solely on account of the attainment of one or more performance goals if:  (a) the grant is made by a compensation committee consisting solely of two or more outside directors, as defined; (b) the plan under which the option right is granted states the maximum number of shares with respect to which options may be granted during a specified period to any employee; (c) under the terms of the option, the amount of compensation the employee could receive is based solely on an increase in the value of the stock after the date of grant; and (d) the stock option plan is disclosed to and subsequently approved by the shareholders.  The certification requirement is not necessary if these other requirements are satisfied.

The Stock Option Plan has been designed to meet the requirements of Section 162(m) of the Internal Revenue Code and, as a result, we believe that compensation attributable to stock options granted under the Stock Option Plan in accordance with the foregoing requirements will be fully deductible under Section 162(m) of the Internal Revenue Code.  The Board of Directors believes that the likelihood of any impact on Abington Bancorp from the deduction limitation contained in Section 162(m) of the Internal Revenue Code is remote at this time.

The above description of tax consequences under federal law is necessarily general in nature and does not purport to be complete.  Moreover, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances.  Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws.




 
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PROPOSAL TO ADOPT THE 2007 RECOGNITION AND
RETENTION PLAN AND TRUST AGREEMENT (Proposal Two)
 


On November 28, 2007, the Board of Directors adopted the 2007 Recognition and Retention Plan and Trust Agreement, the objective of which is to enable Abington Bancorp to provide officers, employees and non-employee directors of Abington Bancorp and Abington Bank with a proprietary interest in Abington Bancorp and as an incentive to contribute to our success.  Officers, employees and non-employee directors of Abington Bancorp and Abington Bank who are selected by the Board of Directors of Abington Bancorp or members of a committee appointed by the board will be eligible to receive benefits under the Recognition and Retention Plan.  If shareholder approval is obtained, shares will be granted to officers, employees and non-employee directors as determined by the committee or the Board of Directors.


The following description of the Recognition and Retention Plan is a summary of its terms and is qualified in its entirety by reference to the Recognition and Retention Plan, a copy of which is attached hereto as Appendix B.



Grants.>  Shares of common stock granted pursuant to the Recognition and Retention Plan will be in the form of restricted stock generally payable over a five-year period at a rate no more rapid than 20% per year, beginning one year from the anniversary date of the grant.  A recipient will be entitled to all shareholder rights with respect to shares which have been earned and distributed under the Recognition and Retention Plan.  However, until such shares have been earned and distributed, they may not be sold, assigned, pledged or otherwise disposed of and are required to be held in the Trust.  In addition, any cash dividends or stock dividends declared in respect of unvested share awards will be held by the Trust for the benefit of the recipients of such plan share awards and such dividends or returns of capital, including any interest thereon, will be paid out proportionately by the Trust to the recipients thereof as soon as practicable after the plan share awards are earned.

If a recipient terminates employment or service with Abington Bancorp for reasons other than death, disability or change in control, the recipient will forfeit all rights to the allocated shares under restriction.  All shares subject to an award held by a recipient whose employment or service with Abington Bancorp or any subsidiary terminates due to death or disability shall be deemed earned as of the recipient’s last day of employment or service with Abington Bancorp or any subsidiary and shall be distributed as soon as practicable thereafter.  In the event of a change in control of Abington Bancorp, all shares subject to an award shall be deemed earned as of the effective date of such change in control.
 
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Performance Share Awards. >The Recognition and Retention Plan provides the committee with the ability to condition or restrict the vesting of any Recognition and Retention Plan award upon the achievement of performance targets or goals as set forth under the Recognition and Retention Plan.  Any Recognition and Retention Plan award subject to such conditions or restrictions is considered to be a “Performance Share Award.”  Subject to the express provisions of the Recognition and Retention Plan and as discussed in this paragraph, the committee has discretion to determine the terms of any Performance Share Award, including the amount of the award, or a formula for determining such, the performance criteria and level of achievement related to these criteria which determine the amount of the award granted, issued, retainable and/or vested, the period as to which performance shall be measured for determining achievement of performance (a “performance period”), the timing of delivery of any awards earned, forfeiture provisions, the effect of termination of timing of delivery of any awards earned, forfeiture provisions, the effect of termination of employment for various reasons, and such further terms and conditions, in each case not inconsistent with the Recognition and Retention Plan, as may be determined from time to time by the committee.  Each Performance Share Award shall be granted and administered to comply with the requirements of Section 162(m) of the Internal Revenue Code.  Accordingly, the performance criteria upon which Performance Share Awards are granted, issued, retained and/or vested shall be a measure based on one or more Performance Goals (as defined below).  Notwithstanding satisfaction of any Performance Goals, the number of shares granted, issued, retainable and/or vested under a Performance Share Award may be reduced or eliminated, but not increased, by the committee on the basis of such further considerations as the committee in its sole discretion shall determine.

Subject to shareholder approval of the Recognition and Retention Plan, the Performance Goals for any Performance Share Award shall be based upon any one or more of the following performance criteria, either individually, alternatively or  any combination, applied to either Abington Bancorp as a whole or to a business unit or subsidiary, either individually, alternatively or in any combination, and measured either on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as preestablished by the committee under the terms of the Performance Share Award: net income, as adjusted for non-recurring items; cash earnings; earnings per share; cash earnings per share; return on average equity; return on average assets; assets; stock price; total shareholder return; capital; net interest income; market share; cost control or efficiency ratio; and asset growth.  To the extent the committee considers granting a Performance Share Award, it may engage outside compensation consultants to assist it in establishing such performance-based targets.

Federal Income Tax Consequences.>  Pursuant to Section 83 of the Internal Revenue Code, recipients of Recognition and Retention Plan awards will recognize ordinary income in an amount equal to the fair market value of the shares of common stock granted to them at the time that the shares vest.  A recipient of a Recognition and Retention Plan award may elect to accelerate the recognition of income with respect to his or her grant to the time when shares of common stock are first issued to him or her, notwithstanding the vesting schedule of such awards.  Abington Bancorp will be entitled to deduct as a compensation expense for tax purposes the same amounts recognized as income by recipients of Recognition and Retention Plan awards in the year in which such amounts are included in income.

Section 162(m) of the Internal Revenue Code generally limits the deduction for certain compensation in excess of $1.0 million per year paid by a publicly-traded corporation to its covered executives.  Certain types of compensation, including compensation based on performance goals, are excluded from the $1.0 million deduction limitation.  In order for compensation to qualify for this exception: (a) it must be paid solely on account of the attainment of one or more preestablished, objective performance goals; (b) the performance goal must be established by a compensation committee consisting solely of two or more outside directors, as defined; (c) the material terms under which the compensation is to be paid, including performance goals, must be disclosed to and approved by shareholders in a separate vote prior to payment; and (d) prior to payment, the compensation committee must certify that the performance goals and any other material terms were in fact satisfied.

The Recognition and Retention Plan, with respect to Performance Share Awards, has been designed to meet the requirements of Section 162(m) of the Internal Revenue Code and, as a result, we believe that compensation attributable to Performance Share Awards granted under the Recognition and Retention Plan in accordance with the foregoing requirements will be fully deductible under Section 162(m) of the Internal Revenue Code.  The Board of Directors believes that the likelihood of any impact on Abington Bancorp from the deduction limitation contained in Section 162(m) of the Internal Revenue Code is remote at this time.

The above description of tax consequences under federal law is necessarily general in nature and does not purport to be complete.  Moreover, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances.  Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws.
 
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Accounting Treatment.>  For a discussion of SFAS No. 123 and SFAS No 123(R), see “Proposal to Adopt the 2007 Stock Option Plan - Description of the Stock Option Plan - Accounting Treatment.”  Abington Bancorp will recognize a compensation expense as shares of common stock granted pursuant to the Recognition and Retention Plan vest.  The amount of compensation expense recognized for accounting purposes is based upon the fair market value of the common stock at the date of grant to recipients, rather than the fair market value at the time of vesting for tax purposes, unless the grants are performance based.  In such event, the fair market value on the date of vesting will be recognized as compensation expense.  The vesting of plan share awards will have the effect of increasing Abington Bancorp’s compensation expense and will be a factor in determining Abington Bancorp’s earnings per share on a fully diluted basis.


