Exhibit 10.8

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT is made as of the 12th day of January, 2004, between SUN BANCORP,
INC. (“Corporation”), a Pennsylvania business corporation having a place of
business at 155 North 15th Street, Lewisburg, Pennsylvania 17837, SUNBANK
(“Bank”), a Pennsylvania chartered banking institution having a place of
business at 155 North 15th Street, Lewisburg, Pennsylvania 17837, SUBI SERVICES,
LLC (“Services Company”), a Pennsylvania limited liability company having a
place of business at 155 North 15th Street, Lewisburg, Pennsylvania 17837 and
Byron M. Mertz, III  (“Executive”), an individual residing at 670 Susquehanna
Rd., Northumberland, PA 17857 (collectively, the “Parties” and, individually,
sometimes a “Party”).

 

WHEREAS, the Corporation is a registered bank holding company;

 

WHEREAS, the Bank is a subsidiary of the Corporation;

 

WHEREAS, the Services Company is a subsidiary of the Bank;

 

WHEREAS, any reference solely to Corporation in this Agreement shall mean
Corporation, Bank or Services Company;

 

WHEREAS, Corporation, Bank and Services Company desire to employ Executive to
serve in the capacity of Regional President and Senior Vice President of
Services Company, Bank and Corporation on the terms and conditions set forth in
this Agreement; and

 

WHEREAS, Executive desires to accept employment with Corporation, Bank and
Services Company on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:

 

1.                                       Employment.   Corporation, Bank and
Services Company hereby employ Executive and Executive hereby accepts employment
with Corporation, Bank and Services Company, on the terms and conditions set
forth in this Agreement.

 

2.                                       Duties and Position of Executive. 
Executive shall perform and discharge well and faithfully such duties as an
executive officer of Corporation as may be assigned to Executive from time to
time by the Board of Directors of Corporation and/or Corporation’s President and
CEO.  Executive shall be employed as Regional President and Senior Vice
President of the Services Company, Bank and Corporation, and shall hold such
other titles as may be given to him from time to time by the Board of Directors
of Corporation.  The Executive may be promoted to other positions within the
Corporation and/or Bank and/or Services Company and assigned duties consistent
with such a position without the Corporation, Bank or Services Company breaching
this Agreement.  Such promotion may occur without amendment of this Agreement;
all other provisions of this Agreement will remain in full force and effect.

 

3.                                       Engagement in Other Employment. 
Executive shall devote his full time, attention and energies to the business of 
Corporation, Bank and Services Company during the Employment Period (as defined
in Section 4(a) of this Agreement); provided, however, that this Section  shall
not be construed as preventing Executive from (a) investing Executive’s personal
assets in enterprises that do not compete with Corporation, Bank, Services
Company or any

 

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of their subsidiaries or affiliates or (b) being involved in any other activity
with the prior approval of the Boards of Directors of Corporation, Bank and
Services Company.  The Executive shall not engage in any business or commercial
activities, duties or pursuits which compete with the business or commercial
activities of Corporation, Bank, Services Company or any of their subsidiaries
or affiliates, nor may the Executive serve as a director or officer or in any
other capacity in a company which competes with Corporation, Bank, Services
Company or any of their subsidiaries or affiliates.

 

4.             Term of Agreement.

 

(a)                                  Employment Period.  This Agreement shall be
for a two (2) year period (the “Employment Period”) beginning on the date first
mentioned above, and if not previously terminated pursuant to the terms of this
Agreement, the Employment Period shall end two (2) years later.  The Employment
Period shall be automatically extended on the second anniversary date of the
commencement of the Employment Period (the “Renewal Date”) for a period ending
one (1) year from the Renewal Date unless either party shall give written notice
of non-renewal to the other party at least sixty (60) days prior to the Renewal
Date, in which event this Agreement shall terminate at the end of the Employment
Period.  If this Agreement is renewed on the Renewal Date, it will be
automatically renewed on the first anniversary date of the Renewal Date and each
subsequent year (the “Annual Renewal Date”) for a period ending one (1) year
from each Annual Renewal Date, unless either party gives written notice of
non-renewal to the other party at least sixty (60) days prior to the Annual
Renewal Date, in which case this Agreement will terminate on the Annual Renewal
Date immediately following such notice.

