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                                                                    Exhibit 10.7

                      EMPLOYMENT AND SEVERANCE AGREEMENT


     THIS EMPLOYMENT AND SEVERANCE AGREEMENT is made and entered this 22nd day
of May, 2001 by and among JAMES R. LAUFFER, an individual and resident of
Pennsylvania ("Lauffer"), PROMISTAR FINANCIAL CORPORATION, a Pennsylvania
corporation ("Promistar"), PROMISTAR BANK, a national banking association
("Promistar Bank"), FNH CORPORATION, a Pennsylvania corporation ("FNH") and
FIRST NATIONAL BANK OF HERMINIE, a national banking association (the "Bank");


     WHEREAS, Promistar and FNH are parties to an Agreement and Plan of
Reorganization dated as of February 24, 2001 (the "Merger Agreement"), which
contemplates that FNH would merge with and into Promistar and that the Bank
would merge with and into Promistar Bank (the FNH into Promistar and Bank into
Promistar Bank mergers are hereinafter referred to collectively as the
"Mergers");

     WHEREAS, Lauffer is a director and executive officer of FNH and of the Bank
and, after the Mergers will be a director of Promistar and an employee of
Promistar Bank for an indefinite period;

     WHEREAS, Lauffer and the Bank are parties to (i) a Second Amended and
Restated Employment Contract dated as of August 9, 1999 (the "Employment
Contract"); (ii) an Executive Supplemental Income Agreement dated as of March
25, 1987 (the "Supplemental Agreement"); (iii) an Executive Salary Continuation
Agreement dated as of July 15, 1999 (the "Continuation Agreement"); and (iv) an
Endorsement Method Split Dollar Plan Agreement (the "Split Dollar Agreement" and
collectively the "Lauffer Employment Contracts");

     WHEREAS, the parties have agreed that, as of the Effective Time (as such
term is defined in the Merger Agreement), Promistar and Promistar Bank will
expressly assume each and all of the obligations of the Bank under the Lauffer
Employment Contracts as such documents are in effect as of the date hereof and
giving effect to the amendments contemplated by this Employment and Severance
Agreement;

     WHEREAS, the parties have agreed that the Employment Contract will be
amended as of the Effective Time to provide, generally, that (i) Promistar and
Promistar Bank shall pay the severance amount due thereunder in a lump-sum and
(ii) such severance amount will be increased if Shareholder Approval (as defined
below) of the amendment to the Continuation Agreement is not received;

     WHEREAS, the parties have agreed that the Continuation Agreement will be
amended as of the Effective Time to provide, generally, that (i) Promistar and
Promistar Bank shall pay the Retirement and Post-Retirement Death Benefit under
Section IV of the Continuation Agreement and (ii) the offsets described in the
second sentence of Section IV shall no longer apply (that is, the benefit will
be increased) if Shareholder Approval of that amendment is received;
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     WHEREAS, the parties have agreed that Lauffer will accept employment with
Promistar Bank and, upon cessation of such employment, he will serve as a
director of Promistar;

     WHEREAS, Sections 5.01(o) and 5.02(l) of the Merger Agreement contemplate,
and make a condition precedent to the Mergers, an agreement among Lauffer, FNH
and Promistar amending the Employment Contract and the Continuation Agreement
and providing for the compensation to be paid to Lauffer following the Mergers;

     WHEREAS, this Employment and Severance Agreement, together with the
Exhibits hereto, is intended to be the agreement contemplated by Sections
5.01(o) and 5.02(l) of the Merger Agreement;

     NOW, THEREFORE, in consideration of the mutual promises hereinafter made
and intending to be legally bound, the parties hereto agree as follow:

1.   Termination of this Employment and Severance Agreement.
     ------------------------------------------------------

     If the Effective Time (as defined in the Merger Agreement) does not occur,
this Employment and Severance Agreement shall be without force and effect and
shall be terminated in its entirety without action by any party upon termination
of the Merger Agreement. Without limiting the generality of the foregoing, if
the Effective Time does not occur, the Mergers will not occur, Lauffer will
retain all rights he has or may have with respect to the Bank and/or FNH under
the Lauffer Employment Contracts and neither Promistar nor Promistar Bank will
have any obligations to Lauffer under this Agreement.

