Document:

exv10w4

 

EXHIBIT 10.4

EMPLOYMENT AGREEMENT

     THIS AGREEMENT (the “Agreement”), made this 20th day of August, 2004 by
and among Yardville National Bancorp, a New Jersey corporation (the “Company”),
Yardville National Bank, a wholly owned subsidiary of the Company (the “Bank”),
and Patrick M. Ryan (the “Executive”).

W I T N E S S E T H

     WHEREAS, the Company and the Bank desire to retain the services of the
Executive as President and Chief Executive Officer of the Bank and the Company;
and

     WHEREAS, the Company previously entered into an employment agreement with
the Executive dated January 31, 2003; and

     WHEREAS, the Executive and the respective Boards of Directors of the Bank
and the Company desire to enter into an updated and revised employment
agreement setting forth the terms and conditions of the continuing employment
of the Executive and the related rights and obligations of each of the parties.

     NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is hereby agreed as follows:

     1. Employment. The Executive is employed as President and Chief Executive
Officer of the Bank and the Company, reporting directly to their respective
Boards of Directors. The Executive shall have responsibility for the general
management and control of the business and affairs of the Company, the Bank,
and their respective subsidiaries, and shall perform all duties and shall have
all powers which are commonly incident to his offices or which, consistent with
those offices, are delegated to him by their respective Boards of Directors.

     2. Location and Facilities. The Executive will be furnished with the
working facilities and staff customary for executive officers with the title
and duties set forth in Section 1 and as are necessary for him to perform his
duties. The location of such facilities and staff shall be at the principal
administrative offices of the Company and the Bank, or at such other site or
sites customary for such offices.

	3.	 	Term.
	 
	a.	 	The term of this Agreement shall be (i) the initial term,
consisting of the period commencing on the date of this Agreement
(the “Effective Date”) and ending on the third anniversary of the
Effective Date, plus (ii) any and all extensions of the initial term
made pursuant to this Section 3.
	 
	b.	 	On each anniversary of the Effective Date prior to a
termination of the Agreement, the term under this Agreement shall be
extended automatically for an

 

 

	 	 	additional one (1) year period beyond the then effective expiration
date without action by any party, provided that neither the Company
and the Bank, on the one hand, nor Executive, on the other, shall
have given written notice at least sixty (60) days prior to such
anniversary date of their or his desire that the term not be
extended.
	 
	4.	 	Base Compensation.
	 
	a.	 	The Company and the Bank agree to pay the Executive during
the term of this Agreement a base salary at the rate of $414,000.00
per year, payable in accordance with customary payroll practices.
	 
	b.	 	The Board of Directors of the Bank (or a designated Committee
thereof) shall review annually the rate of the Executive’s base
salary based upon factors they deem relevant, and may maintain or
increase his salary, provided that no such action shall reduce the
rate of salary below the rate in effect on the Effective Date.
	 
	c.	 	In the absence of action by the Board of Directors of the
Bank (or a designated Committee thereof), the Executive shall
continue to receive salary at the annual rate specified on the
Effective Date or, if another rate has been established under the
provisions of this Section 4, the rate last properly established by
action of the Board of Directors of the Bank under the provisions of
this Section 4.

     5. Bonuses. The Executive shall be entitled to participate in any
discretionary bonuses or other incentive compensation programs that the Company
or the Bank may award from time to time to senior management employees,
pursuant to bonus plans or otherwise. For 2004, the Executive’s bonus shall be
determined in accordance with Appendix A to this Agreement.

     6. Benefit Plans. The Executive shall be entitled to participate in such
life insurance, medical, dental, pension, profit sharing, and retirement plans,
stock compensation plans and other benefit programs and arrangements as may be
approved from time to time by the Company and the Bank for the benefit of their
employees.

	7.	 	Vacation and Leave.
	 
	a.	 	The Executive shall be entitled to vacations and other leave
in accordance with Bank policy for senior executives, or otherwise
as approved by the Boards of Directors of the Company or the Bank.
	 
	b.	 	In addition to paid vacations and other leave, the Executive
shall be entitled, without loss of pay, to absent himself
voluntarily from the performance of his duties for such additional
periods of time and for such valid and legitimate reasons as the
Boards of Directors of the Company and the Bank may in their
discretion determine. Further, the Boards of Directors may grant to
the Executive a leave or leaves of absence, with or without pay, at
such time or times and upon

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	 	 	such terms and conditions as the Boards of Directors, in their
discretion, may determine.

     8. Expense Payments and Reimbursements. The Executive shall be reimbursed
for all reasonable out-of-pocket business expenses that he shall incur in
connection with his services under this Agreement upon substantiation of such
expenses in accordance with applicable policies of the Company or the Bank.

     9. Automobile Allowance. During the term of this Agreement, the Executive
shall be entitled to an automobile allowance on terms no less favorable than
those in effect immediately prior to the execution of this Agreement.
Executive shall comply with reasonable reporting and expense limitations on the
use of such automobile as may be established by the Company or the Bank from
time to time, and the Company or the Bank shall annually include on Executive’s
Form W-2 any amount of income attributable to Executive’s personal use of the
automobile.