 

(b)                                 Cause.  Notwithstanding the provisions of
Section 4(a) of this Agreement, this Agreement shall terminate automatically for
Cause (as defined herein) upon written notice from the Board of Directors of
Corporation to Executive.  As used in this Agreement, the term “Cause” shall
mean any of the following:

 

(i)

Executive’s conviction of or plea of guilty or nolo contendere to a felony, a
crime of falsehood or a crime involving moral turpitude, or the actual
incarceration of Executive;

 

 

(ii)

Executive’s failure to follow the good faith lawful instructions of the Board of
Directors of Corporation with respect to its operations, after notice from
Corporation, and a failure to cure such violation within twenty (20) days of
said notice;

 

 

(iii)

the willful failure by the Executive to substantially perform his duties
hereunder, other than a failure resulting from Executive’s incapacity because of
physical or mental illness, as provided in Section 3(e) of this Agreement, after
notice from the Corporation and a failure to cure such violation within twenty
(20) days of said notice;

 

 

(iv)

Executive’s intentional violation of the provisions of this Agreement, after
notice from Corporation, and a failure to cure such violation within twenty (20)
days of said notice;

 

 

(v)

dishonesty or gross negligence of the Executive in the performance of his
duties;

 

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(vi)

conduct on the part of the Executive which brings public discredit to 
Corporation as determined by a vote of two-thirds (2/3) of the Board of
Directors of Corporation;

 

 

(vii)

Executive’s breach of fiduciary duty involving personal profit;

 

 

(viii)

Executive’s violation of any law, rule or regulation governing banks or bank
officers or any final cease and desist order issued by a bank regulatory
authority;

 

 

(ix)

Executive’s unlawful discrimination, including harassment, against Corporation’s
employees, customers, business associates, contractors or visitors;

 

 

(x)

Executive’s theft or abuse of Corporation’s property or the property of
Corporation’s customers, employees, contractors, vendors or business associates;

 

 

(xi)

any final removal or prohibition order to which the Executive is subject, by a
federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance
Act;

 

 

(xii)

any act of fraud or misappropriation by Executive;

 

 

(xiii)

intentional misrepresentation of a material fact, or intentional omission of
information necessary to make the information supplied not materially
misleading, in an application or other information provided by the Executive to
Corporation or any representative of Corporation in connection with the
Executive’s employment with Corporation, Bank and Services Company;

 

 

(xiv)

direction or recommendation of a state or federal bank regulatory authority to
remove the Executive from his position with Corporation and/or Bank and/or
Services Company, as identified herein;

 

 

(xv)

the willful engaging by the Executive in misconduct injurious to Corporation,
after notice from Corporation, and a failure to cure such conduct within twenty
(20) days of said notice; or

 

 

(xvi)

willful and serious violation(s) by Executive of the Bank’s “Core Values,” and a
failure to cure such violation(s) within twenty (20) days after notice by the
Corporation; if the violation is so serious that an attempt to cure would be
fruitless, no notice need be given by the Corporation.

 

 

(xvii)

the existence of any material conflict between the interests of Corporation and
the Executive that is not disclosed in writing by the Executive to Corporation, 
Bank and Services Company and approved in writing by the Boards of Directors of
Corporation, Bank and Services Company and, after notice from Corporation, a
failure to cure such conflict within twenty (20) days of said notice.

 

 

If this Agreement is terminated for Cause, all of Executive’s rights under this
Agreement shall cease as of the effective date of such termination and all of
Corporation, Bank and Services Company’s

 

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compensation and employment obligations under this Agreement shall terminate.

 

(c)                                  Notwithstanding the provisions of
Section 4(a) of this Agreement, all of Corporation, Bank and Services Company’s 
obligations under this Agreement shall terminate automatically upon Executive’s
voluntary termination of employment.

 

(d)                                 Good Reason.  Notwithstanding the provisions
of Section 4(a) of this Agreement, the Executive may terminate his employment
under this Agreement for Good Reason. As used in this Agreement, “Good Reason”
shall mean any of the following:

 

(i)

any reduction in the Executive’s Annual Base Salary, as in effect on the date
this Agreement is executed or as the same may be increased from time to time,
except such reductions that are the result of a national financial depression or
national or bank emergency, or when such reduction has been implemented by the
Board of Directors for the Corporation’s senior management; or

 

 

(ii)

a requirement that Executive move his principal residence more than seventy-five
(75) miles from the location of Corporation’s principal executive office
immediately prior to this Agreement; or

 

 

(iii)

any removal of the Executive from any of the positions indicated in Section 2 of
this Agreement, other than for a promotion except as a result of his regulatory
removal and/or in connection with termination of the Executive’s employment for
Cause.