2.   Amendment of Continuation Agreement and Employment Contract.
     -----------------------------------------------------------

     Effective as of the Effective Time, the Continuation Agreement and the
Employment Contract shall be amended in the respective forms attached hereto as
Exhibits 1 and 2 to provide generally as follows:

     a.   Continuation Agreement.  If the Mergers occur and the shareholders of
          ----------------------
FNH approve, at or before the Effective Time and in accordance with Section
280G(b)(5)(B) of the Code and Section 6 of this Agreement ("Shareholder
Approval") the elimination of the offsets otherwise required under the second
sentence of Section IV of the Continuation Agreement (the "Offsets"), the
Offsets shall be eliminated under the Continuation Agreement and the amounts
payable to Lauffer will be increased accordingly;

     b.   Employment Contract.  If the Mergers occur and the Shareholder
          --------------------
Approval of  the amendment to the Continuation Agreement is received, the
termination benefit payable to Lauffer pursuant to Section 12 of the Employment
shall be converted from salary continuation to a lump-sum payment.  If the
Mergers occur and Shareholder Approval of the amendment to the Continuation
Agreement is not received, the lump-sum amount payable under Section 12 of the
Employment Contract, as amended, shall be increased to $821,000 if the
automobile otherwise described in Section 4(c) below is transferred by the Bank
prior to the Effective Time in a transfer not part of a parachute payment as
defined in Section 280G(b)(2) of the Code or $778,000 if the transfer of such
automobile is at the Effective Time or otherwise as part of a parachute payment.
Furthermore, the Employment Contract shall be amended to the extent

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necessary to ensure that there is no duplication between the provisions of the
Employment Contract and this Employment and Severance Agreement.

     c.   Assumption of Continuation Agreement and Employment Contract, as
          ----------------------------------------------------------------
amended, by Promistar and Promistar Bank.  As amended, as of the Effective Time,
----------------------------------------
the Continuation Agreement and the Employment Contract shall be assumed by
Promistar and Promistar Bank.

3.   Assumption of Split Dollar Agreement and Supplemental Agreement by
     ------------------------------------------------------------------
Promistar and Promistar Bank.
----------------------------

     As of the Effective Time, Promistar and Promistar Bank shall assume all
obligations to Lauffer under the Split Dollar Agreement and the Supplemental
Agreement.

4.   Employment of Lauffer by Promistar Bank.
     ---------------------------------------

     At the Effective Time, Lauffer shall become an employee of Promistar Bank
and shall have a title, duties and office commensurate with his experience and
abilities, which position shall be no less senior than the level required to
cause Lauffer to be eligible to retain his office in Independent Commercial
Bankers Association ("ICBA"). Promistar Bank agrees to employ Lauffer and
Lauffer agrees to accept such employment. Subject to the Section 5 of this
Agreement, the employment will be employment at will and either party may
terminate the employment arrangement upon thirty (30) days written notice to the
other. During the period of employment, Promistar Bank shall pay and provide to
Lauffer:

     (a)  a monthly salary of no less than $19,662;

     (b)  eligibility to earn annual bonuses on terms no less favorable to
Lauffer than the bonus arrangements provided by the Bank prior to the Mergers
and, if Lauffer's service is less than 12 months in any period taken into
account for an annual bonus, the bonus shall be pro rated for the period of time
actually served by Lauffer during that period;

     (c)  if not transferred prior to the Effective Time, a transfer of title,
free and clear of all encumbrances, of the automobile provided for Lauffer's use
by the Bank prior to the Mergers;

     (d)  participation in such employee benefit and fringe benefit plans as are
provided to senior executives of Promistar Bank on the same terms and conditions
as the such other senior executives of Promistar Bank may participate, provided,
however, Lauffer will decline participation in the Promistar Bank health plan in
favor of receipt of reimbursement of premiums paid under health plan coverage in
effect prior to his employment, as such reimbursement is described in Section
4(f)(2) below;