Shares to be Granted.>  The Board of Directors of Abington Bancorp adopted the Recognition and Retention Plan and the committee established thereunder intends to grant shares to executive officers, employees and non-employee directors of Abington Bancorp and Abington Bank. The Recognition and Retention Plan provides that grants to each employee and each non-employee director shall not exceed 25% and 5% of the shares of common stock available under the Recognition and Retention Plan, respectively.  Awards made to non-employee directors in the aggregate may not exceed 30% of the number of shares available under the Recognition and Retention Plan.  Although, the committee expects to act promptly after receipt of shareholder approval to issue awards under the Recognition and Retention Plan, the timing of any such grants, the individual recipients and the specific amounts of such grants have not been determined.

The Board of Directors recommends that you vote FOR adoption of the 2007 Recognition and
 
 
DIRECTOR AND MANAGEMENT COMPENSATION
 

The Compensation Discussion and Analysis and compensation information for the fiscal year ended December 31, 2006 set forth below relates to the compensation paid to our executive officers and directors of Abington Community Bancorp, the mid-tier holding company and predecessor to Abington Bancorp prior to our second-step conversion and reorganization which was completed on June 27, 2007.

Compensation Discussion and Analysis

Overview.  >Our executive compensation program is designed to provide incentives to our executive officers to effectively lead and manage our business to achieve our growth strategy.  Because the compensation of our executive officers plays an integral role in our success, our compensation programs are designed to attract, retain, and motivate qualified, effective executives and professionals.  Decisions regarding executive compensation are determined by our Compensation Committee, which reviews a number of factors in their decisions, including performance of the individual executive officers, the performance of Abington Community Bancorp and publicly available compensation surveys for comparable companies.  In the year ended December 31, 2006, the members of our Compensation Committee were Ms. Margraff Kieser and Messrs. Graham and Pannepacker, who is Chairman.  In this compensation discussion and analysis, our chief executive officer, our chief financial officer and our three other most highly compensated executive officers during 2006 are referred to collectively as our “named executive officers.”
 
8

 
During the year ended December 31, 2006, we compensated our named executive officers with a combination of base salary, bonus, equity compensation and participation in benefit plans at levels that we believed were comparable to other financial institutions of similar size within our region.  In addition to base salary and bonuses, the primary benefit plans made available to our named executive officers include our employee stock ownership plan, 2005 stock option plan and 2005 recognition and retention plan (both of which have provisions in compliance with federal regulations for recently converted savings banks), 401(k) Plan, our frozen deferred compensation plan, supplemental executive retirement plan and split-dollar life insurance.  Our compensation plans have been developed by our board of directors and the Compensation Committee with the assistance of our management.  Historically, the Compensation Committee has conducted an analysis of our compensation levels based on its review of various publicly available surveys or reports to assist in setting appropriate levels of compensation for our named executive officers.  In the future, we may determine to engage the services of compensation consultants to review our policies and procedures with respect to executive compensation, or conduct annual benchmark reviews of our executive compensation, however, we have no specific plans to do so at this time.

Following the completion of our mutual holding company reorganization in December 2004, we adopted a stock option plan and a restricted stock plan in June 2005 in order to more closely align the interests of our directors and executive officers with our shareholders.  When these plans were approved by our shareholders in fiscal 2005, we made significant grants of stock options and service-based restricted stock awards to our directors and executive officers, both as a reward for past service as well as to provide an incentive for future performance.  All grants of options under our 2005 stock option plan were made with exercise prices equal to the market value of our common stock on the date of grant and become vested over five years at the rate of 20% on each anniversary of the date of grant.  In connection with our mutual holding company reorganization we implemented an employee stock ownership plan.  Through our employee stock ownership plan, as well as our 401(k) Plan, we provide all of our employees, including our named executive officers, with tax-qualified retirement benefits.  In light of the costs associated with the employee stock ownership plan and the benefits available under our 2005 stock option plan and 2005 recognition and retention plan, in December 2005, the board of directors elected to freeze our deferred compensation plan retroactive to January 1, 2005.

We offer various fringe benefits to all of our employees, including our executive officers, on a non-discriminatory basis, including group policies for medical, dental, life, disability and accidental death insurance.  Our President and Chief Executive Officer receives an automobile allowance and country club dues.  The Compensation Committee believes that such additional benefits are appropriate and assist Mr. White in fulfilling his employment obligations.  No perquisites are provided to the other executive officers of Abington Bancorp.


 
·
To attract, retain and motivate an experienced, competent executive management team;
     
 
·
To reward the executive management team for the enhancement of shareholder value based on our annual earnings performance and the market price of our stock;
     
 
·
To make certain that compensation rewards are adequately balanced between short-term and long-term considerations;
     
 
·
To encourage ownership of our common stock through grants of stock options and restricted stock awards to all levels of bank management; and
     
 
·
To maintain compensation levels that are competitive with other financial institutions particularly those of executive officers at peer institutions based on asset size and market area.
 
9

 
Elements of Executive Compensation
 
Base Salary.  >In November 2005, the Compensation Committee determined the base salaries of Messrs. White, Sandoski, Gormley and Kovalcheck for 2006 and submitted such determination to the full Board of Directors for review.  Messrs. White and Sandoski determined Mr. Golden’s base salary for 2006.  Mr. White, the only named executive officer who is also a member of the board, did not participate in discussions regarding his own compensation.  In determining base salary for 2006, the Compensation Committee considered the overall financial performance of Abington Community Bancorp, the named executive officer’s contribution to the attainment of the company’s internal budget expectations, growth in Abington Bank’s market share, the executive officer’s leadership, and the complexity of the duties performed in his position, the amount of salary and employee benefit expense and the overall increases in such expense in light of the company’s efforts to effectively manage increases in non-interest expense, whether asset quality has been maintained at a high level (in the case of Messrs. White and Gormley) and Abington Bank’s overall ratings with our banking regulators, however, no particular weight was given to any single factor.  In addition, the Compensation Committee reviewed two publicly available salary surveys produced by America’s Community Bankers (“ACB”) and L. R. Webber.  The ACB salary survey consists of a tabular presentation of responses provided by community banks located nationwide grouped by various job titles and by asset size of the bank and the geographic region in which the bank operates.  Generally, the data considered by the Compensation Committee in the ACB study consisted of responses from financial institutions with asset ranges of $700 million to $999 million and $1 billion to $2.5 billion, and financial institutions in the Mid-Atlantic Region.  The L. R. Webber survey was restricted to Pennsylvania banks and also provided survey responses grouped by the institution’s asset size and geographic region within the state.  The data considered by the Compensation Committee in the L. R. Webber survey was for financial institutions with asset ranges of $500 million to $1 billion and assets greater than $1 billion and institutions in Abington Bank’s region that responded to the survey.  In the case of both surveys, the salary information is not attributed to specific, named institutions.  The Compensation Committee reviews the data in an effort to ensure that the compensation paid to the company’s president and chief executive officer and other executive officers is generally comparable with or above the average compensation paid to similar officers at the other institutions reviewed in the two surveys, however, the committee does not undertake any specific benchmarking of compensation levels.

Based on the above described review process, the Compensation Committee approved base salaries for Messrs White, Sandoski, Gormley and Kovalcheck of $285,000, $143,000, $138,000 and $122,000, respectively for 2006, increases of 3.6%, 3.6%, 3.2% and 6.1%, respectively, from 2005 salaries.  The Compensation Committee believes that the base salaries paid to each member of the senior management team are commensurate with their duties, performance and range for the industry compared with financial institutions of similar size within our region.  Our policy has been that, due to his increased visibility and in light of Mr. White’s oversight of all aspects of the company’s operations, he should receive significantly greater compensation and benefits than our other named executive officers.  This is consistent with other financial institutions.  The compensation of our President and Chief Executive Officer is higher than that of the other named executive officers, however, the processes used to determine his compensation are the same as the other officers.