 

If Executive terminates his employment for Good Reason, then he may give notice
of intention to collect benefits under this Agreement by delivering a notice in
writing (the “Notice of Termination”) and Corporation shall pay Executive an
amount equal to one (1) times the Executive’s Annual Base Salary as defined in
Section 5(a) of this Agreement, which amount shall be payable in twelve (12)
equal monthly installments and shall be subject to federal, state and local tax
withholdings.  In addition, Executive shall receive a continuation, for a period
of twelve (12) months from the date of termination of employment, or until
Executive secures substantially similar benefits through other employment,
whichever shall first occur, of all health, accident, life and disability
insurance benefits in effect with respect to Executive on the date of
termination of employment and that were in effect during the two (2) years prior
to Executive’s termination of employment, or, if Corporation cannot provide such
benefits because Executive is no longer an employee, a dollar amount equal to
the cost to Executive of obtaining such benefits or substantially similar
benefits.  Executive only becomes entitled to receive these payments and
continuation of benefits if he executes a General Release in favor of
Corporation, Bank and their subsidiaries and affiliates.  However, in the event
the payments described herein, when added to all other amounts or benefits
provided to or on behalf of the Executive in connection with his termination of
employment, would result in the imposition of an excise tax under Code
Section 4999, such payments shall be retroactively (if necessary) reduced to the
extent necessary to avoid such excise tax imposition.  Upon written notice to
Executive, together with calculations of Corporation’s independent auditors,
Executive shall remit to Corporation the amount of the reduction, plus such
interest as may be necessary to avoid the

 

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imposition of such excise tax.  Notwithstanding the foregoing or any other
provision of this contract to the contrary, if any portion of the amount herein
payable to the Executive is determined to be non-deductible pursuant to the
regulations promulgated under Section 280G of the Internal Revenue Code of 1986,
as amended (the “Code”), then Corporation shall be required only to pay to
Executive the amount determined to be deductible under Section 280G.

 

(e)                                  Disability.  Notwithstanding the provisions
of Section 4(a) of this Agreement, if, as a result of physical or mental injury
or impairment, Executive is unable to perform all of the essential job functions
of his position on a full time basis, taking into account any reasonable
accommodation required by law, and without posing a direct threat to himself and
others, for a period up to one hundred eighty (180) days, all obligations of
Corporation, Bank and Services Company to pay Executive an Annual Base Salary as
set forth in Paragraph 5(a) of this Agreement are suspended.  Any paid time off,
sick leave, or short term disability pay Executive may be entitled to receive,
pursuant to an established disability plan or program of the Services Company
and/or Bank and/or Corporation, if any exists, shall be considered part of the
compensation Executive shall receive while disabled, and shall not be in
addition to the compensation received by Executive under this provision of the
Agreement.  Executive further agrees that should he remain unable to perform all
of the essential functions of his position on a full time basis, taking into
account any reasonable accommodation required by law, and without posing a
direct threat to himself or others, after one hundred eighty (180) days, the
Services Company, Bank and Corporation will suffer an undue hardship by
continuing Executive in his position.  Upon this event, all compensation and
employment obligations of the Services Company, Bank and Corporation under this
Agreement shall cease (except Executive’s rights under the Corporation’s then
existing short term and/or long term disability plans, if any), and this
Agreement shall terminate.

 

(f)                                    Death.  Notwithstanding the provisions of
Section 4(a) of this Agreement, this Agreement shall terminate automatically
upon Executive’s death and Executive’s rights under this Agreement shall cease
as of the date of such termination.

 

5.             Employment Period Compensation.

 

(a)                                  Annual Base Salary.  For services performed
by Executive under this Agreement, Corporation shall pay Executive an Annual
Base Salary in the aggregate during the Employment Period at the rate of Ninety
Eight Thousand Six Hundred dollars ($98,600) per year, payable at the same times
as salaries are payable to other executive employees of Corporation. 
Corporation may, from time to time, increase Executive’s Annual Base Salary, and
any and all such increases shall be deemed to constitute amendments to this
Section 5(a) to reflect the increased amounts, effective as of the date
established for such increases by the Board of Directors of Corporation or any
committee of such Board in the resolutions authorizing such increases.

