Exhibit 10.3


 


EXECUTIVE EMPLOYMENT AGREEMENT


 


AGREEMENT made
this day of December 3, 2006, by and between THE FIRST NATIONAL BANK OF
MARYSVILLE ( hereinafter referred to as “BANK”), with principal offices at
101 Lincoln Street, Marysville, Pennsylvania, 17053 and ROBERT M.  GARST 167 Timber Ridge Road, Hummelstown,
Pennsylvania, 17036 (Hereinafter referred to as “EXECUTIVE”).


 


WITNESSETH:


 


WHEREAS, the
Executive is President of the Bank and has developed an intimate and thorough
knowledge of the Bank’s business methods and operations; and


 


WHEREAS,
retention of the Executive’s services for and on behalf of the Bank is of
material importance to the preservation and enhancement of the value of the
Bank’s business;


 


NOW THEREFORE,
in consideration of the mutual covenants set forth below, the Bank and the
Executive agree as follows:


 


I.  TERM
OF EMPLOYMENT


 


I.1  The Bank hereby employs the Executive as President
as set forth below, and Executive hereby accepts this employment and agrees to
render such services to the Bank on the terms and conditions as set forth in
this Agreement.  This Agreement shall be
for a three and a half (3 1⁄2 ) year period (the “Employment Period”) beginning
on July 1, 2006, and if not previously terminated pursuant to the terms of
this Agreement, shall end on December 31, 2009 (the “Initial Term”).  The Employment Period shall be extended
automatically for one (1) additional year on December 31, 2007 (“Renewal
Date”), and then on each anniversary of the Renewal Date of this Agreement
thereafter, unless Bank or Executive gives contrary written notice to the other
before October 31st so that upon such anniversary of the
Renewal Date if notice had not been previously given as provided in this Section I.1,
the Employment Period shall continue for a three (3) year period
thereafter.  References in the Agreement
to “Employment Period” shall refer to the Initial Term of this Agreement and
any extensions to the Initial Term.  It
is the intention of the parties that this Agreement be “Evergreen” unless (i) either
party gives written notice to the other party of his or its intention not to
renew this Agreement as provided above or (ii) this Agreement is
terminated pursuant to Section VI of this Agreement.


 


I.2  During the term of this Agreement the Executive
shall perform such executive services for the Bank as are consistent with his
title and as are assigned to him by the Bank’s Board of Directors.


 

















 


I.3  During the term of this Agreement, the
Executive shall devote his best efforts, including such portion of his time and
effort to the affairs and business of the Bank as he has customarily provided
to this date as President.


 


I.4  The services of Executive shall be rendered
principally in Pennsylvania, but he shall do such traveling on behalf of the Bank
as may be reasonably required.


 


II.  COMPETITIVE
ACTIVITIES


 


Executive
agrees that during the term of his employment except with the express consent
of the Board of Directors, he will not, directly or indirectly, engage or
participate in, become a director of, or render advisory or other services for,
or make any financial investment in any firm, corporation, business entity or
business enterprise competitive with the First National Bank of Marysville;
provided, however, that Executive shall not thereby be precluded or prohibited
from owning passive Investments, including investments in the securities of
other financial institutions, so long as such ownership does not require him to
devote substantial time to management or control of the business or activities
in which he has invested.


 


III.  COMPENSATION


 


The Bank will
compensate Executive for Executive’s services during the term of the Agreement
at a minimum Annual Base Salary of One Hundred Twenty Five Thousand and 00/100 Dollars
($125,000.00) per year ending December 31, 2006, payable at the same times
as salaries are payable to other executive employees.  Bank 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 to reflect the increased amounts.


 


IV.  PARTICIPATION
IN RETIREMENT AND MEDICAL PLANS, LIFE INSURANCE AND DISABILITY


 


IV.1  Executive shall be entitled to participate in
any employee benefit plan of the Bank relating to pension, profit-sharing or other
retirement benefits and health or medical coverage or reimbursement plans that
the Bank may adopt for the benefit of its employees.


 


IV.2  In
the event the Executive suffers from a Disability as defined in Section IV.3,
he shall nevertheless continue to receive an amount equal to and no greater
than 100% of his annual base salary, less amounts payable under any disability
plan of the Bank, for the first three months of his disability.  Thereafter, he shall only be entitled to any
amount provided for in the Bank’s long-term disability policy in effect at the
time of the payments determined therein.