Incentive/Bonus Compensation.>  Abington Community Bancorp and Abington Bank do not have a specific, written bonus program or policy.  However, in recent years Abington Bank, upon review and approval at the discretion of the Compensation Committee, typically has determined at the beginning of the year to establish a bonus pool for the benefit of all employees.  In recent years, the bonus pool authorized by the Compensation Committee typically has been 8.0% of the Bank’s net income for the year.  In December of each year, Messrs. White, Sandoski, Gormley and Kovalcheck typically have been awarded an aggregate of approximately 43% of the bonus pool in recent years, which then has been distributed pro rata to such officers based on their salary.  In January 2006, the Compensation Committee determined an overall bonus pool of 8.0% of net income and determined in December that 43% of that amount paid to the named executive officers was appropriate for 2006.  In making this determination for 2006, the Compensation Committee considered a variety of factors including the compensation levels paid at other institutions as reflected in the salary surveys discussed above in the “Base Salary” discussion, however, no particular weight was attributed to any one factor.  The cash bonuses paid were between 16.7% and 19.0% less than the cash bonuses paid in 2005.  The Compensation Committee had determined to pay bonuses in 2005 that were slightly higher than the company’s typical bonuses in consideration of, among other factors, the freezing the deferred compensation plan in 2005.  By utilizing a calculation of cash bonus based on a percentage of net profit, the Compensation Committee believes this component of executive compensation properly focuses management on the company’s short term profitability.
 
10

 
Equity Compensation.>  The Compensation Committee uses the award of stock options and recognition and retention plan shares to align the interests of the named executive officers with those of Abington Community Bancorp’s shareholders.  At the annual meeting of shareholders in 2005, shareholders approved our stock option plan and recognition and retention plan.  Messrs. White, Sandoski, Gormley, Kovalcheck and Golden received awards from the Compensation Committee under each of those equity compensation plans during 2005 which are vesting at a rate of 20% per year over five years.  Except for Mr. Golden, no additional awards were granted to any of the named executive officers in 2006.  No awards were available under the recognition and retention plan in 2006 as the entire plan was awarded in 2005.  In addition, the Compensation Committee determined not to grant any stock options in 2006, except for options for 1,000 shares granted to Mr. Golden, as a relatively modest amount of options was available for grant, 48,100 shares remain available out of 714,150 shares originally reserved for issuance under the stock option plan, and the committee believed it was advisable to have some amount of stock options available to grant in the future in the event any new officers were hired.  The Compensation Committee believes that the five year vesting of stock options and recognition and retention plan awards will focus senior management on long term performance and stock appreciation.  Vesting at a rate over no less than five years was mandated under the federal banking regulations applicable as a result of our mutual holding company reorganization and facilitates our goal of retaining our experienced, effective management team.

Stock option awards have an exercise price equal to the fair market of the company’s common stock value on the date of the award.  Much has been written in the financial journals over the past year about corporations backdating stock options at the expense of the corporation.  The Compensation Committee closely monitors the stock option awards to all employees and directors.  No changes to the option awards or option exercise price have ever been made to any option granted under our 2005 stock option plan.

Information regarding the outstanding stock option grants and unvested recognition and retention plan awards is included in the section titled “– Outstanding Equity Awards at Fiscal Year End,” below.  No stock options were exercised by the named executive officers in fiscal 2006.  For information regarding Abington Community Bancorp’s expense related to the portion of each stock option and recognition and retention plan award that vested during fiscal 2006, as calculated in accordance with Statement of Financial Accounting Standards No. 123(R), see “Summary Compensation Table.”

Employment Agreements.>  Abington Bank has entered into employment agreements with each of Messrs. White, Sandoski, Gormley and Kovalcheck.  The contracts are reviewed annually by the Compensation Committee and the full board of directors.  In December 2006, the boards of directors of Abington Community Bancorp, Abington Bank and Abington Bancorp approved the amendment and restatement of Abington Bank’s employment agreements with each of the named executive officers.  The employment agreements were amended and restated primarily in order to reflect the proposed conversion of Abington Mutual Holding Company and to comply with new Section 409A of the Internal Revenue Code.  As part of the revisions to comply with Section 409A of the Internal Revenue Code, Abington Community Bancorp and Abington Bank provided for cash severance payments to be paid in a lump sum in order to utilize an exemption from Section 409A.  Furthermore, various defined terms, including the definitions of change in control and disability, were revised to be consistent with Section 409A of the Internal Revenue Code.  For additional information regarding the terms of the employment agreements, see “Employment Agreements.”


Abington Bank maintains a deferred compensation plan for Messrs. White, Sandoski, Gormley and Kovalcheck and Ms. Margraff Kieser.  As of January 1, 2005, Abington Bank no longer contributes to the deferred compensation plan.  Plan balances remain on behalf of each of the named executive officers other than Mr. Golden for contributions prior to 2005, the majority of which is invested in Abington Community Bancorp common stock.  The amounts reported as aggregate earnings in the table under “– Benefit Plans – Nonqualified Deferred Compensation” were primarily the result of the significant increase in Abington Community Bancorp’s stock price during 2006.

The Compensation Committee also reviewed the existing supplemental executive retirement plan in 2005 and determined that no changes were necessary.  The Compensation Committee believes that the supplemental executive retirement plan is a means to provide suitable supplemental retirement benefits to senior management whose benefits otherwise would be reduced due to IRS limits on retirement benefits under the 401(k) plan and employee stock ownership plan.  The supplemental executive retirement plan provides the participants with a ten-year benefit upon retirement at age 65 or older in an amount equal to 50% of the executive’s average base compensation, as defined, for the highest three calendar years during the 10 years immediately preceding retirement.
 
11

 
In 2005, Abington Bank purchased bank-owned life insurance and entered into endorsement split dollar insurance agreements with each of the named executive officers in consideration for a termination of the named executive officers’ participation in the group life insurance benefits provided to other employees of Abington Bank.  Bank-owned life insurance and the related split dollar life insurance arrangements are commonly utilized by financial institutions to provide a benefit to their executive officers while generating additional income and funding various other employee benefit programs.  A description of the endorsement split dollar agreements is set forth under “– Benefit Plans – Endorsement Split Dollar Insurance Agreements.”

Summary Compensation Table>

The table below summarizes the total compensation paid or earned by each of the named executive officers for the fiscal year ended December 31, 2006.

Name and Principal Position
 
Year
 
Salary(1)
   
Bonus
   
Stock
Awards(2)
   
Option
Awards(2)
   
Change in Pension Value and Nonqualified Deferred Compensation Earnings(3)
   
All
Other Compen-
sation(4)
   
Total
 
Robert W. White, Chairman
   of the Board, President and
   Chief Executive Officer
 
2006
  $
285,000
    $
97,347
    $
168,140
    $
104,527
    $
82,107
    $
69,860
    $
806,981
 
                                                             
Jack J. Sandoski, Senior Vice
   President, Chief Financial
   Officer and Treasurer
 
2006
   
143,000
     
48,844
     
42,035
     
34,842
     
52,501
     
31,511
     
352,733
 
                                                             
Edward W. Gormley, Senior Vice
   President and Secretary
 
2006
   
138,000
     
47,136
     
42,035
     
38,118
     
25,410
     
30,314
     
321,013
 
                                                             
Frank Kovalcheck, Senior Vice President
 
2006
   
122,000
     
41,671
     
42,035
     
38,118
     
11,356
     
26,735
     
281,915
 
                                                             
Eric L. Golden, Vice President
   and Controller
 
2006
   
77,530
     
8,916
     
7,206
     
1,296
     
--
     
16,667
     
111,615
 
 

(1)
In addition to salary, the amounts disclosed in this column include amounts contributed by the named executive officer to the Abington Bank 401(k) plan.  We periodically review, and may increase, base salaries in accordance with the terms of employment agreements or Abington Bancorp’s normal annual compensation review for each of our named executive officers.
(2)
Reflects the amount expensed in accordance with Statement of Financial Accounting Standards No. 123(R) during fiscal 2006 with respect to awards of restricted stock awards and/or stock options, as the case may be, with respect to each of the named executive officers.
(3)
Messrs. White, Sandoski, Gormley and Kovalcheck are participants in Abington Bank’s frozen executive deferred compensation plan and supplemental executive retirement plan (“SERP”).  The amounts for Messrs. White, Sandoski, Gormley and Kovalcheck reflect increases in the actuarial present value of SERP benefits.  There are no above-market or preferential earnings paid on the named executive officers’ accounts under the deferred compensation plan.
(4)
Includes employer matching contributions of $11,000, $7,150, $6,900, $6,100 and $3,876 allocated in 2006 to the accounts of Messrs. White, Sandoski, Gormley, Kovalcheck and Golden, respectively, under Abington Bank’s 401(k) plan and split dollar life insurance premiums paid by Abington Bank of $504, $553, $416, $231 and $69 for Messrs. White, Sandoski, Gormley, Kovalcheck and Golden, respectively.  Also includes the fair market value at December 31, 2006 of the shares of common stock allocated pursuant to the employee stock ownership plan (“ESOP”) in 2006, representing $35,658, $23,178, $22,368, $19,794 and $12,556 for each of Messrs. White, Sandoski, Gormley, Kovalcheck and Golden, respectively, and dividends paid on shares awarded pursuant to the 2005 recognition and retention plan that vested during 2006.  Includes $6,000 of country club dues and automobile allowances of $14,178 for Mr. White in 2006.