	10.	 	Loyalty and Confidentiality.
	 
	a.	 	During the term of this Agreement the Executive: (i) shall
devote all his time, attention, skill, and efforts to the faithful
performance of his duties hereunder; provided, however, that from
time to time, the Executive may serve on the boards of directors of,
and hold any other offices or positions in, companies or
organizations which will not present any conflict of interest with
the Company and the Bank or any of their subsidiaries or affiliates,
unfavorably affect the performance of Executive’s duties pursuant to
this Agreement, or violate any applicable statute or regulation; and
(ii) shall not engage in any business or activity contrary to the
business affairs or interests of the Company and the Bank.
	 
	b.	 	Nothing contained in this Agreement shall prevent or limit
the Executive’s right to invest in the capital stock or other
securities of any business dissimilar from that of the Company and
the Bank, or, solely as a passive, minority investor, in any
business.
	 
	c.	 	The Executive agrees to maintain the confidentiality of any
and all information concerning the operations or financial status of
the Company and the Bank; the names or addresses of any borrowers,
depositors and other customers; any information concerning or
obtained from such customers; and any other information concerning
the Company and the Bank to which he may be exposed during the
course of his employment. The Executive further agrees that, unless
required by law or specifically permitted by the Boards of Directors
in writing, he will not disclose to any person or entity, either
during or subsequent to his employment, any of the above-mentioned
information which is not generally known to the public, nor shall he
employ such information in any way other than for the benefit of the
Company and the Bank.

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     11. Termination and Termination Pay. Subject to Section 12 of this
Agreement, the Executive’s employment under this Agreement may be terminated in
the following circumstances:

	a.	 	Death. The Executive’s employment under this Agreement shall
terminate upon his death during the term of this Agreement, in which
event the Executive’s estate shall be entitled to receive the
compensation due to the Executive through the last day of the
calendar month in which his death occurred.
	 
	b.	 	Retirement. Notwithstanding anything in this Agreement to
the contrary, this Agreement shall terminate upon the retirement of
the Executive under the retirement benefit plan or plans in which he
participates under Section 6 of this Agreement or otherwise.
	 
	c.	 	Disability.

	i.	 	The Company, the Bank, or the Executive may
terminate the Executive’s employment after having established
the Executive’s Disability. For purposes of this Agreement,
“Disability” means the Executive’s suffering a sickness,
accident or injury which has been determined by the carrier of
any individual or group disability insurance policy covering
the Executive, or by the Social Security Administration, to be
a disability rendering the Executive totally and permanently
disabled. The Boards of Directors of the Company and the Bank
shall determine in good faith whether or not the Executive is
disabled for purposes of this Agreement. As a condition to
any benefits, the Board may require the Executive to submit
proof of the carrier’s or the Social Security Administration’s
determination of disability.
	 
	ii.	 	In the event of such Disability, the Executive’s
obligation to perform services under this Agreement will
terminate. In the event of such termination, the Executive
shall be entitled to receive a disability benefit in
accordance with Section 3 of the Bank’s Supplemental Executive
Retirement Plan (the “SERP”). In the event such SERP is not
in effect or the Executive is not a SERP participant on the
date of Disability, the Executive shall continue to receive
one-hundred percent (100%) of his monthly base salary (at the
annual rate in effect on his date of termination) through the
earlier of the date of the Executive’s death, the date he
attains age 65 or the date which is three (3) years after the
Executive’s termination date. Such payments shall be reduced
by the amount of any short- or long-term disability benefits
payable to the Executive under any other disability program
sponsored by the Company or the Bank.
	 
	iii.	 	In addition, during any period of the Executive’s
Disability in which he is receiving payments under this
Section 11(c), the Executive and his dependents shall, to the
greatest extent possible, continue to be covered

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	 	 	under all benefit plans (including, without limitation,
retirement plans and medical, dental and life insurance
plans) of the Company and the Bank in which Executive
participated prior to his Disability, on the same terms as if
Executive were actively employed by the Company and the Bank
through the earlier of the date of the Executive’s death, the
date he attains age 65 or the date which is three (3) years
after the Executive’s termination date.

	d.	 	Just Cause.

	i.	 	The Boards of Directors of the Company or the
Bank may, by written notice to the Executive in the form and
manner specified in this paragraph, immediately terminate his
employment with the Company or the Bank, respectively, at any
time, for Just Cause. The Executive shall have no right to
receive compensation or other benefits for any period after
termination for Just Cause, except for previously vested
benefits. Termination for “Just Cause” shall mean termination
because of, in the good faith determination of the Company’s
or the Bank’s Board of Directors, the Executive’s:

	(1)	 	Personal dishonesty;
	 
	(2)	 	Incompetence;
	 
	(3)	 	Willful misconduct;
	 
	(4)	 	Breach of fiduciary duty involving
personal profit;
	 
	(5)	 	Intentional failure to perform duties
under this Agreement;
	 