 

















 


IV.3  For purposes of this Agreement, “Disability”
means the Executive is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months. The Executive will be deemed disabled if
the Social Security Administration has determined that he is disabled or if a
carrier of any group disability insurance policy provided by the Bank or made
available by the Bank to its employees and covering the Executive determines
that he is disabled provided that the policy’s definition of disability
complies with the definition of disability under IRC Section 409A.


 


V.  ADDITIONAL
COMPENSATION AND BENEFITS


 


V.1  During the term of the Agreement, Executive
will be entitled to participate in and receive the benefits of any stock
option, profit sharing, or other plan, benefit or privilege given to employees
and executives of the Bank or its subsidiaries and affiliates which may come
into existence hereafter, to the extent commensurate with his duties and
responsibilities, as fixed by the Bank’s Board of Directors or any committee of
such Board or of the Bank selected for such purpose.  To the extent Executive is otherwise eligible
and qualifies, he shall participate in and receive such benefits or privileges.
The Bank shall not make any changes in such plans, benefits or privileges which
would adversely affect Executive’s rights or benefits, unless such change
occurs pursuant to a program applicable to all executive officers of’ the Bank
and does not result in a proportionately greater adverse change in the rights
or benefits to Executive as compared with any other executive officer of the
Bank.  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 
III.1.


 


V.2  For services performed by Executive under
this Agreement, Bank has established a bonus program for Executive which is
attached hereto as Exhibit A.  The
payment of any such bonuses shall not reduce or otherwise affect any other
obligation of Bank to Executive provided for in this Agreement.


 


VI. TERMINATION


 


VI.1  In the event Executive’s employment is
terminated, Executive’s right to compensation and other benefits under this
agreement shall be as set forth hereinafter in this Section VI. In the
event the Executive is terminated in a manner which violates the provisions of this
Agreement, as determined by a court of competent jurisdiction, Bank shall reimburse
Executive for all reasonable costs, including attorney’s fees in challenging
such termination.  Such reimbursement
shall be in addition to all rights to which the Executive is otherwise entitled
under this Agreement.


 


VI.2  Executive may terminate his employment upon thirty
(30) days prior written notice to the Board of Directors.


 

















 


VI.3  (a)  If a change in control (hereinafter
referred to as “CIC”) of the Bank shall occur, as defined in VI.3 (b), and
without Executive’s express written consent, thereafter, there shall be:


 


(i)         an involuntary termination
of Executive without Cause as defined in Section VI.8;


 


(ii)        an assignment to Executive
of duties inconsistent with Executive’s positions, duties, responsibilities and
status with the Bank immediately prior to a CIC;


 


(iii)       a change in Executive’s
reporting responsibilities, titles or offices in effect immediately prior to a CIC
of the Bank, including any removal of the Executive from, or any failure to
reelect Executive to any of such positions, except in connection with a
termination for disability or retirement;


 


(iv)       a reduction by the Bank in
Executive’s annual salary in effect immediately prior to a CIC or as the same
may be increased from time to time; or


 


(v)        the failure of the Bank to
continue in effect any bonus, benefit or compensation plan, life insurance
plan, health and accident plan or disability plan in which the Executive is
participating at the time of a CIC of the Bank, or the taking of any action by
Bank which would adversely affect Executive’s participation in or materially
reduce Executive’s benefits under any of such plans;


 


then at the option of the Executive, exercisable by Executive within twelve
(12) months of the Change in Control or occurrence of the foregoing events,
Executive may resign from employment with Bank ( or in the case of an
involuntary termination), give notice (“Notice of Termination”) to collect
benefits under this Agreement by delivering written notice to Bank and the
provisions of Section VI.4 of this Agreement shall apply.


 


(b)  For purposes of this Agreement, the
definition of a “change in control” (CIC) of the Bank shall mean


 


(1)(a)  a merger, consolidation or
division involving Bank or its parent company, (b) a sale, exchange,
transfer or other disposition of substantially all of the assets of Bank, or (c) a
purchase by Bank of substantially all of the assets of another entity, unless
such merger, consolidation, division, sale, exchange, transfer, purchase or disposition
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 Bank; or


 


(2)  any “person” (as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934
(the “Exchange Act”)), other than Bank or any “person” who on the date hereof
is a director or officer of Bank is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Bank or its parent company representing thirty five (35%) percent
or more of the combined voting power of Bank’s or its parent company’s then
outstanding securities; or


 

















 


(3)  during any period of one (1) year
during the term of Executive’s employment under this Agreement, individuals who
at the beginning of such period constitute the Board of Directors of Bank 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.