 
12

 
Grants of Plan-Based Awards>

The table below provides information with respect to equity awards granted to the named executive officers during fiscal 2006.  Other than an award of stock options to Mr. Golden, there were no other equity awards to the named executive officers in 2006.  Abington Bancorp and Abington Bank do not maintain a management incentive plan.
 
Name
 
Grant Date
   
All Other Option Awards:
Number of Securities
Underlying Options
   
Exercise or Base Price of
Option Awards ($/Sh)
   
Grant Date Fair Value
of Stock and Option
Awards
 
Robert W. White
 
--
     
--
     
--
     
--
 
Jack J. Sandoski
 
--
     
--
     
--
     
--
 
Edward W. Gormley
 
--
     
--
     
--
     
--
 
Frank Kovalcheck
 
--
     
--
     
--
     
--
 
Eric L. Golden
 
11/17/06(1)
     
1,000
    $
16.28
    $
4,300
 
____________________
(1)
Granted pursuant to the 2005 stock option plan.

Outstanding Equity Awards at Fiscal Year-End>

Abington Community Bancorp did not grant any awards of restricted stock or stock options during fiscal 2006 to its executive officers named in the summary compensation table.  The table below sets forth outstanding equity awards at December 31, 2006 to our named executive officers.
 
   
Option Awards         
 
Stock Awards   
 
   
Number of Securities
                 
Market
 
   
Underlying Unexercised
           
Number of Shares
   
Value of Shares or
 
   
Options(1)
           
or Units of Stock
   
Units of Stock That
 
                 
Option
 
That Have Not
   
Have Not
 
Name
 
Exercisable
   
Unexercisable
   
Exercise Price
 
Expiration Date
 
Vested
   
Vested
 
Robert W. White
   
35,100
     
140,400
    $
12.01
 
                              7/5/2015
   
56,000
    $
1,074,080
 
Jack J. Sandoski
   
11,700
     
46,800
     
12.01
 
                              7/5/2015
   
14,000
     
268,520
 
Edward W. Gormley
   
11,700
     
46,800
     
12.01
 
                              7/5/2015
   
14,000
     
268,520
 
Frank Kovalcheck
   
11,700
     
46,800
     
12.01
 
                              7/5/2015
   
14,000
     
268,520
 
Eric L. Golden
   
400
     
1,600
     
12.01
 
                              7/5/2015
   
2,400
     
46,032
 
     
--
     
1,000
     
16.28
 
                          11/17/2016  
   
--
     
--
 
 

(1)
Options vest at a rate of 20% per year commencing on the first anniversary of the date of grant.

Option Exercises and Stock Vested>

The table below sets forth the number of shares acquired and their value on the date of vesting pursuant to our 2005 recognition and retention plan for the year ended December 31, 2006.  None of our named executive officers exercised stock options during the fiscal year.

   
Option Awards
  
Stock Awards
 
Name
 
Number of Shares
Acquired on Exercise
   
Value Realized
on Exercise
   
Number of Shares Acquired on Vesting(1)
   
Value Realized
on Vesting
 
Robert W. White                                  
   
--
    $
--
     
14,000
    $
203,420
 
Jack J. Sandoski                                  
   
--
     
--
     
3,500
     
50,855
 
Edward W. Gormley                                  
   
--
     
--
     
3,500
     
50,855
 
Frank Kovalcheck                                  
   
--
     
--
     
3,500
     
50,855
 
Eric L. Golden                                  
   
--
     
--
     
600
     
8,718
 
 

(1)
Represents shares granted pursuant to the 2005 recognition and retention plan that vested on July 5, 2006.
 
13

 
 
On December 27, 2006, the Boards of Directors of Abington Community Bancorp, Abington Bank and Abington Bancorp approved the amendment and restatement of Abington Bank’s employment agreement, dated January 21, 2004, entered into with Robert W. White, Chairman of the Board, President and Chief Executive Officer of Abington Bancorp and Abington Bank; and the January 1, 2005 employment agreements entered into between Abington Bank and each of our Senior Vice Presidents:  Edward W. Gormley, Frank Kovalcheck and Jack J. Sandoski.

The employment agreements were primarily amended and restated in 2006 in order to reflect the proposed second-step conversion of Abington Bank and to comply with new Section 409A of the Internal Revenue Code of 1986, as amended, including the proposed regulations issued by the Internal Revenue Service.  Section 409A of the Internal Revenue Code governs the deferral of compensation where the director, officer or employee has a legally binding right to compensation that is payable in a future year.  Section 409A imposes new requirements with respect to deferral elections, payment events and payment elections.

As part of the revisions to comply with Section 409A of the Internal Revenue Code, Abington Community Bancorp and Abington Bank provided for cash severance payments to be paid in a lump sum in order to utilize an exemption from Section 409A.  A specified employee is generally any employee whose annual compensation exceeds a specified dollar amount ($140,000 for 2006), which amount adjusts annually.  Furthermore, various defined terms, including the definitions of change in control and disability, were revised to be consistent with Section 409A of the Internal Revenue Code.

In addition to amending and restating the employment agreement between Abington Bank and Mr. White, the Boards of Directors approved a new employment agreement between Abington Bancorp and Mr. White.  The amended and restated agreement between Abington Bank and Mr. White and the new agreement between Abington Bancorp and Mr. White are substantially similar, provided, however, that in order to comply with the policies of the Office of Thrift Supervision, which will become the primary federal bank regulatory authority of Abington Bancorp upon consummation of our conversion and reorganization, certain payments otherwise payable under the amended and restated agreement with Abington Bank will be reduced or “scaled back” if they would constitute a “parachute payment” pursuant to Section 280G of the Internal Revenue Code.  In addition, the amended and restated agreement between Abington Bank and Mr. White and the agreement between Abington Bancorp and Mr. White include the following provisions:

 
·
Salary and other compensation payable to Mr. White will be shared by Abington Bancorp and Abington Bank on a proportional basis.
     
 
·
In the event Mr. White’s employment is involuntarily terminated, other than for cause, disability, retirement or death, or by Mr. White for good reason, as defined, prior to a change in control, he will be entitled to a lump sum payment equal three times his current base salary plus highest cash bonus received in the prior three years, plus the continuation of certain employee benefits for a period up to the remaining term of the agreement.
     
 
·
In the event Mr. White’s employment is terminated concurrently with or within 12 months following a change in control, Mr. White will be entitled to a lump sum payment equal to 2.99 times his “base amount” as defined under Section 280G of the Internal Revenue Code, subject to reduction in the amended and restated agreement with Abington Bank, plus the continuation of certain employee benefits for up to three years. Under his agreement with Abington Bancorp, Abington Bancorp will reimburse Mr. White for any excise tax liability incurred pursuant to Sections 280G and 4999 of the Internal Revenue Code and for any additional taxes incurred as a result of such reimbursement.
     
 
·
In the event of Mr. White’s disability, he will be entitled to receive aggregate annual disability benefits at least equal to 60% of his then current salary through his 70th birthday.
     
 
·
A death benefit equal to three times Mr. White’s base salary.
     
 
·
The agreements contain non-competition and arbitration provisions substantially similar to those currently in place with Mr. White.
 