 

(b)                                 Bonus.  Executive may be eligible for
incentive compensation under the terms and conditions of any incentive
compensation plan that Corporation may have in effect from time to time.

 

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(c)                                  Vacations.  During the term of this
Agreement, Executive shall be entitled to paid annual vacation in accordance
with the policies as established from time to time by the Board of Directors of
Corporation, Bank and Services Company.  However, Executive shall not be
entitled to receive any additional compensation from Corporation for failure to
take a vacation, nor shall Executive be able to accumulate unused vacation time
from one year to the next, except to the extent authorized by the Board of
Directors of Corporation.

 

(d)                                 Employee Benefit Plans.  During the term of
this Agreement, Executive shall be entitled to participate in and receive the
benefits of any Employee Benefit Plan currently in effect at Corporation, until
such time that the Board of Directors of Corporation authorizes a change in such
benefits.  Executive shall also be entitled to participate in any stock option
and profit sharing plans that Corporation may have in effect, subject to the
terms and conditions of those plans.  Nothing paid to Executive under any plan
or arrangement presently in effect or made available in the future shall be
deemed to be in lieu of the salary payable to Executive pursuant to Section 5(a)
hereof.

 

(e)                                  Business Expenses.  During the term of this
Agreement, Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by him, which are properly accounted for, in
accordance with the policies and procedures established by the Board of
Directors of Corporation for its executive officers.

 

6.             Termination of Employment Following Change in Control.

 

(a)                                  If a Change in Control (as defined in
Section 6(b) of this Agreement) shall occur and if, within twelve (12) months
following the Change in Control (as defined in Section 6(b) of this Agreement),
Executive’s employment is involuntarily terminated (other than for the Cause as
defined in Section 4(b) of this Agreement), then, Executive may give notice of
intention to collect benefits under this Agreement, by delivering a notice in
writing (the “Notice of Termination”) to Corporation and Bank and the provisions
of Section 7 of this Agreement shall apply.

 

(b)                                 As used in this Agreement, “Change in
Control” shall mean a change in control (other than one occurring by reason of
an acquisition of the Bank and/or Corporation by Executive) of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A or any successor rule or regulation promulgated under the
Securities Exchange Act of 1934, as amended (the “1934 Act”); provided that,
without limiting the foregoing, a Change in Control shall be deemed to have
occurred if:

 

(i)

(A) the Corporation and/or Bank shall be merged or consolidated, or (B)
substantially all of the assets of Corporation and/or Bank shall be sold,
exchanged, transferred or otherwise disposed of, and, as a result of such
merger, consolidation, sale, exchange or transfer, less than a majority of the
outstanding voting stock of the surviving, resulting, purchasing “person”is
owned, immediately after the transaction, by the holders of voting stock of the
Corporation before the transaction, unless (y) such merger, consolidation, sale,
exchange, purchase or transfer is approved in advance by seventy percent (70%)
or more of the members of the

 

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Board of Directors of Corporation who are not interested in the transaction and
(z) a majority of the members of the Board of Directors of the legal entity
resulting from, or existing after, any such transaction, and of the Board of
Directors of such entity’s parent corporation, if any, are former members of the
Board of Directors of Corporation, or

 

 

(ii)

any “person” or group of “persons” (as such term is used in Sections 13(d) and
14(d) of the 1934 Act), other than Corporation, Bank or any “person” who on the
date hereof is a director or officer of Corporation and/or Bank is or becomes
the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act or any
successor rule or regulation promulgated under the 1934 Act), directly or
indirectly, of securities of Corporation representing thirty (30%) percent or
more of the combined voting power of Corporation’s then outstanding securities,
or

 

 

(iii)

during any period of two (2) consecutive years during the term of Executive’s
employment under this Agreement, individuals who at the beginning of such period
constitute the Board of Directors of Corporation cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of the period.