     (e)  vacations taken at Lauffer's discretion of not less in the aggregate
than four (4) nor more than 6 weeks per calendar year;

     (f)  Lauffer shall be entitled to the following additional fringe benefits:

          (i)  a payment of up to $2,500 per year in each of calendar years
     2001, 2002 and 2003 for financial planning and tax services provided to
     Lauffer and/or his spouse;

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<PAGE>

          (ii)   reimbursement, in an amount not to exceed $8,500 per year, for
     the payment of premiums for health insurance coverage as provided under
     arrangements secured by or with respect to Lauffer prior to the Effective
     Time in which Lauffer intends to continue his coverage;

          (iii)  reimbursement of up to $1,500 per year in country club dues
     each year for calendar years 2001, 2002 and 2003;

          (iv)   reimbursement of up to $10,000 each year for calendar years
     2001, 2002 and 2003 for the expenses of attendance by Lauffer and Lauffer's
     spouse of ICBA meetings or other banking industry conventions and/or
     conferences;

          (v)    until the death of Lauffer, payment of premiums on term life
     insurance policies with a death benefit of not less than $250,000 (which
     may be provided by continuing the policy purchased by the Bank and in
     effect on Lauffer's life prior to the Merger;

          (vi)   payment of premiums in accordance with the terms of the Lincoln
     Benefit Life Insurance Endorsement Method Split Dollar Policy;

          (vii)  payment at his age 65 of the balance accrued for Lauffer under
     the FNH Director's Deferred Compensation Plan prior to the Mergers in
     accordance with its terms and, at the Effective Time, Promistar shall place
     an amount of cash with a value equal to such accrued balance in an
     irrevocable grantor trust with an institution with trust powers as trustee
     and trust provisions requiring payment to Lauffer or his beneficiary at
     Lauffer's age 65.

          (viii) At the Effective Time, Promistar shall place an amount of cash
     with a present value equal to the aggregate of its payment obligations to
     Lauffer under the  Supplemental Agreement and its estimated payment
     obligations to Lauffer under the Continuation Agreement in an irrevocable
     grantor trust with an institution with trust powers as trustee and trust
     provisions requiring payment to Lauffer or his beneficiary in accordance
     with the terms of such agreements.

5.   Compensation to Lauffer for Services as Director of Promistar.
     -------------------------------------------------------------

     During the period Lauffer is employed by Promistar Bank as an active
employee under Section 4 above, he shall receive no compensation from Promistar
for his services as a director of Promistar and, instead, he shall serve as an
employee-director of Promistar. Upon his termination of employment with
Promistar Bank for any reason, Promistar shall compensate Lauffer for his
services as a director in accordance with Promistar's compensation program for
outside (non-employee) directors then in effect. In addition, since it is
contemplated that Lauffer will represent Promistar at ICBA, community and
industry functions, if Lauffer terminates employment with Promistar Bank prior
to the expiration of any times or dates set forth in Section 4(f) above,
Promistar shall pay or provide to Lauffer the fringe benefits set forth in
Section 4(f) for the times remaining in the respective subsections of Section
4(f) to the extent not then paid or provided by Promistar Bank.

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6.   Shareholder Approval.
     --------------------

     Shareholder Approval shall be deemed received if, at or before the
Effective Time:

     (a)  the payments contemplated by the Change in Control Agreements (before
giving effect to the Non-duplication Amendments) are approved by a vote of
persons who owned, immediately before the Merger, more than 75% of the voting
power of all outstanding stock of FNH within the meaning of Prop. Treas. Reg.
1.280G-1, Q&A 7(c); and

     (b)  Promistar receives an opinion of counsel acceptable to Promistar
(which may be counsel to the Bank) that the requirements for the exemption set
forth at Section 280G(b)(5) of the Code and Prop. Treas. Reg. 1.280G-1, Q&A 7 5,
6 and 7 have been satisfied.