	(6)	 	Willful violation of any law, rule or
regulation (other than traffic violations or similar
offenses) that reflects adversely on the reputation of
the Bank, any felony conviction, any violation of law
involving moral turpitude, or any violation of a final
cease-and-desist order; or
	 
	(7)	 	Material breach of any provision of
this Agreement.

	ii.	 	Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Just Cause by
the Company or the Bank unless there shall have been delivered
to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds (2/3) of the
entire membership of the Boards of Directors of the Company or
the Bank at a meeting of such Board called and held for the
purpose (after reasonable notice to the Executive and an
opportunity for the Executive to be heard before the Board
with counsel), finding that, in the good faith

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opinion of such Board, the Executive was guilty of conduct
described above and specifying the particulars thereof.

	e.	 	Voluntary Termination by Executive. In addition to his other
rights to terminate employment under the Agreement, the Executive
may voluntarily terminate employment during the term of this
Agreement upon at least sixty (60) days prior written notice to the
Boards of Directors of the Company and the Bank, in which case the
Executive shall receive only his compensation, vested rights and
employee benefits up to the date of his termination.
	 
	f.	 	Without Just Cause or With Good Reason.

	i.	 	In addition to termination pursuant to Sections
11(a) through 11(e), (x) the Boards of Directors of the
Company or the Bank, may, by written notice to the Executive,
immediately terminate his employment at any time for a reason
other than Just Cause (a termination “Without Just Cause”) and
(y) the Executive may, by written notice to the Boards of the
Company and the Bank, immediately terminate this Agreement at
any time within ninety (90) days following an event
constituting “Good Reason” as defined below (a termination
“With Good Reason”).
	 
	ii.	 	Subject to Section 12 hereof, in the event of
termination under this Section 11(f), the Executive shall be
entitled to receive his annual base salary and the bonus that
would have been paid for the remaining term of the Agreement,
including any renewals or extensions thereof, determined by
reference to the highest annual rate of base salary in effect
pursuant to Section 4 of this Agreement in any of the twelve
(12) months immediately preceding the date of such termination
and the highest annual cash bonus paid (or accrued on behalf
of) the Executive in any of the three (3) completed calendar
years immediately preceding the date of termination. The sum
due under this Section 11(f) shall be paid in one lump sum
within thirty (30) calendar days of such termination. Also,
in such event, the Executive shall, for a thirty-six (36)
month period, continue to participate in any benefit plans of
the Company and the Bank that provide health (including
medical and dental), or life insurance, or similar coverage,
upon terms no less favorable than the most favorable terms
provided to senior executives of the Company or the Bank
during such period. In the event that the Company or the Bank
is unable to provide such coverage by reason of the Executive
no longer being an employee, the Company or the Bank shall
provide the Executive with comparable coverage on an
individual policy basis or, if individual coverage is not
available, provide a cash payment equivalent to the value of
such coverage.
	 
	iii.	 	“Good Reason” shall exist if, without the
Executive’s express written consent, the Company or the Bank
materially breach any of their

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	 	 	respective obligations under this Agreement. Without
limitation, such a material breach shall be deemed to occur
upon any of the following:

	(1)	 	A material reduction in the
Executive’s responsibilities or authority, or a
requirement that the Executive report to any person or
group other than the Boards of Directors of the Company
and the Bank (or any other effective reduction in
reporting responsibilities) in connection with his
employment with the Company or the Bank;
	 
	(2)	 	Assignment to the Executive of duties
of a non-executive nature or duties for which he is not
reasonably equipped by his skills and experience;
	 
	(3)	 	Failure of the Executive to be
nominated or renominated to the Boards of Directors of
the Company or the Bank;
	 
	(4)	 	A reduction in salary or benefits
contrary to the terms of this Agreement, or, following a
Change in Control as defined in Section 12 of this
Agreement, any reduction in salary or material reduction
in benefits below the amounts to which he was entitled
prior to the Change in Control;
	 
	(5)	 	Termination of incentive and benefit
plans, programs or arrangements, or reduction of the
Executive’s participation, to such an extent as to
materially reduce their aggregate value below their
aggregate value as of the Effective Date; or
	 
	(6)	 	A requirement that the Executive
relocate his principal business office or his principal
place of residence outside of the area consisting of a
thirty-five (35) mile radius from the current main
office of the Bank, or the assignment to the Executive
of duties that would reasonably require such a
relocation.

	iv.	 	Notwithstanding the foregoing, a reduction in
base salary or a reduction or elimination of the Executive’s
participation or benefits under one or more benefit plans
maintained by the Company or the Bank as part of a good faith,
overall reduction in salary or reduction or elimination of
such plan or plans or benefits thereunder, applicable to all
participants in a manner that does not discriminate against
the Executive (except as such discrimination may be necessary
to comply with law), shall not constitute an event of Good
Reason or a material breach of this Agreement, provided that
benefits of the type or to the general extent as those offered
under such plans prior to such reduction or elimination are
not available to other officers of the Company or the Bank, or
any company that controls either of them, under a plan or
plans in or under which the Executive is not entitled to
participate.

