**Exhibit10.6**

 

EMPLOYMENT AGREEMENT

 

**THIS AGREEMENT** is made as of the 12th day ofJanuary, 2004, between **SUN BANCORP, INC.**(“Corporation”), a Pennsylvania business corporation having a place of businessat 155 North 15th Street, Lewisburg, Pennsylvania 17837, **SUNBANK** (“Bank”), a Pennsylvania charteredbanking institution having a place of business at 155 North 15thStreet, Lewisburg, Pennsylvania 17837, **SUBISERVICES, LLC** (“Services Company”), a Pennsylvania limited liabilitycompany having a place of business at 155 North 15th Street,Lewisburg, Pennsylvania 17837 and **David M.Diffenderffer**  (“Executive”),an individual residing at 2826 Wimbledon Lane, Lancaster, PA 17601**(collectively, the “Parties” and,individually, sometimes a “Party”).

 

**WHEREAS**, the Corporation is a registeredbank holding company;

 

**WHEREAS**, the Bank is a subsidiary of theCorporation;

 

**WHEREAS**, the Services Company is asubsidiary of the Bank;

 

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

 

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

 

**WHEREAS,** Executive desires to acceptemployment with Corporation, Bank and Services Company on the terms andconditions set forth in this Agreement.

 

**NOW, THEREFORE,** the parties hereto, intending to belegally bound, agree as follows:

 

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

 

2.             **Duties and Positionof Executive****.**  Executive shall perform and discharge welland faithfully such duties as an executive officer of Corporation as may beassigned to Executive from time to time by the Board of Directors ofCorporation and/or Corporation’s President and CEO.  Executive shall be employed as Regional President and Senior VicePresident of the Services Company, Bank and Corporation, and shall hold suchother titles as may be given to him from time to time by the Board of Directorsof Corporation.  The Executive may bepromoted to other positions within the Corporation and/or Bank and/or ServicesCompany and assigned duties consistent with such a position without theCorporation, Bank or Services Company breaching this Agreement.  Such promotion may occur without amendmentof this Agreement; all other provisions of this Agreement will remain in fullforce and effect.

 

3.             **Engagement in OtherEmployment****.**  Executive shall devote his full time,attention and energies to the business of Corporation, Bank and Services Company during the Employment Period (asdefined in Section 4(a) of this Agreement); provided, however, that thisSection  shall not be construed aspreventing Executive from (a) investing Executive’s personal assets inenterprises that do not compete with Corporation, Bank, Services Company or anyof their subsidiaries or affiliates or (b) being involved in any other activity

 

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with the prior approval of the Boards ofDirectors of Corporation, Bank and Services Company.  The Executive shall not engage in any business or commercialactivities, duties or pursuits which compete with the business or commercialactivities of Corporation, Bank, Services Company or any of their subsidiariesor affiliates, nor may the Executive serve as a director or officer or in anyother capacity in a company which competes with Corporation, Bank, ServicesCompany 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 “EmploymentPeriod”) beginning on the date first mentioned above, and if not previouslyterminated pursuant to the terms of this Agreement, the Employment Period shallend two (2) years later.  The EmploymentPeriod shall be automatically extended on the second anniversary date of thecommencement of the Employment Period (the “Renewal Date”) for a period endingone (1) year from the Renewal Date unless either party shall give writtennotice of non-renewal to the other party at least sixty (60) days prior to theRenewal Date, in which event this Agreement shall terminate at the end of theEmployment Period.  If this Agreement isrenewed on the Renewal Date, it will be automatically renewed on the firstanniversary date of the Renewal Date and each subsequent year (the “AnnualRenewal 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 atleast sixty (60) days prior to the Annual Renewal Date, in which case thisAgreement will terminate on the Annual Renewal Date immediately following suchnotice.