7.   Non Competition.
     ---------------

     During the period of employment under Section 4 of this Agreement and for
one year thereafter, Lauffer shall refrain from competing with Promistar and
Promistar Bank except with the prior written consent of Promistar and Promistar
Bank. The phrase "refrain from competing with Promistar and Promistar Bank"
shall mean that Lauffer will not engage, directly or indirectly (including, by
way of example only, as a principal, partner, venturer, employee or agent) nor
have any direct or indirect interest in any enterprise (a "Competing
Enterprise") which competes or holds an interest of more than five percent (5%)
of an entity which competes with Promistar and Promistar Bank, or with any
subsidiary of Promistar and Promistar Bank, by engaging in providing banking
services to individuals or corporations engaging in any activity in any
geographic area which the business plan of Promistar and/or Promistar Bank as in
effect at the Effective Time, contemplates Promistar and Promistar Bank to be
engaged within two (2) years following the Effective Time. It is agreed that the
foregoing provisions shall not restrict Lauffer from either (i) being a director
of or having any investments or other interests in an enterprise which is not a
Competing Enterprise or (ii) having any investments in any Competing Enterprise
the stock of which is listed on a national securities exchange or traded
publicly over-the-counter so long as such investment does not give Lauffer more
than three percent (3%) of the voting stock of such company.

8.   Confidentiality.
     ---------------

     Lauffer agrees:

     (a)  To keep secret all business plans and mailing lists of the Promistar
or Promistar Bank and all matters of Promistar or Promistar Bank specifically
indicated to be confidential by the Promistar or Promistar Bank or established
as confidential by written Promistar or Promistar Bank policy, and not to
disclose them to any one outside Promistar or Promistar Bank either during or
after his employment with Promistar or Promistar Bank, except with the prior
written consent of the applicable entity of Promistar or Promistar Bank or as
required by law; and

     (b)  To deliver promptly to Promistar or Promistar Bank on termination of
employment of Lauffer all memoranda, notes, records, reports and other documents
(and all copies thereof) with respect to any such confidential matters and other
proprietary information

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(such as customer lists, supplier lists, etc.) which Lauffer may then possess or
have under his control.

9.   Arbitration.
     -----------

     Any disputes hereunder shall be settled by arbitration in Johnstown,
Pennsylvania, under the auspices of, and in accordance with the National Rules
for the Resolution of Employment Disputes of the American Arbitration
Association, and the decision in such arbitration shall be final and conclusive
on the parties and judgment upon such decision may be entered in any court
having jurisdiction thereof. No arbitrator shall have the power of authority to
attempt to change the character of such payments, reform this Agreement or to
award more to one party or the other than allowed by the Agreement.

10.  Notices.
     -------

     All notices and other communications that are required or may be given
under this Agreement shall be in writing and shall be delivered personally or by
registered or certified mail addressed to the party concerned at the following
addresses:

          If to Promistar:

          Promistar Financial Corporation
          551 Main Street
          Johnstown, Pennsylvania 15901
          Attention: John H. Anderson

          If to Promistar Bank:

          Promistar Bank
          551 Main Street
          Johnstown, Pennsylvania 15901
          Attention: John H. Anderson

          If to FNH:

          FNH Corporation
          98 Wendel Road
          Irwin, Pennsylvania 15642

          If to the Bank:

          First National Bank of Herminie
          98 Wendel Road
          Irwin, Pennsylvania 15642

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<PAGE>

          If to Lauffer:

          James R. Lauffer
          405 Old Route 30
          Irwin, PA 15642

          with a copy to:

          James J. Barnes, Esq.
          Richard D. Rose, Esq.
          Buchanan Ingersoll Professional Corporation
          301 Grant Street

          20th Floor - One Oxford Centre
          Pittsburgh, PA 15219

or to such other address as shall be designated by notice in writing to the
other party in accordance herewith.  Notices and other communications hereunder
shall be deemed effectively given when personally delivered, or, if mailed, 72
hours after deposit in the United States mail.

11.  Miscellaneous.
     -------------

     (a)  Except as specifically set forth herein, this Agreement supersedes all
prior agreements, arrangements and undertakings, written or oral, relating to
the subject matter hereof.

     (b)  After the Effective Time,

          (i)  this Agreement shall inure to the benefit of and be binding upon
     Lauffer, Lauffer's heirs, representatives or estate.