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	v.	 	Notwithstanding anything in this Agreement to the
contrary, during the twelve (12) month period beginning on the
effective date of a Change in Control (as defined in Section
12(a)), and continuing through the first anniversary of such
date, the Executive may voluntarily terminate his employment
under this Agreement for any reason and such termination shall
constitute termination With Good Reason.

	g.	 	Continuing Covenant Not to Compete or Interfere with
Relationships. Regardless of anything herein to the contrary,
following a termination by the Company, the Bank or the Executive
pursuant to Section 11(f) and continuing until the six month
anniversary of the effective date of such termination, (i) the
obligations of the Executive under Section 10(c) of this Agreement
will continue in effect (ii) the Executive shall not serve as an
officer, director or employee of any bank holding company, bank,
savings association, savings and loan holding company, or mortgage
company which offers products or services competing with those
offered by the Company or the Bank from any office within fifty (50)
miles from the main office or any branch of the Bank and shall not
interfere with the relationship of the Company or the Bank and any
of its employees, agents, or representatives.
	 
	12.	 	Termination in Connection with a Change in Control.
	 
	a.	 	“Change in Control” means any one of the following events occurs:

	i.	 	Merger: the Company merges into or consolidates
with another corporation, or merges another corporation into
the Company and as a result less than a majority of the
combined voting power of the resulting corporation immediately
after the merger or consolidation is held by persons who were
stockholders of the Company immediately before the merger or
consolidation;
	 
	ii.	 	Acquisition of Significant Share Ownership: a
report on Schedule 13D or another form or schedule (other than
Schedule 13G) is filed or is required to be filed under
Sections 13(d) or 14(d) of the Securities Exchange Act of
1934, if the schedule discloses that the filing person or
persons acting in concert has or have become the beneficial
owner of 25% or more of a class of the Company’s voting
securities, but this clause (b) shall not apply to beneficial
ownership of Company voting shares held in a fiduciary
capacity by an entity of which the Company directly or
indirectly beneficially owns fifty percent (50%) or more of
its outstanding voting securities;
	 
	iii.	 	Change in Board Composition: during any period
of two consecutive years, individuals who constitute the
Company’s Board of Directors at the beginning of the two-year
period cease for any reason to constitute at least a majority
of the Company’s Board of Directors; provided, however, that
for purposes of this clause (c) each director who is first
elected by the board (or first nominated by the board for
election by stockholders) by a

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	 	 	vote of at least three-fourths (3/4) (b) of the directors who
were directors at the beginning of the period shall be deemed
to have been a director at the beginning of the two-year
period; or
	 
	iv.	 	Sale of Assets: The Company sells to a third
party all or substantially all of the Company’s assets.

	b.	 	If within the period beginning six (6) months prior to and
ending three (3) years after a Change in Control, (i) the Company or
the Bank shall terminate the Executive’s employment Without Just
Cause, or (ii) the Executive shall voluntarily terminate his
employment With Good Reason, the Company and the Bank shall, within
thirty (30) calendar days of the termination of the Executive’s
employment, make a lump-sum cash payment to him equal to three (3)
times the sum of the Executive’s (x) highest annual rate of base
salary during the thirty-six (36) month period preceding the
effective date of the Change in Control and (y) the highest annual
bonus or similar incentive compensation paid to the Executive or
accrued on the Executive’s behalf during the three (3) most recently
completed calendar years preceding the effective date of the Change
in Control. This cash payment shall be made in lieu of any payment
also required under Section 11(f) of this Agreement because of a
termination in such period. Also, in such event, the Executive
shall, for a thirty six (36) month period, continue to participate
in any benefit plans of the Company and the Bank that provide health
(including medical and dental) or life insurance, or similar
coverage upon terms no less favorable than the most favorable terms
provided to senior executives of the Bank during such period. In
the event that the Company or the Bank is unable to provide the
coverage referred to in the preceding sentence by reason of the
Executive no longer being an employee, the Company and the Bank
shall provide the Executive with comparable coverage on an
individual policy basis or, if individual coverage is not available,
provide a cash payment equivalent to the value of such coverage.
	 
	13.	 	Indemnification and Liability Insurance.
	 
	a.	 	Indemnification. The Company and the Bank agree to indemnify
the Executive (and his heirs, executors, and administrators), and to
advance expenses related thereto, to the fullest extent permitted
under applicable law and regulations against any and all expenses
and liabilities reasonably incurred by him in connection with or
arising out of any action, suit, or proceeding in which he may be
involved by reason of his having been a director or executive of the
Company or the Bank or any of their subsidiaries (whether or not he
continues to be a director or Executive at the time of incurring any
such expenses or liabilities). Such expenses and liabilities shall
include, but shall not be limited to, judgments, court costs, and
attorney’s fees and the cost of reasonable settlements, such
settlements to be approved by the Boards of Directors of the Company
or the Bank, if such action is brought against the Executive in his
capacity as an Executive or director of the Company or the Bank or
any of their subsidiaries. Indemnification for expenses shall not
extend to matters for which the Executive has been terminated for
Just Cause. Nothing contained herein shall be deemed to provide
indemnification otherwise prohibited by applicable law or
regulation.