 

(b)           Cause. Notwithstanding the provisions of Section 4(a) of this Agreement, thisAgreement shall terminate automatically for Cause (as defined herein) uponwritten 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 ofguilty or nolo contendere to a felony, a crime of falsehood or a crimeinvolving moral turpitude, or the actual incarceration of Executive;

 

(ii)           Executive’s failure to follow thegood faith lawful instructions of the Board of Directors of Corporation withrespect to its operations, after notice from Corporation, and a failure to curesuch violation within twenty (20) days of said notice;

 

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

 

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

 

(v)           dishonesty or gross negligence ofthe Executive in the performance of his duties;

 

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

 

(vii)         Executive’s breach of fiduciary dutyinvolving personal profit;

 

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

 

(ix)           Executive’s unlawful discrimination,including harassment, against Corporation’s employees, customers, businessassociates, contractors or visitors;

 

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

 

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

 

(xii)          any act of fraud or misappropriationby Executive;

 

(xiii)         intentional misrepresentation of amaterial fact, or intentional omission of information necessary to make theinformation supplied not materially misleading, in an application or otherinformation provided by the Executive to Corporation or any representative ofCorporation in connection with the Executive’s employment with Corporation,Bank and Services Company;

 

(xiv)        direction or recommendation of astate or federal bank regulatory authority to remove the Executive from hisposition with Corporation and/or Bank and/or Services Company, as identifiedherein;

 

(xv)         the willful engaging by theExecutive in misconduct injurious to Corporation, after notice fromCorporation, and a failure to cure such conduct within twenty (20) days of saidnotice; or

 

(xvi)        willful and serious violation(s) byExecutive 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 soserious that an attempt to cure would be fruitless, no notice need be given bythe Corporation.

 

(xvii)       the existence of any materialconflict between the interests of Corporation and the Executive that is notdisclosed in writing by the Executive to Corporation,  Bank and Services Company and approved in writing by the Boardsof Directors of Corporation, Bank and Services Company and, after notice fromCorporation, a failure to cure such conflict within twenty (20) days of saidnotice.

 

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

 

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compensation and employment obligations underthis Agreement shall terminate.

 

(c)           Notwithstanding the provisions ofSection 4(a) of this Agreement, all of Corporation, Bank and ServicesCompany’s  obligations under thisAgreement shall terminate automatically upon Executive’s voluntary terminationof employment.

 

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

 

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

 

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

 

(iii)          any removal of the Executive fromany of the positions indicated in Section 2 of this Agreement, other than for apromotion except as a result of his regulatory removal and/or in connectionwith termination of the Executive’s employment for Cause.

 

If Executive terminates his employment forGood Reason, then he may give notice of intention to collect benefits underthis Agreement by delivering a notice in writing (the “Notice of Termination”)and Corporation shall pay Executive an amount equal to one (1) times theExecutive’s Annual Base Salary as defined in Section 5(a) of this Agreement,which amount shall be payable in twelve (12) equal monthly installments andshall be subject to federal, state and local tax withholdings.  In addition, Executive shall receive acontinuation, for a period of twelve (12) months from the date of terminationof employment, or until Executive secures substantially similar benefitsthrough other employment, whichever shall first occur, of all health, accident,life and disability insurance benefits in effect with respect to Executive onthe date of termination of employment and that were in effect during the two(2) years prior to Executive’s termination of employment, or, if Corporationcannot provide such benefits because Executive is no longer an employee, adollar amount equal to the cost to Executive of obtaining such benefits orsubstantially similar benefits.  Executiveonly becomes entitled to receive these payments and continuation of benefits ifhe executes a General Release in favor of Corporation, Bank and theirsubsidiaries and affiliates.  However,in the event the payments described herein, when added to all other amounts orbenefits provided to or on behalf of the Executive in connection with histermination of employment, would result in the imposition of an excise taxunder 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, togetherwith calculations of Corporation’s independent auditors, Executive shall remitto Corporation the amount of the reduction, plus such interest as may be necessaryto avoid the 

 

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

 

(e)           Disability. Notwithstanding the provisions of Section 4(a) of this Agreement, if, asa result of physical or mental injury or impairment, Executive is unable toperform all of the essential job functions of his position on a full timebasis, taking into account any reasonable accommodation required by law, andwithout posing a direct threat to himself and others, for a period up to onehundred eighty (180) days, all obligations of Corporation, Bank and ServicesCompany to pay Executive an Annual Base Salary as set forth in Paragraph 5(a)of this Agreement are suspended.  Anypaid time off, sick leave, or short term disability pay Executive may beentitled to receive, pursuant to an established disability plan or program ofthe Services Company and/or Bank and/or Corporation, if any exists, shall beconsidered part of the compensation Executive shall receive while disabled, andshall not be in addition to the compensation received by Executive under thisprovision of the Agreement.  Executivefurther agrees that should he remain unable to perform all of the essentialfunctions of his position on a full time basis, taking into account anyreasonable accommodation required by law, and without posing a direct threat tohimself or others, after one hundred eighty (180) days, the Services Company,Bank and Corporation will suffer an undue hardship by continuing Executive inhis position.  Upon this event, allcompensation and employment obligations of the Services Company, Bank andCorporation under this Agreement shall cease (except Executive’s rights underthe 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, thisAgreement shall terminate automatically upon Executive’s death and Executive’srights under this Agreement shall cease as of the date of such termination.