 

7.                                       Rights in Event of Termination of
Employment Following Change in Control.

 

(a)                                  In the event that a Change in Control
occurs and Executive delivers a Notice of Termination (as defined in
Section 6(a) of this Agreement) to Corporation, Bank and Services Company,
Executive shall be entitled to receive the compensation and benefits set forth
below:

 

(i)

a lump sum equal to two (2) times the Executive’s Annual Base Salary as defined
in Section 5(a), which amount shall be subject to federal, state and local tax
withholdings; and

 

 

(ii)

for a period of two (2) years from the date of termination of employment, or
until Executive secures substantially similar benefits through other employment,
whichever shall first occur, Executive shall receive a continuation of all
health, accident, life and disability insurance benefits in effect with respect
to Executive during the two (2) years prior to his termination of employment,
or, if Corporation cannot provide such benefits because Executive is no longer
an employee, a dollar amount equal to the cost to Executive of obtaining such
benefits or substantially similar benefits.

 

However, in the event the payment described herein, when added to all other
amounts or benefits provided to or on behalf of the Executive in connection with
his termination of employment, would result in the imposition of an excise tax
under Code Section 4999, such payments shall be retroactively (if  necessary)
reduced to the extent necessary to avoid such excise tax imposition.  Upon
written notice to Executive, together with calculations of Corporation’s
independent auditors, Executive shall remit to Corporation the amount of the
reduction plus such interest as

 

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may be necessary to avoid the imposition of such excise tax.  Notwithstanding
the foregoing or any other provision of this contract to the contrary, if any
portion of the amount herein payable to the Executive is determined to be
non-deductible pursuant to the regulations promulgated under Section 280G of the
Internal Revenue Code of 1986, as amended (the “Code”), the Corporation shall be
required only to pay to Executive the amount determined to be deductible under
Section 280G.

 

(b)                                 Executive shall not be required to mitigate
the amount of any payment provided for in this Section 7 by seeking other
employment or otherwise.  The amount of payment provided for in this
Section 7(a)(i) shall not be reduced by any compensation earned by Executive as
the result of employment by another employer or by reason of Executive’s receipt
of or right to receive any retirement or other benefits after the date of
termination of employment or otherwise.

 

8.             Rights in Event of Termination of Employment Absent Change in
Control.

 

(a)                                  In the event that Executive’s employment is
involuntarily terminated by  Corporation without Cause and no Change in Control
shall have occurred at the date of such termination, Corporation shall pay
Executive an amount equal to and no greater than two (2) times the Executive’s
Annual Base Salary as defined in Section 5(a) of this Agreement, which amount
shall be payable in twenty-four (24) equal monthly installments.  In addition,
Executive shall be entitled to a continuation of health, accident, life and
disability insurance benefits for twenty-four (24) months or until Executive
secures substantially similar benefits through other employment, whichever shall
first occur.  However, if the payment described herein, when added to all other
amounts or benefits provided  to  or  on  behalf  of  the  Executive in
connection with his termination of employment, would result in the imposition of
an excise tax under Code Section 4999, such payments shall be retroactively (if
necessary) reduced to the extent necessary to avoid such imposition.  Upon
written notice to Executive, together with calculations of Corporation’s
independent auditors, Executive shall remit to Corporation the amount of the
reduction plus such interest as may be necessary to avoid the imposition of such
excise tax.  Notwithstanding the foregoing or any other provision of this
contract to the contrary, if any portion of the amount herein payable to the
Executive is determined to be non-deductible pursuant to the regulations
promulgated under Section 280G of the Code, then Corporation shall be required
only to pay to Executive the amount determined to be deductible under
Section 280G.

 

(b)                                 Executive shall not be required to mitigate
the amount of any payment provided for in this Section 8 by seeking other
employment or otherwise.  The amount of payment provided for in this Section 8
(not continuation of benefits) shall not be reduced by any compensation earned
by Executive as the result of employment by another employer or by reason of
Executive’s receipt of or right to receive any retirement or other benefits
after the date of termination of employment or otherwise.

 

(c)                                  The amounts payable pursuant to this
Section 8 shall constitute Executive’s sole and exclusive remedy in the event of
involuntary termination without cause of Executive’s employment by Corporation
in the absence of a Change in Control.

 

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9.                                       Restrictive Covenant.