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	 	 	Notwithstanding anything herein to the contrary, the obligations of
this Section 13 shall survive the term of this Agreement by a
period of six (6) years.
	 
	b.	 	Insurance. During the period in which indemnification of the
Executive is required under this Section 13, the Company or the Bank
shall provide the Executive (and his heirs, executors, and
administrators) with coverage under a directors’ and officers’
liability policy at the expense of the Company and the Bank, at
least equivalent to such coverage provided to directors and senior
Executives of the Company or the Bank.

     14. Reimbursement of Executive’s Expenses to Enforce this Agreement. The
Company or the Bank shall reimburse the Executive for all out-of-pocket
expenses, including, without limitation, reasonable attorney’s fees, incurred
by the Executive in connection with successful enforcement by the Executive of
the obligations of the Company or the Bank to the Executive under this
Agreement. Successful enforcement shall mean the grant of an award of money or
the requirement that the Company or the Bank take some action specified by this
Agreement (i) as a result of court order; or (ii) otherwise by the Company or
the Bank following an initial failure of the Company or the Bank to pay such
money or take such action promptly after written demand therefor from the
Executive stating the reason that such money or action is or was due under this
Agreement.

     15. Adjustment of Certain Payments and Benefits.

	a.	 	Tax Indemnification. Anything in this Agreement to the
contrary notwithstanding and except as set forth below, in the event
it shall be determined that any payment, benefit or distribution
made or provided by the Company or the Bank to or for the benefit of
the Executive (whether made or provided pursuant to the terms of
this Agreement or otherwise) (each referred to herein as a
“Payment”), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the “Code”)
or any interest or penalties are incurred by the Executive with
respect to such excise tax (the excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as
the “Excise Tax”), the Executive shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that,
after payment by the Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
	 
	b.	 	Determination of Gross-Up Payment. Subject to the provisions
of Section 15(c), all determinations required to be made under this
Section 15, including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determination, shall be made by a
certified public accounting firm reasonably acceptable to the
Company and the Bank as may be designated by the Executive (the
“Accounting Firm”) which shall provide detailed supporting
calculations to the Company, the Bank and the Executive within
fifteen (15) business days of the receipt of notice from the

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	 	 	Executive that there has been a Payment, or such earlier time as is
requested by the Company and the Bank. All fees and expenses of
the Accounting Firm shall be borne solely by the Company and the
Bank. Any Gross-Up Payment, as determined pursuant to this Section
15, shall be paid by the Company to the Executive within five
business days of the later of (i) the due date for the payment of
any Excise Tax, and (ii) the receipt of the Accounting Firm’s
determination. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code, at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that a Gross-Up Payment will not have been made by
the Company and the Bank which should have been made (an
“Underpayment”), consistent with the calculations required to be
made hereunder. In the event that the Company and the Bank exhaust
their remedies pursuant to Section 15(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by
the Company or the Bank to or for the benefit of the Executive.
	 
	c.	 	Treatment of Claims. The Executive shall notify the Company
and the Bank in writing of any claim by the Internal Revenue Service
that, if successful, would require a Gross-Up Payment to be made.
Such notification shall be given as soon as practicable, but no
later than ten business days, after the Executive is informed in
writing of such claim and shall apprise the Company and the Bank of
the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior
to the expiration of the thirty (30) day period following the date
on which it gives such notice to the Company and the Bank (or any
shorter period ending on the date that payment of taxes with respect
to such claim is due). If the Company or the Bank notifies the
Executive in writing prior to the expiration of this period that it
desires to contest such claim, the Executive shall:

	i.	 	give the Company and the Bank any information
reasonably requested by the Company and the Bank relating to
such claim;
	 
	ii.	 	take such action in connection with contesting
such claim as the Company and the Bank shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company
and the Bank;
	 
	iii.	 	cooperate with the Company and the Bank in good
faith in order to effectively contest such claim; and
	 
	iv.	 	permit the Company and the Bank to participate in
any proceedings relating to such claim; provided, however,
that the Company and the Bank shall bear and pay directly all
costs and expenses (including additional interest and
penalties) incurred in connection with such contest and
indemnity and hold the Executive harmless, on an after-tax
basis, for any

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	 	 	Excise Tax or related taxes, interest or penalties imposed as
a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section 15(c), the Company and the Bank shall control
all proceedings taken in connection with such contest and, at
their option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority with respect to such claim and may, at their
option, either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible
manner. Further, the Executive agrees to prosecute such
contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company and the Bank shall
determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company
and the Bank shall advance the amount of such payment to the
Executive, on an interest-free basis (including interest or
penalties with respect thereto). Furthermore, the Company’s
and the Bank’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issues
raised by the Internal Revenue Service or any other taxing
authority.

     d. Adjustments to the Gross-Up Payment. If, after the receipt
by the Executive of an amount advanced by the Company pursuant to
Section 15(c), the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to the
Company’s compliance with the requirements of Section 15(c))
promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after applicable taxes).
If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 15(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and such denial of refund occurs prior to the expiration
of thirty (30) days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the
amount of the Gross-Up Payment required to be paid.