 

5.             **Employment PeriodCompensation****.**

 

(a)           Annual Base Salary. For services performed by Executive under this Agreement, Corporationshall pay Executive an Annual Base Salary in the aggregate during theEmployment Period at the rate of One Hundred Twenty Five Thousand dollars($125,000) per year, payable at the same times as salaries are payable to otherexecutive employees of Corporation. Corporation may, from time to time, increase Executive’s Annual BaseSalary, and any and all such increases shall be deemed to constitute amendmentsto this Section 5(a) to reflect the increased amounts, effective as of the dateestablished for such increases by the Board of Directors of Corporation or anycommittee of such Board in the resolutions authorizing such increases.

 

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

 

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

 

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

 

(e)           Business Expenses. During the term of this Agreement, Executive shall be entitled toreceive prompt reimbursement for all reasonable expenses incurred by him, whichare properly accounted for, in accordance with the policies and proceduresestablished by the Board of Directors of Corporation for its executiveofficers.

 

6.             **Termination ofEmployment Following Change in Control****.**

 

(a)           If a Change in Control (as definedin 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 thisAgreement), Executive’s employment is involuntarily terminated (other than forthe Cause as defined in Section 4(b) of this Agreement), then, Executive maygive notice of intention to collect benefits under this Agreement, by deliveringa notice in writing (the “Notice of Termination”) to Corporation and Bank andthe provisions of Section 7 of this Agreement shall apply.

 

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

 

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

 

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Board of Directors of Corporation who are notinterested in the transaction and (z) a majority of the members of the Board ofDirectors of the legal entity resulting from, or existing after, any suchtransaction, 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 thanCorporation, Bank or any “person” who on the date hereof is a director orofficer of Corporation and/or Bank is or becomes the “beneficial owner” (asdefined in Rule 13d-3 under the 1934 Act or any successor rule or regulationpromulgated under the 1934 Act), directly or indirectly, of securities ofCorporation representing thirty (30%) percent or more of the combined votingpower of Corporation’s then outstanding securities, or

 

(iii)          during any period of two (2)consecutive years during the term of Executive’s employment under thisAgreement, individuals who at the beginning of such period constitute the Boardof Directors of Corporation cease for any reason to constitute at least amajority thereof, unless the election of each director who was not a director atthe beginning of such period has been approved in advance by directorsrepresenting at least two-thirds of the directors then in office who weredirectors at the beginning of the period.

 

7.             **Rights in Event ofTermination of Employment Following Change in Control****.**

 

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

 

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

 

(ii)           for a period of two (2) years fromthe date of termination of employment, or until Executive secures substantiallysimilar benefits through other employment, whichever shall first occur,Executive shall receive a continuation of all health, accident, life anddisability insurance benefits in effect with respect to Executive during thetwo (2) years prior to his termination of employment, or, if Corporation cannotprovide such benefits because Executive is no longer an employee, a dollaramount equal to the cost to Executive of obtaining such benefits orsubstantially similar benefits.

 

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

 

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may be necessary to avoid the imposition ofsuch excise tax.  Notwithstanding theforegoing or any other provision of this contract to the contrary, if anyportion of the amount herein payable to the Executive is determined to benon-deductible pursuant to the regulations promulgated under Section 280G ofthe Internal Revenue Code of 1986, as amended (the “Code”), the Corporationshall be required only to pay to Executive the amount determined to bedeductible under Section 280G.

 

(b)           Executive shall not be required tomitigate the amount of any payment provided for in this Section 7 by seekingother employment or otherwise.  Theamount of payment provided for in this Section 7(a)(i) shall not be reduced byany compensation earned by Executive as the result of employment by anotheremployer or by reason of Executive’s receipt of or right to receive anyretirement or other benefits after the date of termination of employment orotherwise.