14

 
In addition, Abington Bank’s amended and restated employment agreements with Messrs. Gormley, Kovalcheck and Sandoski include the following provisions:

 
·
If the executive’s employment is terminated by Abington Bank, other than for cause, disability, retirement or death, or is terminated by the executive for good reason, as defined, prior to a change in control, the executive will be entitled to a lump sum payment equal to two times his current base salary and any cash bonus received in the prior year, plus continuation of certain employee benefits for up to two years.
     
 
·
If the executive’s employment is terminated concurrently with or within 12 months following a change in control, the executive will be entitled, with certain exceptions, to a lump sum payment equal to three times his current base salary and bonus for the prior year plus continuation of certain employee benefits for up to three years, subject to reduction in the event such payments or benefits would constitute a “parachute payment” under Section 280G of the Code.

Although the above-described employment agreements could increase the cost of any acquisition of control of Abington Bancorp, we do not believe that the terms thereof would have a significant anti-takeover effect.


The tables below reflect the amount of compensation to each of the named executive officers of Abington Bancorp and Abington Bank in the event of termination of such executive’s employment.  The amount of compensation payable to each named executive officer upon voluntary termination, early retirement, involuntary not-for-cause termination, termination following a change in control and in the event of disability or death of the executive is shown below.  The amounts shown assume that such termination was effective as of December 29, 2006, and thus includes amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination.  The actual amounts to be paid out can only be determined at the time of such executive’s separation from Abington Bancorp and Abington Bank.
 
15

 
Robert W. White.  >The following table shows the potential payments upon termination or a change in control of Abington Bancorp or Abington Bank for Robert W. White, our President and Chief Executive Officer.

Payments and Benefits
 
Voluntary
Termination
   
Termination
for Cause
   
Involuntary Termination
Without Cause or Termination by the Executive for Good Reason Absent a Change in Control
   
Change in
Control With Termination
of
Employment
   
Death or
Disability (n)
   
Retirement (o)
 
Accrued leave(a)
  $
--
    $
--
    $
--
    $
--
    $
--
    $
--
 
                                                 
Severance payments and benefits: (b)
                                               
Cash severance(c)
   
--
     
--
     
1,214,073
     
906,500
      773,705 (p)    
--
 
ESOP allocations(d)
   
--
     
--
     
--
     
154,814
     
--
     
--
 
Medical and dental benefits (e)
   
--
     
--
     
47,587
     
47,587
     
--
     
--
 
Other welfare benefits (f)
   
--
     
--
     
2,887
     
2,887
     
--
     
--
 
Club dues (g)
   
--
     
--
     
18,000
     
18,000
     
--
     
--
 
Automobile expenses (h)
   
--
     
--
     
42,534
     
42,534
     
--
     
--
 
§280G tax gross-up (i)
   
--
     
--
     
--
     
706,218
     
--
     
--
 
                                                 
Equity awards: (j)
                                               
Unvested stock options (k)
   
--
     
--
     
--
     
1,006,668
     
1,006,668
     
--
 
Unvested restricted stock awards (l)
   
--
     
--
     
--
     
1,074,080
     
1,074,080
     
--
 
                                                 
Total payments and benefits (m)
  $
--
    $
--
    $
1,325,081
    $
3,959,288
    $
2,854,453
    $
--
 

 (Footnotes begin on page 18)

 
Jack J. Sandoski.>  The following table shows the potential payments upon termination or a change in control of Abington Bancorp or Abington Bank for Jack J. Sandoski, our Senior Vice President and Chief Financial Officer.

Payments and Benefits
 
Voluntary
Termination
   
Termination
for Cause
   
Involuntary Termination
Without Cause or Termination by the Executive for Good Reason Absent a Change in Control
   
Change in Control With Termination
of
Employment
   
Death or
Disability
(n)
   
Retirement
(o)
 
Accrued leave(a)
  $
16,500
    $
16,500
    $
16,500
    $
16,500
    $
16,500
    $
16,500
 
                                                 
Severance payments and benefits: (b)
                                               
Cash severance(c)
   
--
     
--
     
406,126
     
609,189
     
--
     
--
 
ESOP allocations(d)
   
--
     
--
     
--
     
101,161
     
--
     
--
 
Medical and dental benefits (e)
   
--
     
--
     
30,980
     
46,333
     
--
     
--
 
Other welfare benefits (f)
   
--
     
--
     
1,988
     
3,038
     
--
     
--
 
Club dues (g)
   
--
     
--
     
--
     
--
     
--
     
--
 
Automobile expenses (h)
   
--
     
--
     
--
     
--
     
--
     
--
 
§280G cut-back (i)
   
--
     
--
     
--
      (426,693 )    
--
     
--
 
                                                 
Equity awards: (j)
                                               
Unvested stock options (k)
   
--
     
--
     
--
     
335,556
     
335,556
     
--
 
Unvested restricted stock awards (l)
   
--
     
--
     
--
     
268,520
     
268,520
     
--
 
                                                 
Total payments and benefits (m)
  $
16,500
    $
16,500
    $
455,594
    $
953,604
    $
620,576
    $
16,500
 

 (Footnotes begin on page 18)
 
16

 
Edward W. Gormley. >The following table shows the potential payments upon termination or a change in control of Abington Bancorp or Abington Bank for Edward W. Gormley, our Senior Vice President and Corporate Secretary.

Payments and Benefits
 
Voluntary
Termination
   
Termination
for Cause
   
Involuntary Termination
Without Cause or Termination by the Executive for
Good Reason
Absent a Change
in Control
   
Change in
Control With Termination of Employment
   
Death or
Disability
(n)
   
Retirement
(o)
 
Accrued leave(a)
  $
15,923
    $
15,923
    $
15,923
    $
15,923
    $
15,923
    $
15,923
 
                                                 
Severance payments and benefits: (b)
                                               
Cash severance(c)
   
--
     
--
     
392,382
     
588,573
     
--
     
--
 
ESOP allocations(d)
   
--
     
--
     
--
     
97,837
     
--
     
--
 
Medical and dental benefits (e)
   
--
     
--
     
29,618
     
44,971
     
--
     
--
 
Other welfare benefits (f)
   
--
     
--
     
1,713
     
2,618
     
--
     
--
 
Club dues (g)
   
--
     
--
     
--
     
--
     
--
     
--
 
Automobile expenses (h)
   
--
     
--
     
--
     
--
     
--
     
--
 
§280G tax gross-up (i)
   
--
     
--
     
--
      (412,973 )    
--
     
--
 
                                                 
Equity awards: (j)
                                               
Unvested stock options (k)
   
--
     
--
     
--
     
335,556
     
335,556
     
--
 
Unvested restricted stock awards (l)
   
--
     
--
     
--
     
268,520
     
268,520
     
--
 
                                                 
Total payments and benefits (m)
  $
15,923
    $
15,923
    $
439,636
    $
941,025
    $
619,999
    $
15,923
 

 (Footnotes begin on following page)

Frank Kovalcheck. >The following table shows the potential payments upon termination or a change in control of Abington Bancorp or Abington Bank for Frank Kovalcheck, our Senior Vice President.

Payments and Benefits
 
Voluntary
Termination
   
Termination
for Cause
   
Involuntary Termination
Without Cause or Termination by the Executive for
Good Reason
Absent a Change
in Control
   
Change in
Control With Termination of Employment
   
Death or
Disability
(n)
   
Retirement
(o)
 
Accrued leave(a)
  $
8,212
    $
8,212
    $
8,212
    $
8,212
    $
8,212
    $
8,212
 
                                                 
Severance payments and benefits:(b)
                                               
Cash severance(c)
   
--
     
--
     
344,104
     
516,156
     
--
     
--
 
ESOP allocations(d)
   
--
     
--
     
--
     
85,297
     
--
     
--
 
Medical and dental benefits(e)
   
--
     
--
     
37,031
     
56,608
     
--
     
--
 
Other welfare benefits(f)
   
--
     
--
     
1,339
     
2,046
     
--
     
--
 
Club dues(g)
   
--
     
--
     
--
     
--
     
--
     
--
 
Automobile expenses(h)
   
--
     
--
     
--
     
--
     
--
     
--
 
§280G tax gross-up(i)
   
--
     
--
     
--
      (434,781 )    
--
     
--
 
                                                 
Equity awards:(j)
                                               
Unvested stock options(k)
   
--
     
--
     
--
     
335,556
     
335,556
     
--
 
Unvested restricted stock awards(l)
   
--
     
--
     
--
     
268,520
     
268,520
     
--
 
                                                 
Total payments and benefits(m)
  $
8,212
    $
8,212
    $
390,686
    $
837,614
    $
612,288
    $
8,212
 
 
(Footnotes begin on following page)
 
17

 
Eric L. Golden. >The following table shows the potential payments upon termination or a change in control of Abington Bancorp or Abington Bank for Eric L. Golden, our Vice President and Controller.