     16. Injunctive Relief. If there is a breach or threatened breach of
Section 11(g) of this Agreement, the Company or the Bank and the Executive
agree that there is no adequate remedy at law for such breach, and that the
Company and the Bank each shall be entitled to injunctive relief restraining
the Executive from such breach or threatened breach, but such relief shall not
be the exclusive remedy hereunder for such breach. The parties hereto likewise
agree that the Executive, without limitation, shall be entitled to injunctive
relief to enforce the obligations of the Company and the Bank under Section 12
of this Agreement.

	17.	 	Successors and Assigns.
	 
	a.	 	This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Company or the Bank
that acquires, directly or indirectly,

12

 

	 	 	by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company or the
Bank.
	 
	b.	 	Since the Bank and the Company are contracting for the unique
and personal skills of the Executive, the Executive shall be
precluded from assigning or delegating his rights or duties
hereunder without first obtaining the written consent of the Bank
and the Company.

     18. No Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Executive in any
subsequent employment.

     19. Notices. All notices, requests, demands and other communications in
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch office of the United States Postal Service, by registered or
certified mail, postage prepaid, addressed to the Company and/or the Bank at
their principal business offices and to the Executive at his home address as
maintained in the records of the Company and the Bank.

     20. Joint and Several Liability; Payments by the Company and the Bank. To
the extent permitted by law, except as otherwise provided herein, the Company
and the Bank shall be jointly and severally liable for the payment of all
amounts due under this Agreement. The Company hereby agrees that it shall be
jointly and severally liable with the Bank for the payment of all amounts due
under this Agreement and shall guarantee the performance of the Bank’s
obligations hereunder, provided that the Company shall not be required by this
Agreement to pay to the Executive a salary or any bonuses or any other cash
payments, except in the event that the Bank does not fulfill its obligations to
the Executive for such payments.

     21. No Plan Created by this Agreement. The Executive, the Company and the
Bank expressly declare and agree that this Agreement was negotiated among them
and that no provisions of this Agreement are intended to, or shall be deemed
to, create any “plan” for purposes of the Employee Retirement Income Security
Act of 1974 (ERISA) or any other law or regulation, and each party expressly
waives any right to assert the contrary. Any assertion in any judicial or
administrative filing, hearing, or process that such a plan was created by this
Agreement shall be deemed a material breach of this Agreement by the party
making such an assertion.

     22. Amendments. No amendments or additions to this Agreement shall be
binding unless made in writing and signed by all of the parties, except as
otherwise specifically provided for herein.

     23. Applicable Law. Except to the extent preempted by federal law, the
laws of the State of New Jersey shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.

13

 

     24. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the remaining provisions hereof.

     25. Headings. Headings contained herein are for convenience of reference
only.

     26. Entire Agreement. This Agreement, together with any understandings or
modifications agreed to in writing by the parties, shall constitute the entire
agreement among the parties with respect to the subject matter hereof, other
than written agreements with respect to specific plans, programs or
arrangements described in Sections 5 and 6. This agreement supercedes and
replaces in its entirety any previous employment agreements between or among
the Company, the Bank and the Executive.

14

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.

	 	 	 
	Attest:

	 	YARDVILLE NATIONAL BANCORP
	 
	 	 
	

	 	By: /s/ Jay G. Destribats

	/s/ Daniel J. O’Donnell

	 	Title: Chairman
	Daniel J. O’Donnell, Secretary
	 	 
	 
	 	 
	Attest:

	 	YARDVILLE NATIONAL BANK
	 
	 	 
	

	 	By: /s/ Jay G. Destribats

	/s/ Daniel J. O’Donnell

Daniel J. O’Donnell, Secretary

	 	Title: Chairman
	 
	 	 
	/s/ Daniel J. O’Donnell

Witness, Daniel J. O’Donnell

	 	/s/ Patrick M. Ryan

Patrick M. Ryan

15exv10w5

 

EXHIBIT 10.5

EMPLOYMENT AGREEMENT

     THIS
AGREEMENT (the “Agreement”), made this 20th day of August, 2004, by
and among Yardville National Bancorp, a New Jersey corporation (the “Company”),
Yardville National Bank, a wholly owned subsidiary of the Company (the “Bank”),
and Stephen R. Walker (the “Executive”).

W I T N E S S E T H

     WHEREAS, the Company and the Bank desire to retain the services of the
Executive; and

     WHEREAS, the Company previously entered into an employment agreement with
the Executive dated January 31, 2003; and

     WHEREAS, the Executive and the respective Boards of Directors of the Bank
and the Company desire to enter into an updated and revised employment
agreement setting forth the terms and conditions of the continuing employment
of the Executive and the related rights and obligations of each of the parties.

     NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is hereby agreed as follows:

     1. Employment. The Executive is employed as Executive Vice President and
Chief Information Officer of the Bank. The Executive shall render such
administrative and management services as are customarily provided by persons
employed in similar executive capacities and shall have such other powers and
duties as the Chief Executive Officer or the Board of Directors of the Bank may
prescribe from time to time.

     2. Location and Facilities. The Executive will be furnished with the
working facilities and staff customary for executive officers with the title
and duties set forth in Section 1 and as are necessary for him to perform his
duties. The location of such facilities and staff shall be at the principal
administrative offices of the Company and the Bank, or at such other site or
sites customary for such offices.

     3. Term.

	a.	 	The term of this Agreement shall be (i) the initial term,
consisting of the period commencing on the date of this Agreement
(the “Effective Date”) and ending on the third anniversary of the
Effective Date, plus (ii) any and all extensions of the initial term
made pursuant to this Section 3.
	 
	b.	 	On each anniversary of the Effective Date prior to a
termination of the Agreement, the term under this Agreement shall be
extended automatically for an additional one (1) year period beyond
the then effective expiration date without

 

 

	 	 	action by any party, provided that neither the Company and the
Bank, on the one hand, nor Executive, on the other, shall have
given written notice at least sixty (60) days prior to such
anniversary date of their or his desire that the term not be
extended.

     4. Base Compensation.

	a.	 	The Bank agrees to pay the Executive during the term of this
Agreement a base salary at the rate of $169,125.00 per year, payable
in accordance with customary payroll practices.
	 
	b.	 	The Board of Directors of the Bank (or a designated Committee
thereof) shall review annually the rate of the Executive’s base
salary based upon factors they deem relevant, and may maintain or
increase his salary, provided that no such action shall reduce the
rate of salary below the rate in effect on the Effective Date.
	 
	c.	 	In the absence of action by the Board of Directors of the
Bank (or a designated Committee thereof), the Executive shall
continue to receive salary at the annual rate specified on the
Effective Date or, if another rate has been established under the
provisions of this Section 4, the rate last properly established by
action of the Board of Directors of the Bank under the provisions of
this Section 4.

     5. Bonuses. The Executive shall be entitled to participate in any
discretionary bonuses or other incentive compensation programs that the Company
or the Bank may award from time to time to senior management employees,
pursuant to bonus plans or otherwise.

     6. Benefit Plans. The Executive shall be entitled to participate in such
life insurance, medical, dental, pension, profit sharing, and retirement plans,
stock compensation plans and other benefit programs and arrangements as may be
approved from time to time by the Company and the Bank for the benefit of their
employees.

     7. Vacation and Leave.

	a.	 	The Executive shall be entitled to vacations and other leave
in accordance with Bank policy for senior executives, or otherwise
as approved by the Boards of Directors of the Company or the Bank.
	 
	b.	 	In addition to paid vacations and other leave, the Executive
shall be entitled, without loss of pay, to absent himself
voluntarily from the performance of his duties for such additional
periods of time and for such valid and legitimate reasons as the
Boards of Directors of the Company and the Bank may in their
discretion determine. Further, the Boards of Directors may grant to
the Executive a leave or leaves of absence, with or without pay, at
such time or times and upon such terms and conditions as the Boards
of Directors, in their discretion, may determine.

2

 

     8.
Expense Payments and Reimbursements. The Executive shall be reimbursed
for all reasonable out-of-pocket business expenses that he shall incur in
connection with his services under this Agreement upon substantiation of such
expenses in accordance with applicable policies of the Company or the Bank.

     9. Automobile Allowance. During the term of this Agreement, the Executive
shall be entitled to an automobile allowance on terms no less favorable than
those in effect immediately prior to the execution of this Agreement.
Executive shall comply with reasonable reporting and expense limitations on the
use of such automobile as may be established by the Company or the Bank from
time to time, and the Company or the Bank shall annually include on Executive’s
Form W-2 any amount of income attributable to Executive’s personal use of the
automobile.

     10. Loyalty and Confidentiality.

	a.	 	During the term of this Agreement the Executive: (i) shall
devote all his time, attention, skill, and efforts to the faithful
performance of his duties hereunder; provided, however, that from
time to time, the Executive may serve on the boards of directors of,
and hold any other offices or positions in, companies or
organizations which will not present any conflict of interest with
the Company and the Bank or any of their subsidiaries or affiliates,
unfavorably affect the performance of Executive’s duties pursuant to
this Agreement, or violate any applicable statute or regulation; and
(ii) shall not engage in any business or activity contrary to the
business affairs or interests of the Company and the Bank.
	 
	b.	 	Nothing contained in this Agreement shall prevent or limit
the Executive’s right to invest in the capital stock or other
securities of any business dissimilar from that of the Company and
the Bank, or, solely as a passive, minority investor, in any
business.
	 
	c.	 	The Executive agrees to maintain the confidentiality of any
and all information concerning the operations or financial status of
the Company and the Bank; the names or addresses of any borrowers,
depositors and other customers; any information concerning or
obtained from such customers; and any other information concerning
the Company and the Bank to which he may be exposed during the
course of his employment. The Executive further agrees that, unless
required by law or specifically permitted by the Boards of Directors
in writing, he will not disclose to any person or entity, either
during or subsequent to his employment, any of the above-mentioned
information which is not generally known to the public, nor shall he
employ such information in any way other than for the benefit of the
Company and the Bank.