 

8.             **Rights in Event ofTermination of Employment Absent Change in Control****.**

 

(a)           In the event that Executive’semployment is involuntarily terminated by Corporation without Cause and no Change in Control shall have occurred atthe date of such termination, Corporation shall pay Executive an amount equalto and no greater than two (2) times the Executive’s Annual Base Salary asdefined in Section 5(a) of this Agreement, which amount shall be payable intwenty-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 oruntil Executive secures substantially similar benefits through otheremployment, whichever shall first occur. However, if the payment described herein, when added to all otheramounts or benefits provided  to  or on  behalf  of the  Executive in connection withhis termination of employment, would result in the imposition of an excise taxunder Code Section 4999, such payments shall be retroactively (if necessary)reduced to the extent necessary to avoid such imposition.  Upon written notice to Executive, togetherwith calculations of Corporation’s independent auditors, Executive shall remitto Corporation the amount of the reduction plus such interest as may benecessary to avoid the imposition of such excise tax.  Notwithstanding the foregoing or any other provision of thiscontract to the contrary, if any portion of the amount herein payable to theExecutive is determined to be non-deductible pursuant to the regulationspromulgated under Section 280G of the Code, then Corporation shall be requiredonly to pay to Executive the amount determined to be deductible under Section280G.

 

(b)           Executive shall not be required tomitigate the amount of any payment provided for in this Section 8 by seekingother employment or otherwise.  Theamount 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 ofemployment by another employer or by reason of Executive’s receipt of or rightto receive any retirement or other benefits after the date of termination ofemployment or otherwise.

 

(c)           The amounts payable pursuant to thisSection 8 shall constitute Executive’s sole and exclusive remedy in the eventof involuntary termination without cause of Executive’s employment byCorporation in the absence of a Change in Control.

 

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9.             **RestrictiveCovenant**.

 

(a)           Executive hereby acknowledges andrecognizes the highly competitive nature of the business of Corporation, Bankand Services Company and, accordingly, agrees that, during and for theapplicable 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% ofthe stock of a publicly owned company) or otherwise of any person, firm,corporation or enterprise engaged in (1) the banking or financial servicesindustry (including bank holding company), or (2) any other activity in whichCorporation, Bank, Services Company or any of their subsidiaries or affiliatesare engaged during the Employment Period, in any county in which, at any timeduring the Employment Period or on the date of termination of the Executive’semployment, a branch, office or other facility of Corporation, Bank, ServicesCompany or any of their subsidiaries or affiliates is located, or in any countycontiguous to such a county, including contiguous counties located outside ofthe Commonwealth of Pennsylvania (the “Non-Competition Area”); or

 

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

 

(iii)          directly or indirectly contact,solicit or induce any person, corporation or other entity who or which is acustomer or referral source of Corporation, Bank, Services Company or any oftheir subsidiaries or affiliates, during the term of Executive’s employment oron 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 anyof their subsidiaries or affiliates, who is employed during the term ofExecutive’s employment or on the date of termination of Executive’s employment,to leave the employ of Corporation, Bank, Services Company or any of theirsubsidiaries or affiliates, or to seek, obtain or accept employment with anyperson or entity other than Corporation, Bank, Services Company or any of theirsubsidiaries or affiliates.

 

(b)           It is expressly understood andagreed that, although Executive, Corporation, Bank and Services Companyconsider the restrictions contained in Section 9(a) reasonable for the purposeof preserving for Corporation, Bank, Services Company and any of theirsubsidiaries or affiliates, their good will and other proprietary rights, if afinal judicial determination is made, by a court or arbitration panel havingjurisdiction, that the time or territory or any other restriction contained inSection 9(a) is an unreasonable or otherwise unenforceable restriction againstExecutive, the provisions of Section 9(a) shall not be rendered void, but shallbe deemed amended to apply as to such maximum time and territory and to suchother extent as such court may judicially determine or indicate to bereasonable.

 

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

 

(i)            if Executive voluntarily terminateshis employment without Good Reason, the first anniversary date of the effectivedate of termination of employment;

 

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

 

(iii)          if the Executive’s employment isinvoluntarily terminated in accordance with the provisions of Section 6 of thisAgreement (relating to involuntary termination without Cause following a Changein Control), the second anniversary date of the effective date of terminationof employment;

 

(iv)          if the Executive’s employment isinvoluntarily terminated in accordance with the provisions of Section 8 of thisAgreement (relating to involuntary termination without Cause absent a Change inControl), the second anniversary date of the effective date of termination ofemployment;

 

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

 