Payments and Benefits
 
Voluntary
Termination
   
Termination
for Cause
   
Involuntary Termination
Without Cause or Termination by the Executive for Good Reason Absent a Change in Control
   
Change in
Control With Termination of Employment
   
Death or
Disability
(n)
   
Retirement
(o)
 
Accrued leave (a)
  $
914
    $
914
    $
914
    $
914
    $
914
    $
914
 
                                                 
Severance payments and benefits: (b)
                                               
Cash severance (c)
   
--
     
--
     
--
     
--
     
--
     
--
 
ESOP allocations (d)
   
--
     
--
     
--
     
54,578
     
--
     
--
 
Medical and dental benefits (e)
   
--
     
--
     
--
     
--
     
--
     
--
 
Other welfare benefits (f)
   
--
     
--
     
--
     
--
     
--
     
--
 
Club dues (g)
   
--
     
--
     
--
     
--
     
--
     
--
 
Automobile expenses (h)
   
--
     
--
     
--
     
--
     
--
     
--
 
§280G tax gross-up (i)
   
--
     
--
     
--
     
--
     
--
     
--
 
                                                 
Equity awards: (j)
                                               
Unvested stock options (k)
   
--
     
--
     
--
     
14,372
     
14,372
     
--
 
Unvested restricted stock awards (l)
   
--
     
--
     
--
     
46,032
     
46,032
     
--
 
                                                 
Total payments and benefits (m)
  $
914
    $
914
    $
914
    $
115,896
    $
61,318
    $
914
 
 

 
(a)
Employees are credited with vacation and sick time each calendar year based on position and tenure.  If an employee voluntarily resigns, dies or retires during the year, he or she is paid for a portion of the current year’s unused vacation and sick leave.  A payment also would be made if employment was involuntarily terminated with or without cause, by an executive for good reason, death, disability or retirement.  Employees are unable to carryover to the following year any unused vacation time, but employees, except for Mr. White, may carryover up to 90 days of unused sick leave from one year to the next.  In the event of termination of employment, however, only a maximum of 30 days of unused sick leave is paid.  The amounts shown represent each executive’s accrued but unused vacation time and sick leave in the cases of Messrs. Gormley, Sandoski, Kovalcheck and Golden, but not in the case of Mr. White, as of December 29, 2006.
 
(b)
These severance payments and benefits are payable if the executive’s employment is terminated prior to a change in control either (i) by Abington Bancorp or Abington Bank for any reason other than cause, disability, retirement or death or (ii) by the executive if Abington Bancorp or Abington Bank takes certain adverse actions (a “good reason” termination). The severance payments and benefits are also payable if an executive’s employment is terminated during the term of the executive’s employment agreement following a change in control. Neither Abington Bancorp nor Abington Bank currently has any employment, change in control or severance agreement or policy with Mr. Golden.  As a result, if the employment of Mr. Golden had been terminated as of December 29, 2006, either before or after a change in control, he would not have been entitled to receive any cash severance.
 
(c)
For Mr. White, the amount in the Involuntary Termination column represents a lump sum payment equal to three times the sum of his current base salary from Abington Bancorp and Abington Bank and his highest bonus paid in the prior three calendar years, while the amount in the Change in Control column represents 2.99 times his average taxable income from Abington Bancorp and Abington Bank for the five years preceding the year in which the date of termination occurs.  For each other executive, other than Mr. Golden, the amount in the Involuntary Termination column represents two times the sum of the executive’s current base salary and bonus for the prior calendar year, while the amount in the Change in Control column represents a lump sum cash payment equal to three times the sum of the executive’s current base salary and bonus for the prior calendar year.
 
(d)
Upon a change in control, the ESOP will be terminated and the unallocated ESOP shares will first be used to repay the outstanding ESOP loan.  Any remaining unallocated ESOP shares will then be allocated among ESOP participants on a pro rata basis based on account balances.  Based on the December 29, 2006 closing price of $19.18 per share, the value of the remaining unallocated ESOP shares exceeds the remaining principal balance of the loan by approximately $3.2 million, and the Change in Control column reflects each executive’s proportionate share of such amount.
 
18

 
 
(e)
In the Involuntary Termination column, represents the estimated present value cost of providing continued medical and dental coverage to each of the executives for the remaining term of Mr. White’s employment agreement or for an additional 24 months for each of the other executives, except Mr. Golden.  In the Change in Control column, represents the estimated present value cost of providing continued medical and dental coverage to each of the executives, other than Mr. Golden, for an additional 36 months.   In each case, the benefits will be discontinued if the executive obtains full-time employment with a subsequent employer which provides substantially similar benefits.  The estimated costs assume the current insurance premiums or costs increase by 10% in each of 2008 and 2009.
 
(f)
In the Involuntary Termination column, represents the estimated present value cost of providing continued life, accidental death and long-term disability coverage to each of the executives for the remaining term of Mr. White’s employment agreement or for an additional 24 months for each of the other executives, except Mr. Golden. In the Change in Control column, represents the estimated present value cost of providing such benefits to each of the executives for an additional 36 months.  In each case, the benefits will be discontinued if the executive obtains full-time employment with a subsequent employer which provides substantially similar benefits.  The estimated costs assume the current insurance premiums or costs increase by 10% in each of 2008 and 2009.
 
(g)
Represents the estimated costs of paying club dues to Mr. White for an assumed additional 36 months, based on the amounts paid in 2006.  The amounts have not been discounted to present value.
 
(h)
Represents the estimated costs of paying automobile leases and related expenses to Mr. White for an assumed additional 36 months, based on the amounts paid in 2006.  The amounts have not been discounted to present value.
 
(i)
The payments and benefits to Mr. White in the Change in Control column are subject to a 20% excise tax to the extent the parachute amounts associated therewith under Section 280G of the Code equal or exceed three times his average taxable income for the five years ended December 31, 2005.  His payments exceed this threshold. If a change in control was to occur, Abington Bancorp believes that the Section 280G gross-up payments could be reduced or even eliminated if the timing of the change in control permitted tax planning to be done.  However, if the excise tax cannot be avoided, then Abington Bancorp has agreed in its employment agreement with Mr. White to pay the 20% excise tax and the additional federal, state and local income taxes and excise taxes on such reimbursement in order to place him in the same after-tax position he would have been in if the excise tax had not been imposed.  If the parachute amounts associated with the payments and benefits to Messrs. Sandoski, Gormley and Kovalcheck equal or exceed three times their average taxable income for the five years ended December 31, 2005, such payments and benefits in the event of a change of control will be reduced by the minimum amount necessary so that they do not trigger the 20% excise tax.  The amount of the reductions for such officers are shown in the tables.  If the timing of the change in control permitted tax planning to be done, Abington Bancorp believes that the amount of the cut-backs could be reduced or even eliminated.
 
(j)
The vested stock options held by Messrs. White, Sandoski, Gormley, Kovalcheck and Golden had a value of approximately $252,000, $84,000, $84,000, $84,000 and $2,900, respectively, based on the December 29, 2006 closing price of $19.18 per share. Such value can be obtained in the event of termination due to voluntary termination, death, disability, retirement or cause only if the executive actually exercises the vested options in the manner provided for by the relevant option plan and subsequently sells the shares received for $19.18 per share. In the event of a termination of employment, each executive (or his estate in the event of death) will have the right to exercise vested stock options for the period specified in his option grant agreement. If the termination of employment occurs following a change in control, each executive can exercise the vested stock options for the remainder of the original ten-year term of the option.
 
(k)
All unvested stock options will become fully vested upon an executive’s death, disability or retirement after age 65 or upon a change in control.  None of the executives had reached age 65 as of December 29, 2006.
 