 

(a)                                  Executive hereby acknowledges and
recognizes the highly competitive nature of the business of Corporation, Bank
and Services Company and, accordingly, agrees that, during and for the
applicable period set forth in Section 9(c) hereof, Executive shall not:

 

(i)                                     be engaged, directly or indirectly,
either for his own account or as agent, consultant, employee, partner, officer,
director, proprietor, investor (except as an investor owning less than 5% of the
stock of a publicly owned company) or otherwise of any person, firm, corporation
or enterprise engaged in (1) the banking or financial services industry
(including bank holding company), or (2) any other activity in which
Corporation, Bank, Services Company or any of their subsidiaries or affiliates
are engaged during the Employment Period, in any county in which, at any time
during the Employment Period or on the date of termination of the Executive’s
employment, a branch, office or other facility of Corporation, Bank, Services
Company or any of their subsidiaries or affiliates is located, or in any county
contiguous to such a county, including contiguous counties located outside of
the Commonwealth of Pennsylvania (the “Non-Competition Area”); or

 

(ii)                                  provide financial or other assistance to
any person, firm, corporation, or enterprise engaged in (1) the banking or
financial services industry (including bank holding company), or (2) any other
activity in which Corporation, Bank, Services Company or any of their
subsidiaries or affiliates are engaged during the Employment Period in the
Non-Competition Area; or

 

(iii)                               directly or indirectly contact, solicit or
induce any person, corporation or other entity who or which is a customer or
referral source of Corporation, Bank, Services Company or any of their
subsidiaries or affiliates, during the term of Executive’s employment or on the
date of termination of Executive’s employment; or

 

(iv)                              directly or indirectly solicit, induce or
encourage any employee of Corporation, Bank, Services Company or any of their
subsidiaries or affiliates, who is employed during the term of Executive’s
employment or on the date of termination of Executive’s employment, to leave the
employ of Corporation, Bank, Services Company or any of their subsidiaries or
affiliates, or to seek, obtain or accept employment with any person or entity
other than Corporation, Bank, Services Company or any of their subsidiaries or
affiliates.

 

(b)                                 It is expressly understood and agreed that,
although Executive, Corporation, Bank and Services Company consider the
restrictions contained in Section 9(a) reasonable for the purpose of preserving
for Corporation, Bank, Services Company and any of their subsidiaries or
affiliates, their good will and other proprietary rights, if a final judicial
determination is made, by a court or arbitration panel having jurisdiction, that
the time or territory or any other restriction contained in Section 9(a) is an
unreasonable or otherwise unenforceable restriction against Executive, the
provisions of Section 9(a) shall not be rendered void, but shall be deemed
amended to apply as to such maximum time and territory and to such other extent
as such court may judicially determine or indicate to be reasonable.

 

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(c)                                  The provisions of this Section 9 shall be
applicable, commencing on the date of this Agreement and ending on one of the
following dates, as applicable:

 

(i)                                     if Executive voluntarily terminates his
employment without Good Reason, the first anniversary date of the effective date
of termination of employment;

 

(ii)                                  if Executive’s employment terminates in
accordance with the provisions of Section 4(b) of this Agreement (relating to
termination for Cause) or the Executive voluntarily terminates his employment in
accordance with the provisions of Section 4(c) of this Agreement (relating to
termination by Executive for Good Reason), the first anniversary date of the
effective date of termination of employment;

 

(iii)                               if the Executive’s employment is
involuntarily terminated in accordance with the provisions of Section 6 of this
Agreement (relating to involuntary termination without Cause following a Change
in Control), the second anniversary date of the effective date of termination of
employment;

 

(iv)                              if the Executive’s employment is involuntarily
terminated in accordance with the provisions of Section 8 of this Agreement
(relating to involuntary termination without Cause absent a Change in Control),
the second anniversary date of the effective date of termination of employment;

 

(v)                                 if Executive’s employment terminates in
accordance with the provisions of Section 4(a) relating to non-renewal of
contract, the effective date of termination of employment.