10.           **UnauthorizedDisclosure****.**  During the term of his employment hereunder,or at any later time, the Executive shall not, without the written consent ofthe Board of Directors of Corporation or a person authorized thereby, knowinglydisclose to any person, other than an employee of the Corporation or a personto whom disclosure is reasonably necessary or appropriate in connection withthe performance by the Executive of his duties as an executive of Corporation,any material confidential information obtained by him while in the employ ofCorporation with respect to any of the services, products, improvements,formulas, designs or styles, processes, customers, customer lists, methods ofbusiness or any business practices of Corporation, Bank, Services Company orany of their subsidiaries or affiliates, the disclosure of which could be orwill be damaging to Corporation, Bank, Services Company or any of theirsubsidiaries or affiliates; provided, however, that confidential informationshall not include any information known generally to the public (other than asa 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 nototherwise considered confidential by persons engaged in the same business or abusiness similar to that conducted by Corporation, Bank, Services Company orany of their subsidiaries or affiliates or any information that must bedisclosed as required by law.

 

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

 

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Corporation, Bank, Services Company and theirsubsidiaries and affiliates.  In theevent it should be established that such work does not qualify as a Work Madefor 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, allcopyrights, patents, trademarks, and proprietary rights.

 

12.           **Return of CompanyProperty and Documents.**  The Executive agrees that, at the time oftermination of his employment, regardless of the reason for termination, hewill deliver to Corporation, Bank, Services Company and their subsidiaries andaffiliates, 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, orreproductions of any of the aforementioned items developed or obtained by theExecutive during the course of his employment.

 

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

 

14.           **Liability Insurance**. Corporation shall use its best efforts to obtain insurance coverage forthe Executive under an insurance policy covering officers and directors ofCorporation, Bank and Services Company against lawsuits, arbitrations or otherlegal or regulatory proceedings; however, nothing herein shall be construed torequire Corporation to obtain such insurance, if the Board of Directors of theCorporation determines that such coverage cannot be obtained at a reasonableprice.

 

15.           **Indemnification.** Corporation will indemnify the Executive as required by  Pennsylvania law  and as provided by the Articles and By-laws of Corporation, ifnot prohibited by federal law, with respect to any threatened, pending or completedlegal or regulatory action, suit or proceeding brought against him by reason ofthe fact that he is or was a director, officer, employee or agent ofCorporation 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 communicationsprovided for in this Agreement shall be in writing and shall be deemed to havebeen 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 aparty to the other parties in writing):

 
| If to the Executive:        | Mr. David M. Diffenderffer          |
|-----------------------------|-------------------------------------|
|                        | 2826 Wimbledon Lane                 |
|                        | Lancaster, PA 17601                 |
|                        |
| 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 dischargedunless such waiver, modification or discharge is agreed to in writing andsigned by Executive and an executive officer specifically designated by theBoard of Directors of Corporation, Bank and Services Company.  No waiver by either party, at any time, ofany breach by the other party of, or compliance with, any condition orprovision of this Agreement to be performed by such other party shall be deemeda waiver of similar or dissimilar provisions or conditions at the same or atany prior or subsequent time. Notwithstanding this Section 17, a promotion of Executive in accordancewith Section 2 of this Agreement shall not constitute a breach of thisAgreement or require an amendment in writing.

 

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

 

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

 

20.           **Successors; BindingAgreement****.**

 

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

 

(b)           This Agreement shall inure to thebenefit 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 ofTermination is delivered by Executive, or following termination of Executive’semployment without Cause, and any amounts would be payable to Executive underthis Agreement if Executive had continued to live, all such amounts shall bepaid 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’sestate.

 

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

 

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

 

22.           **Attorney’s Fees andCosts.**  If any action at law or in equity isnecessary to enforce or interpret the terms of this Agreement, each party shallbear his or its own attorney’s fees, costs, and expenses incurred in connectionwith the litigation, unless mandated by statute.

 

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

 

24.           **Applicable Law****. **This Agreement shall be governed by and construed in accordancewith the domestic, internal laws of the Commonwealth of Pennsylvania, withoutregard to its conflicts of laws principles.

 

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

 

**[THISSPACE WAS INTENTIONALLY LEFT BLANK]**

 

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**IN WITNESS WHEREOF,** the parties have executed thisAgreement 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/ David M. Diffenderffer |   |
|                  |   | David M.  Diffenderffer                |
|                       |        |                                        |  |  |  |  |

 

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