(l)
If an executive’s employment is terminated as a result of death or disability, unvested restricted stock awards are deemed fully earned. In addition, in the event of a change in control of Abington Bancorp, the unvested restricted stock awards are deemed fully vested.
 
(m)
Does not include the value of the vested benefits to be paid under our tax-qualified 401(k) plan and ESOP or under our SERP and our executive deferred compensation plan.  See the Pension Benefits table and the Nonqualified Deferred Compensation table under “– Benefit Plans” below.  Also does not include the value of vested stock options set forth in Note (j) above, earned but unpaid salary and reimbursable expenses.
 
(n)
If the employment of any of the executives is terminated due to death, such executive’s beneficiaries or estate will receive life insurance proceeds of $350,000 ($300,000 for Mr. Golden) under our bank owned life insurance policies.  For Mr. White, this amount is in addition to the continuation of his base salary in the event of his death as described in Note (p) below.  The life insurance coverage is based on three times base salary, subject to a cap of $350,000.  If the employment of any of the executives is terminated due to disability, they would each receive disability benefits equal to 65% of their base salary for the first six months, and thereafter would receive disability benefits of $5,000 per month ($4,288 for Mr. Golden) until the executive reaches his normal retirement age of 65, minus Social Security disability benefits.  In addition, Mr. White has a separate disability policy that would pay him $3,750 per month until his 65th birthday.  Mr. White will also receive supplemental disability benefits as described in Note (p) below.  In addition, each executive’s unvested stock options and unvested restricted stock awards will become fully vested upon death or disability.  The SERP benefits discussed in Note (o) below will also become payable following death or disability.
 
(o)
Abington Bancorp has a supplemental executive retirement plan (the “SERP”) covering each executive other than Mr. Golden.  Under the SERP, the normal retirement benefits in the event of retirement, death or disability on or after age 65 is an annual benefit equal to 50% of the executive’s salary for the highest three of the last 10 years, with the annual benefit payable for 10 years in quarterly installments.  If the executive dies before age 65, his beneficiary or estate will receive a lump sum payment equal to the present value of the aggregate retirement benefit accrued by us.  If the executive becomes disabled before age 65, then his 40 quarterly installments will begin as of the first day of the first full quarter following his 65th birthday.  See the Pension Benefits table under “– Benefit Plans” below.
 
(p)
Represents the estimated present value of the supplemental disability benefits that Mr. White would be entitled to receive under his employment agreement if he remained disabled until age 70.  In the event of disability, he is entitled to receive supplemental disability benefits equal to the difference between 60% of his base salary and the disability benefits otherwise payable to him, as described in Note (n) above.  If Mr. White had died as of December 9, 2006, his spouse or his estate would have received a lump sum cash payment of approximately $831,000, representing the present value of his base salary for 36 months.
 
19

 
Benefit Plans



The table below shows the present value of accumulated benefits payable to Messrs. White, Sandoski, Gormley and Kovalcheck, including the number of years of credited service, under the SERP determined using interest rate and mortality rate assumptions consistent with those used in our financial statements.  Mr. Golden does not participate in the SERP.

Name
 
Plan Name
 
Number of Years
Credited Service
   
Present Value of
Accumulated Benefit(1)
 
                     
Robert W. White
 
Supplemental Executive Retirement Plan
   
33
    $
815,417
 
                     
Jack J. Sandoski
 
Supplemental Executive Retirement Plan
   
19
     
427,045
 
                     
Edward W. Gormley
 
Supplemental Executive Retirement Plan
   
35
     
287,011
 
                     
Frank Kovalcheck
 
Supplemental Executive Retirement Plan
   
6
     
50,207
 
 

(1)
Reflects value as of December 31, 2006.

Executive Deferred Compensation Plan. >Abington Bank maintains an executive deferred compensation plan for selected executive officers.  In December 2005, Abington’s board of directors froze the amended and restated executive deferred compensation plan retroactive to January 1, 2005, such that no further contributions will be made on behalf of the executive officers under the plan.  Messrs. White, Sandoski, Gormley, and Kovalcheck currently participate in the executive deferred compensation plan.  In addition, director Jane Margraff Kieser maintains an account in the executive deferred compensation plan with respect to amounts accumulated when she was an executive officer of Abington Bank.  The board of directors took these actions upon its review of the total compensation programs available to Abington’s employees, including the increased benefits available as a result of the mutual holding company reorganization completed in December 2004 and the adoption of equity compensation plans by Abington’s shareholders at the 2005 annual meeting of shareholders held in June 2005.  The participant maintains an account in the executive deferred compensation plan until the earlier of retirement, termination of employment or death.  Mr. Golden does not participate in the executive deferred compensation plan.
 
20

 
Nonqualified Deferred Compensation>

Name
 
Executive
Contributions
in 2006 Fiscal
Year(1)
   
Registrant
Contributions
in 2006 Fiscal
Year(1)
   
Aggregate
Earnings
in 2006 Fiscal
Year(1)
   
Aggregate
Withdrawals/
Distributions
   
Aggregate
Balance at
December 31, 2006
 
Robert W. White
  $
--
    $
--
    $
308,697
    $
--
    $
958,006
 
Jack J. Sandoski
   
--
     
--
     
130,382
     
--
     
418,074
 
Edward W. Gormley
   
--
     
--
     
143,474
     
--
     
440,557
 
Frank Kovalcheck
   
--
     
--
     
31,732
     
--
     
101,015
 
 

(1)
In 2005 the executive deferred compensation plan was frozen retroactive to January 1, 2005.  No contributions have been made to the named executive officers since the date that the executive deferred compensation plan was frozen.  We have established a rabbi trust to fund certain benefit plans, including the executive deferred compensation plan.  The aggregate earnings amounts in 2006 in the table reflect the increase in value of the assets held in the rabbi trust, which include our common stock for Messrs. White, Sandoski, Gormley and Kovalcheck, respectively.

Endorsement Split Dollar Insurance Agreements.>  Abington Bank has purchased insurance policies on the lives of the executive officers named in the Summary Compensation Table, other than Mr. Golden and has entered into Split Dollar Insurance Agreements with each of those officers.  The policies are owned by Abington Bank which pays each premium due on the policies.  Under the agreements with the named executive officers, upon an officer’s death while he remains employed by Abington Bank the executive’s beneficiary shall receive proceeds in the amount of the executive’s salary at the time of death multiplied by three (up to a maximum of $250,000) plus an additional $100,000 ($50,000 for Mr. Golden).  In the case of the officer’s death after termination of employment with Abington Bank, provided he reached age 65 before such termination, the officer’s beneficiary shall receive proceeds in the amount of $100,000 ($50,000 for Mr. Golden).  Abington Bank is entitled to receive the amount of the death benefits less those paid to the officer’s beneficiary, which is expected to reimburse Abington Bank in full for its life insurance investment.

The Split Dollar Insurance Agreements may be terminated at any time by Abington Bank or the officer, by written notice to the other.  The Split Dollar Insurance Agreements will also terminate upon cancellation of the insurance policy by Abington Bank, cessation of Abington Bank’s business or upon bankruptcy, receivership or dissolution or by Abington Bank upon the officer’s termination of service to Abington Bank.  Upon termination, the officer forfeits any right in the death benefit and Abington Bank may retain or terminate the insurance policy in its sole discretion.


Ms. Margraff Kieser and Messrs. Graham and Pannepacker, who is Chairman, served as members of the Compensation Committee for fiscal 2006.  None of the members of the Compensation Committee during 2006 was a current or former officer or employee of Abington Community Bancorp or Abington Bank other than Ms. Margraff Kieser, who served as our Senior Vice President, Operations and Human Resources from 1980 to 2001.  Nor did any member engage in certain transactions with Abington Community Bancorp or Abington Bank required to be disclosed by regulations of the SEC.  Additionally, there were no compensation committee “interlocks” during 2006, which generally means that no executive officer of Abington Community Bancorp served as a director or member of the compensation committee of another entity, one of whose executive officers served as a director or member of the Compensation Committee of Abington Community Bancorp.
 
21

 

We have reviewed and discussed with management certain Compensation Discussion and Analysis provisions to be included in Abington Bancorp’s proxy statement, filed pursuant to Section 14(a) of the Securities Exchange Act of 1934.  Based on the reviews and discussions referred to above, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Abington Bancorp’s proxy statement.