 

10.                                 Unauthorized Disclosure.  During the term of
his employment hereunder, or at any later time, the Executive shall not, without
the written consent of the Board of Directors of Corporation or a person
authorized thereby, knowingly disclose to any person, other than an employee of
the Corporation or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive of Corporation, any material confidential information obtained by
him while in the employ of Corporation with respect to any of the services,
products, improvements, formulas, designs or styles, processes, customers,
customer lists, methods of business or any business practices of Corporation,
Bank, Services Company or any of their subsidiaries or affiliates, the
disclosure of which could be or will be damaging to Corporation, Bank, Services
Company or any of their subsidiaries or affiliates; provided, however, that
confidential information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by the Executive
or any person with the assistance, consent or direction of the Executive) or any
information of a type not otherwise considered confidential by persons engaged
in the same business or a business similar to that conducted by Corporation,
Bank, Services Company or any of their subsidiaries or affiliates or any
information that must be disclosed as required by law.

 

11.                                 Work Made for Hire.  Any work performed by
the Executive under this Agreement should be considered a “Work Made for Hire”
as that phrase is defined by the U.S. patent laws and shall be owned by and for
the express benefit of

 

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Corporation, Bank, Services Company and their subsidiaries and affiliates.  In
the event it should be established that such work does not qualify as a Work
Made for Hire, the Executive agrees to and does hereby assign to Corporation,
Bank, Services Company and their affiliates and subsidiaries, all of his rights,
title, and/or interest in such work product, including, but not limited to, all
copyrights, patents, trademarks, and proprietary rights.

 

12.                                 Return of Company Property and Documents. 
The Executive agrees that, at the time of termination of his employment,
regardless of the reason for termination, he will deliver to Corporation, Bank,
Services Company and their subsidiaries and affiliates, any and all company
property, including, but not limited to, automobiles, keys, security codes or
passes, mobile telephones, pagers, computers, devices, confidential information,
records, data, notes, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, software programs, equipment, other documents or
property, or reproductions of any of the aforementioned items developed or
obtained by the Executive during the course of his employment.

 

13.                                 Resignation as Director.  Executive agrees
that in the event that this Agreement or his employment under this Agreement is
terminated, Executive shall resign as a director of Corporation, Bank, Services
Company or any of their affiliates or subsidiaries, if he is then serving as a
director of any such entities.

 

14.                                 Liability Insurance.  Corporation shall use
its best efforts to obtain insurance coverage for the Executive under an
insurance policy covering officers and directors of Corporation, Bank and
Services Company against lawsuits, arbitrations or other legal or regulatory
proceedings; however, nothing herein shall be construed to require Corporation
to obtain such insurance, if the Board of Directors of the Corporation
determines that such coverage cannot be obtained at a reasonable price.

 

15.                                 Indemnification.  Corporation will indemnify
the Executive as required by  Pennsylvania law  and as provided by the Articles
and By-laws of Corporation, if not prohibited by federal law, with respect to
any threatened, pending or completed legal or regulatory action, suit or
proceeding brought against him by reason of the fact that he is or was a
director, officer, employee or agent of Corporation or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
person or entity.

 

16                                    Notices.  For the purposes of this
Agreement, notices and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or mailed by United States certified mail, return receipt requested, postage
prepaid, addressed as follows  (or to such other addresses provided by a party
to the other parties in writing):

 

If to the Executive:

Mr. Byron M. Mertz, III

 

670 Susquehanna Road

 

Northumberland, PA 17857

 

If to the Services Company:

 

Mr. Robert McCormack

 

President and CEO

 

SUBI Services, LLC

 

155 North 15th Street

 

Lewisburg, Pennsylvania  17837

 

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If to the Bank:

 

Mr. Robert McCormack

 

President and CEO

 

Sun Bank

 

155 North 15th Street

 

Lewisburg, Pennsylvania  17837

 

 

If to the Corporation:

Mr. Robert McCormack

 

President and CEO

 

Sun Bancorp, Inc.

 

155 North 15th Street

 

Lewisburg, Pennsylvania  17837

 

17.                                 Waiver.  No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by Executive and an executive officer
specifically designated by the Board of Directors of Corporation, Bank and
Services Company.  No waiver by either party, at any time, of any breach by the
other party of, or compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.  Notwithstanding this Section 17, a promotion of Executive in accordance
with Section 2 of this Agreement shall not constitute a breach of this Agreement
or require an amendment in writing.

 

18.                                 Assignment.  This Agreement shall not be
assignable by any party, except by Corporation to any successor in interest to
its respective businesses.