          (ii) this Agreement shall be binding upon and inure to the benefit of
     Promistar and Promistar Bank and its successors and assigns.  Promistar and
     Promistar Bank shall require any successor (whether direct or indirect, by
     purchase, conversion of form, merger, consolidation or otherwise) to all or
     substantially all of the business or assets of Promistar and Promistar
     Bank, by agreement in form and substance satisfactory to the Executive,
     expressly to assume and agree to perform this Agreement in the same manner
     and to the same extent that Promistar and Promistar Bank would be required
     to perform if no such succession had taken place.  As used in this
     subparagraph, "Bank" shall mean (A) such entity as defined in this
     Agreement, (B) each parent or subsidiary thereof and (C) any successor,
     other than a regulatory agency, to the business or any of the assets of
     Promistar and Promistar Bank which executes and delivers the agreement
     provided for in this Subsection 11(b)(ii) or which otherwise becomes bound
     by all the terms and provisions of this Agreement by operation of law.

     (c)  This Agreement may be amended, modified, superseded, canceled, renewed
or extended and the terms or covenants hereof may be waived, only by a written
instrument executed by each of the parties hereto, or in the case of a waiver,
by the party waiving compliance. The failure of any party at any time or times
to require performance of any

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<PAGE>

provisions hereof shall in no manner affect the right at a later time to enforce
such provisions. No waiver by either party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such breach or a waiver of the breach, preceding or succeeding, of
any other term or covenant contained in this Agreement.

     (d)  In the event any one or more of the covenants, terms or provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity of the remaining covenants, terms and provisions contained
herein shall be in no way affected, prejudiced or disturbed thereby.

     (e)  This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder. Without limiting the foregoing, the
Executive's right to receive payments hereunder shall not be assignable or
transferable, whether by pledge, creation of a security interest or otherwise,
other than a transfer to his beneficiary pursuant to the terms of the applicable
Lauffer Employment Contract or by his will or by the laws of descent or
distribution, and in the event of any attempted assignment or transfer contrary
to this Subsection 11(e) neither Promistar nor Promistar Bank shall have
liability to pay any amount so attempted to be assigned or transferred.

     (f)  This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania regardless of its principles of
conflict of laws, except as such laws of the Commonwealth of Pennsylvania may be
preempted by the laws of the United States.

     (g)  All payments required hereunder shall be made from the general assets
of Promistar or Promistar Bank and Lauffer shall have no rights greater than the
rights of a general creditor of Promistar or Promistar Bank.

     (h)  Promistar and Promistar Bank may withhold from any payment required
hereunder such amounts for federal, state and local income tax as Promistar and
Promistar Bank, in good faith, determines to be required by applicable laws,
provided, however, Promistar and Promistar Bank shall provide Lauffer with
notice of the amount so withheld and shall promptly pay over such amounts to the
appropriate taxing body.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the date first above written.


ATTEST:                             PROMISTAR


By: /s/ Janet E. Gillen             By: /s/ John H. Anderson
  ------------------------              ---------------------------------------
     Assistant Secretary            Title: Chairman and Chief Executive Officer
                                           ------------------------------------


ATTEST:                             PROMISTAR BANK


By: /s/ Janet E. Gillen             By: /s/ Steven C. Ackmann
  ------------------------              ---------------------------------------
     Assistant Secretary            Title: Chairman, President and Chief
                                           Operating Officer
                                         --------------------------------------

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ATTEST:                             FNH


By /s/ Kerry M. Anthony             By: /s/ Anthony P. Zello, Jr.
  -----------------------------         ------------------------------------
     EVP/C.O.O.                     Title  Vice President, Personnel Officer
                                           ---------------------------------


ATTEST:                             FIRST NATIONAL BANK OF HERMINIE


By /s/ Kerry M. Anthony             By: /s/ Jay A. Miller
  -----------------------------         ------------------------------------
     EVP/C.O.O.                     Title
                                         -----------------------------------

WITNESS:


By /s/ V. David Lavella             By: /s/ James R. Lauffer
  -----------------------------         ------------------------------------
     Secretary                           James Lauffer


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