 
Members of the Compensation Committee
 
     
 
Robert J. Pannepacker, Sr., Chairman
 
 
A. Stuard Graham, Jr.
 
 
Jane Margraff Kieser
 

Director Compensation>

Directors of Abington Bancorp are not currently compensated by Abington Bancorp but also serve as directors of Abington Bank and are compensated by Abington Bank for such service.  It is not anticipated that separate compensation will be paid to Abington Bancorp’s directors until such time as such persons devote significant time to the separate management of its affairs, which is not expected to occur unless we become actively engaged in additional businesses other than holding the stock of Abington Bank.  We may determine that such compensation is appropriate in the future.  The primary elements of Abington Bank’s non-employee director compensation program consist of equity compensation and cash compensation.

Compensation for non-employee directors is reviewed and determined annually by the Compensation Committee at a meeting held prior to the beginning of the fiscal year.  The Committee’s objective in setting directors’ compensation is to provide a competitive program that will enable us to attract and retain highly skilled individuals with relevant experience and that reflects the time and talent required to serve on the board of directors and its various committees.  The Compensation Committee compares the compensation of our directors to that paid by other financial institutions reported in publicly available surveys to determine whether the objectives are met, but does not benchmark such compensation.  Executive officers are not involved in determining or recommending non-employee director compensation, nor does the Committee utilize compensation consultants.  The Compensation Committee seeks to promote short term and long term goals by providing a combination of equity-based and cash compensation through the payment of Board fees, an annual retainer and awards under our equity compensation plans.  In addition, we maintain a retirement plan for directors, which provides benefits upon retirement after age 75.  Our directors may also elect to defer the receipt of a portion of their board fees pursuant to our Deferred Compensation Plan, although none of our directors elected to defer compensation in fiscal 2006.  Each of these components of our non-employee director compensation program are described more fully below.

In fiscal 2006, the Compensation Committee reduced the annual retainer for directors from $10,400 in fiscal 2005 to $10,000 in fiscal 2006.  Members of Abington Bank’s board of directors also received a fee of $1,000 per meeting attended in fiscal 2006 which was reduced from $1,300 per meeting in fiscal 2005.  The Committee considered the overall compensation of directors when determining to make such reductions based on the fact that directors, other than Mr. Wilson, received grants of stock options and recognition and retention plan shares in 2005, both of which vest over five years.  In addition, in reducing the annual retainer and board fee for 2006, the Compensation Committee considered that the number of committee meetings has increased, which has resulted in a greater aggregate amount of cash compensation to non-employee directors.  In fiscal 2006, the Compensation Committee granted 4,000 stock options to Mr. Wilson, who first became a director in 2006.  In accordance with regulations of the Office of Thrift Supervision, this was the maximum equity based grant that could be made to Mr. Wilson.

Committee fees were unchanged in 2006 from 2005.  In fiscal 2006, members of the Audit Committee received $500 per meeting, the Chair received $700 per meeting, and the Secretary of the Audit Committee received an additional $100 per quarter.  The members of the Compensation and Nominating and Corporate Governance Committees receive $400 per meeting, with the Chair receiving $500.  Such fees are paid only if the meeting is attended.
 
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We maintain a deferred compensation plan for our Board of Directors whereby non-employee directors may elect to defer a portion of their board fees until the earlier of retirement, termination of service, death or disability, each as defined in the deferred compensation plan.  The participants’ accounts are invested in cash unless they elect to invest all or a portion of their accounts in stock units representing an equal number of shares of Abington common stock.  Payments upon retirement, termination of service or disability will be made, at the election of the participant, in a lump sum or monthly installments over a period not to exceed fifteen years.  Upon death of a participant prior to termination of service, payments are made to his or her beneficiary in a lump sum.  We also maintain a board retirement plan.  Pursuant to the board’s retirement plan, upon retirement after reaching age 75, non-employee directors will receive an annual benefit equal to 75% of the director fees paid in the year of retirement for a period of 10 years.  If a director dies while serving as a director and prior to reaching age 75, his or her beneficiary will receive the present value of the director’s accrued retirement benefit in a lump sum.

The table below summarizes the total compensation paid to our non-employee directors for the fiscal year ended December 31, 2006.

Name
 
Fees
Earned or
Paid in
Cash
   
Stock
Awards(1)
   
Option
Awards(2)
   
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(3)
   
All Other
Compensation(4)
   
Total(5)
 
Michael F. Czerwonka, III
  $
26,000
    $
28,824
    $
19,548
    $
245
    $
432
    $
75,049
 
A. Stuard Graham, Jr.
   
24,400
     
28,824
     
12,516
      (2,651 )    
432
     
63,521
 
Jane Margraff Kieser
   
24,400
     
28,824
     
14,748
     
9,867
     
432
     
78,271
 
Joseph B. McHugh                                 
   
23,600
     
28,824
     
14,748
      (808 )    
432
     
66,796
 
Robert J. Pannepacker, Sr.
   
26,200
     
28,824
     
19,548
      (924 )    
432
     
74,080
 
G. Price Wilson, Jr.                                 
   
23,200
     
--
     
420
      (6,069 )    
--
     
17,551
 
___________________
 
(1)
Reflects expense recognized in accordance with Statement of Financial Accounting Standards No. 123(R) related to grants of restricted stock awards to directors in July 2005 under the 2005 recognition and retention plan.  Such awards vest pro rata over five years commencing July 5, 2006. Each non-employee director, other than Mr. Wilson, received an award of 12,000 shares that had a grant date fair value of $144,120.
 
(2)
Reflects expense recognized in accordance with Statement of Financial Accounting Standards No. 123(R) related to grants of stock options under the 2005 stock option plan made to each non-employee director, other than Mr. Wilson, covering 30,000 shares in July 2005 which vest pro rata over five years commencing July 5, 2006 and, in the case of Mr. Wilson covering 4,000 shares made in November 2006, which vests pro rata over five years commencing November 17, 2007.  The full grant date values of the awards are set forth below.


Name
 
Grant Date Fair Value of Option Awards
 
Michael F. Czerwonka, III
  $
97,740
 
A. Stuard Graham, Jr.
   
62,580
 
Jane Margraff Kieser
   
73,740
 
Joseph B. McHugh
   
73,740
 
Robert J. Pannepacker, Sr.
   
97,740
 
G. Price Wilson, Jr.
   
17,176
 

 
(3)
Our directors participate in the board of directors deferred compensation plan and board retirement plan.  In addition, Ms. Margraff Kieser maintains an account in the executive deferred compensation plan with respect to amounts accumulated while she served as an executive officer. The amounts represent the changes in the actuarial present value of accumulated pension benefits.  There are no above-market or preferential earnings paid on the accounts under the deferred compensation plan.
 
(4)
Consists of dividends paid on shares awarded pursuant to the 2005 recognition and retention plan that vested during 2006.
 
(5)
At December 31, 2006, each non-employee director held the following amount of unvested stock awards under our 2005 recognition and retention plan and outstanding options under our 2005 stock option plan:
 
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Name
 
Unvested Stock Awards
   
Option
Awards
 
Michael F. Czerwonka, III
   
9,600
     
30,000
 
A. Stuard Graham, Jr.
   
9,600
     
30,000
 
Jane Margraff Kieser
   
9,600
     
30,000
 
Joseph B. McHugh                                 
   
9,600
     
30,000
 
Robert J. Pannepacker, Sr.
   
9,600
     
30,000
 
G. Price Wilson, Jr.                                 
   
--
     
4,000
 


 
BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
 

The following table sets forth as of December 17, 2007, the voting record date, certain information as to the common stock beneficially owned by (i) each person or entity, including any “group” as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, who or which was known to us to be the beneficial owner of more than 5% of the issued and outstanding common stock, (ii) the directors of Abington Bancorp, (iii) certain executive officers of Abington Bancorp, and (iv) all directors and executive officers of Abington Bancorp as a group.
 
 Name of Beneficial
Owner or Number of
Persons in Group
 
Amount and Nature of
Beneficial Ownership as of
December 17, 2007(1)
   
Percent of
Common Stock
 
             
QVT Financial LP
1177 Avenue of the Americas, 9th Floor
New York, NY 10036
 
2,339,552