 

19.                                 Entire Agreement.  This Agreement contains
the entire agreement of the parties relating to the employment of Executive and
supersedes any and all agreements, either oral or in writing, between the
parties with regard to the employment of Executive by Corporation, including the
Change of Control Agreement entered between Executive, Corporation and Bank,
dated April 19, 1999.

 

20.                                 Successors; Binding Agreement.

 

(a)                                  Corporation, and Bank will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the businesses and/or assets of
Corporation and Bank to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that Corporation and Bank would be
required to perform it if no such succession had taken place.

 

(b)                                 This Agreement shall inure to the benefit of
and be enforceable by Executive’s personal or legal representatives, executors,
administrators, heirs, distributees, devisees and legatees.  If Executive should
die after a Notice of Termination is delivered by Executive, or following
termination of Executive’s employment without Cause, and any amounts would be
payable to Executive under this Agreement if Executive had continued to live,
all such amounts shall be paid in accordance with the terms of this Agreement to
Executive’s devisee, legatee, or other designee, or, if there is no such
designee, to Executive’s estate.

 

21.                                 Arbitration.   Corporation and Executive
recognize that in the event a dispute should arise between them concerning the
interpretation or implementation of this Agreement (except for any enforcement
sought with respect to Sections 9,

 

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10, 11, or 12, which may be litigated in court), lengthy and expensive
litigation will not afford a practical resolution of the issues within a
reasonable period of time.  Consequently, each party agrees that all disputes,
disagreements and questions of interpretation concerning this Agreement are to
be submitted for resolution, in Philadelphia, Pennsylvania, to the American
Arbitration Association (the “Association”) in accordance with the Association’s
National Rules for the Resolution of Employment Disputes or other applicable
rules then in effect (“Rules”).  Corporation or Executive may initiate an
arbitration proceeding at any time by giving notice to the other in accordance
with the Rules.  Corporation and Executive may, as a matter or right, mutually
agree on the appointment of a particular arbitrator from the Association’s
pool.  The arbitrator shall not be bound by the rules of evidence and procedure
of the courts of the Commonwealth of Pennsylvania, but shall be bound by the
substantive law applicable to this Agreement.  The decision of the arbitrator,
absent fraud, duress, incompetence or gross and obvious error of fact, shall be
final and binding upon the parties and shall be enforceable in courts of proper
jurisdiction.  Following written notice of a request for arbitration,
Corporation, Bank and Executive shall be entitled to an injunction restraining
all further proceedings in any pending or subsequently filed litigation
concerning this Agreement, except as otherwise provided herein or any
enforcement sought with respect to Sections 9, 10, 11, or 12.

 

22.                                 Attorney’s Fees and Costs.  If any action at
law or in equity is necessary to enforce or interpret the terms of this
Agreement, each party shall bear his or its own attorney’s fees, costs, and
expenses incurred in connection with the litigation, unless mandated by statute.

 

23.                                 Validity.  The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect.

 

24.                                 Applicable Law.  This Agreement shall be
governed by and construed in accordance with the domestic, internal laws of the
Commonwealth of Pennsylvania, without regard to its conflicts of laws
principles.

 

25.                                 Headings.  The section headings of this
Agreement are for convenience only and shall not control or affect the meaning
or construction or limit the scope or intent of any of the provisions of this
Agreement.

 

[THIS SPACE WAS INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 

 

ATTEST:

 

SUN BANCORP, INC.

 

 

 

 

 

 

/s/ Sandra J. Miller

 

 

/s/ Robert J. McCormack

 

 

 

Robert J. McCormack, President and CEO

 

 

 

 

 

 

ATTEST:

 

SUN BANK

 

 

 

 

 

 

/s/ Sandra J. Miller

 

 

/s/ Robert J. McCormack

 

 

 

Robert J. McCormack, President and CEO

 

 

 

 

 

 

ATTEST:

 

SUBI SERVICES, LLC

 

 

 

 

 

 

/s/ Sandra J. Miller

 

 

/s/ Robert J. McCormack

 

 

 

 

 

 

Robert J. McCormack, President and CEO

 

 

 

 

 

 

WITNESS:

 

EXECUTIVE:

 

 

 

 

 

 

/s/ Annette Sarsfield

 

 

/s/ Byron M. Mertz, III

 

 

 

Byron M. Mertz, III

 

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