 


VI.4.  In the event that
Executive delivers a Notice of Termination (as defined in Section VI.3  of this Agreement) to Bank, Executive shall
be entitled to receive the compensation and benefits set forth below:


 


If a “Change
in Control” (as defined in Section 6(b) of this Agreement) has also
occurred, Bank shall pay Executive a lump sum amount equal to and no greater
than 3.0  times Executive’s Annual Compensation
minus applicable taxes and withholdings. For purposes of this paragraph, Annual
Compensation shall be defined as Executive’s Annual Base Salary plus the
highest bonus received within the previous two years plus the amount which Bank
pays for employee benefits (including automobile allowance) for Executive for a
one year period.   In addition, Bank
shall reimburse Executive for his and his family’s COBRA premiums until
Executive is no longer eligible for COBRA 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 Section 4999 of the Code, Bank will
pay to Executive an additional cash payment (“Gross-up Payment”) in an amount
such that the after-tax proceeds of such Gross-up Payment (including any income
tax or Excise Tax on such Gross-up Payment) will be equal to the amount of the
Excise Tax.


 


VI.5.  If Executive’s employment with Bank is
terminated by Bank for any reason other than Cause as defined in Section VI.8,
then Executive shall be entitled to an amount equal to a lump sum amount equal
to and no greater than 3.0  times
Executive’s Annual Compensation minus applicable taxes and withholdings. For
purposes of this paragraph, Annual Compensation shall be defined as Executive’s
Annual Base Salary plus the highest bonus received within the previous two
years plus the amount which Bank pays for employee benefits (including
automobile allowance) for Executive for a one year period.   In addition, Bank shall reimburse Executive
for his and his family’s COBRA premiums until Executive is no longer eligible
for COBRA 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 Section 4999
of the Code, Bank will pay to Executive an additional cash payment (“Gross-up
Payment”) in an amount such that the after-tax proceeds of such Gross-up
Payment (including any income tax or Excise Tax on such Gross-up Payment) will
be equal to the amount of the Excise Tax.


 

















 


VI.6  Any termination of Executive’s employment by
the Bank or by the Executive shall be communicated by written notice of
termination to the other party by means of United States certified mail return
receipt requested pursuant to Section VII.3 of this Agreement. For
purposes of this Agreement, a “notice of termination” shall mean a dated notice
which shall (i) indicate the specific termination provision in the
Agreement relied upon; (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive’s
employment under the provision so indicated; and (iii) specify a date of
termination, which shall not be less than thirty nor more than ninety days
after such notice of termination.


 


VI.7.  Executive shall not be required to mitigate
the amount of any payment period provided for in Sections VI.4 or VI.5 if he is
seeking other employment.


 


VI.8  Termination for Cause. The Board of Directors
of the Bank may terminate Executive’s employment at any time for cause. For
purposes of this agreement “cause” includes,


 


(i)  the Executive’s failure to perform or to comply with any term.
or provision of this Agreement;


 


(ii)  the Executive’s failure to perform or to comply fully with
any lawful directive of the Bank’s Board of Directors or of any duly
constituted committee thereof;


 


(iii) Executive’s violation of Bank’s EBO policy;  or


 


(iv)  Executive’s removal from office or permanently prohibited
from participating in the conduct of the Bank’s affairs by a final order issued
by an appropriate federal banking agency pursuant to Section 8(e) or
8(g) of the Federal Deposit Insurance Act or by the Comptroller of the
Currency pursuant to national law.


 


VI.9.  In the event that Executive is terminated for
“cause” as defined in Section VI.8,  all obligations of Bank under this Agreement
shall terminate.


 


VI.10  Notwithstanding any other provision, in the
event that Executive is determined to be a specified employee (“key employee”)
as that term is defined in Section 409A of the Code, no payment that is
determined to be deferred compensation subject to Section 409A of the Code
shall be made until one day following six months from the date of separation of
service as that term is defined in Section 409A of the Code.


 


VII MISCELLANEOUS


 


VII.1  Notwithstanding any other provision contained
in this agreement, the payment or obligation to pay monies or granting of any
rights or privileges to Executive as provided in this Agreement shall not be in
lieu or derogation of the rights and privileges that Executive now has under
any plan or benefit presently outstanding.


 

















 


VII.2  This Agreement may not be modified, changed,
amended, extended, or altered except in writing signed by the Executive or by
his duly authorized representative, and by a duly authorized officer of the
Bank.


 


VII.3  All notices given or required to be given
shall be in writing, sent by United States certified mail return receipt
requested, postage prepaid, to Executive (or to Executive’s spouse or estate
upon Executive’s death) at Executive’s last known address, and to the Bank at
its principal office. All such notices shall be effective when deposited in the
mail in the manner specified in this Section VII.3. Either party by written
notice may change or designate the place for receipt of all such notices.


 


VIII. SUCCESSORS, ETC.


 


VIII.1  This Agreement shall inure to the benefit of
and be binding upon Executive, and, to the extent applicable, his heirs,
assigns, executors, and personal representatives and the Bank, its successors,
and assigns, including, without limitation, any person, partnership, or
corporation which may acquire all or substantially all of the Bank’s assets and
business, or with or into which the Bank may be consolidated or merged. This
provision shall apply in the event of any subsequent merger, consolidation, or
transfer.


 


VIII.2 This
Agreement is personal to each of the parties and neither party may assign or
delegate any of its rights or obligations under this Agreement without the
prior written consent of the other party.


 


IX APPLICABLE LAW.


 


This Agreement
shall be governed in all respects and be interpreted by and under the laws of
the Commonwealth of Pennsylvania, except to the extent that such law may be
preempted by applicable federal law, in which event this Agreement shall be
governed and interpreted by and under federal law. This Agreement shall also be
interpreted as is minimally required to qualify any payment hereunder as not
triggering any penalty on the Executive or the Bank pursuant to Code Section 409A
and the regulations promulgated thereunder.


 


X. SEVERABILITY


 


If any
provision in this Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remaining provisions nevertheless shall
continue in full force and effect.


 


XI ARBITRATION


 


Each party
agrees that all disputes, disagreements and questions of interpretation
concerning this Agreement (except the question of Executive’s disability which
is


 

















 


governed in Section IV), are to be submitted for resolution, in
Marysville, 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”).  Bank or Executive may initiate an arbitration
proceeding at any time by giving notice to the other in accordance with the
Rules.  Bank and Executive may, as a
matter of 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, Bank and Executive shall be entitled to an injunction restraining
all further proceedings in any pending or subsequently filed litigation
concerning this Agreement.


 


IN WITNESS
WHEREOF, the parties have duly executed this Agreement as of the day and year first
above written.


 


	
  Attest:

  	
   

  	
  The First National Bank of Marysville

  
	
  /s/ Kandi Lopp

  	
   

  	
  By:

  	
      /s/ William L. Hummel

  
	
   

  	
   

  	
  William L. Hummel, CEO

  
	
  Witness:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Larry Somin

  	
   

  	
  By:

  	
      /s/ Kandi Lopp

  
	
   

  	
   

  	
  Kandi Lopp, Secretary

  
	
   

  	
   

  	
   

  
	
  Witness:

  	
   

  	
   

  
	
   

  	
   

  	
  Executive

  
	
  /s/ Larry Somin

  	
   

  	
  By:

  	
      /s/ Robert M. Garst

  
	
   

  	
   

  	
  Robert M Garst

  
	
  Witness:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Larry Somin

  	
   

  	
   

  



 














 


AMENDMENT TO EMPLOYMENT AGREEMENT


 


This Amendment
to the Employment Agreement between Robert M. Garst (“Garst”) and The First
National Bank of Marysville (“Bank”) dated December 3, 2006 is made this
18th day of June, 2008.


 


WHEREAS,  Bank and Garst entered into an employment
agreement dated December 3, 2006 (“Employment Agreement”);


 


WHEREAS, First
Perry Bancorp, Inc. (“First Perry”) and HNB Bancorp, Inc. (“HNB”)
intend to enter into an Agreement and Plan of Consolidation on or about June 18,
2008 (“Consolidation Agreement”) pursuant to which First Perry and HNB shall
consolidate into a new holding company (the “Consolidation”);


 


WHEREAS, the
parties wish to amend the Employment Agreement to provide that the Consolidation
Agreement will not and does not constitute a change of control under the
Employment Agreement;


 


NOW, THEREFORE, in
consideration of the covenants hereinafter set forth, and intending to be
legally bound hereby, the Parties agree, effective the date hereof, as follows:


 


1.  The consolidation of the Bank through the Agreement
and Plan of Consolidation between First Perry Bancorp, Inc. and HNB Bancorp, Inc.
does not constitute a change of control under the Employment Agreement.


 


IN WITNESS WHEREOF,
the Parties, intending to be legally bound hereby, have caused this Amendment
to be duly executed in their respective names or by their authorized
representative, on the day and year first above written.


 


	
   

  	
   

  	
  FIRST PERRY BANCORP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE FIRST NATIONAL BANK OF

  
	
   

  	
   

  	
  MARYSVILLE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Robert M. Garst