     11. Termination and Termination Pay. Subject to Section 12 of this
Agreement, the Executive’s employment under this Agreement may be terminated in
the following circumstances:

3

 

	a.	 	Death. The Executive’s employment under this Agreement shall
terminate upon his death during the term of this Agreement, in which
event the Executive’s estate shall be entitled to receive the
compensation due to the Executive through the last day of the
calendar month in which his death occurred.
	 
	b.	 	Retirement. Notwithstanding anything in this Agreement to
the contrary, this Agreement shall terminate upon the retirement of
the Executive under the retirement benefit plan or plans in which he
participates under Section 6 of this Agreement or otherwise.
	 
	c.	 	Disability.

	i.	 	The Bank, or the Executive may terminate the
Executive’s employment after having established the
Executive’s Disability. For purposes of this Agreement,
“Disability” means the Executive’s suffering a sickness,
accident or injury which has been determined by the carrier of
any individual or group disability insurance policy covering
the Executive, or by the Social Security Administration, to be
a disability rendering the Executive totally and permanently
disabled. The Board of Directors of the Bank shall determine
in good faith whether or not the Executive is disabled for
purposes of this Agreement. As a condition to any benefits,
the Board may require the Executive to submit proof of the
carrier’s or the Social Security Administration’s
determination of disability.
	 
	ii.	 	In the event of such Disability, the Executive’s
obligation to perform services under this Agreement will
terminate. In the event of such termination, the Executive
shall be entitled to receive a disability benefit in
accordance with Section 3 of the Bank’s Supplemental Executive
Retirement Plan (the “SERP”). In the event such SERP is not
in effect or the Executive is not a SERP participant on the
date of Disability, the Executive shall continue to receive
one-hundred percent (100%) of his monthly base salary (at the
annual rate in effect on his date of termination) through the
earlier of the date of the Executive’s death, the date he
attains age 65 or the date which is three (3) years after the
Executive’s termination date. Such payments shall be reduced
by the amount of any short- or long-term disability benefits
payable to the Executive under any other disability program
sponsored by the Company or the Bank.
	 
	iii.	 	In addition, during any period of the Executive’s
Disability in which he is receiving payments under this
Section 11(c), the Executive and his dependents shall, to the
greatest extent possible, continue to be covered under all
benefit plans (including, without limitation, retirement plans
and medical, dental and life insurance plans) of the Company
and the Bank in which Executive participated prior to his
Disability, on the same terms as if Executive were actively
employed by the Company and the Bank through the earlier of
the date of the Executive’s death, the date he attains

4

 

	 	 	age 65 or the date which is three (3) years after the
Executive’s termination date.

	d.	 	Just Cause.

	i.	 	The Board of Directors of the Bank may, by
written notice to the Executive in the form and manner
specified in this paragraph, immediately terminate his
employment with the Bank, respectively, at any time, for Just
Cause. The Executive shall have no right to receive
compensation or other benefits for any period after
termination for Just Cause, except for previously vested
benefits. Termination for “Just Cause” shall mean termination
because of, in the good faith determination of the Bank’s
Board of Directors, the Executive’s:

	(1)	 	Personal dishonesty;
	 
	(2)	 	Incompetence;
	 
	(3)	 	Willful misconduct;
	 
	(4)	 	Breach of fiduciary duty involving
personal profit;
	 
	(5)	 	Intentional failure to perform duties
under this Agreement;
	 
	(6)	 	Willful violation of any law, rule or
regulation (other than traffic violations or similar
offenses) that reflects adversely on the reputation of
the Bank, any felony conviction, any violation of law
involving moral turpitude, or any violation of a final
cease-and-desist order; or
	 
	(7)	 	Material breach of any provision of
this Agreement.

	ii.	 	Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Just Cause by
the Bank unless there shall have been delivered to the
Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds (2/3) of the
entire membership of the Board of Directors of the Bank at a
meeting of such Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the
Executive to be heard before the Board with counsel), finding
that, in the good faith opinion of such Board, the Executive
was guilty of conduct described above and specifying the
particulars thereof.

	e.	 	Voluntary Termination by Executive. In addition to his other
rights to terminate employment under the Agreement, the Executive
may voluntarily terminate employment during the term of this
Agreement upon at least sixty (60) days prior written notice to the
Board of Directors of the Bank, in which case the Executive

5

 

	 	 	shall receive only his compensation, vested rights and employee
benefits up to the date of his termination.
	 
	f.	 	Without Just Cause or With Good Reason.

	i.	 	In addition to termination pursuant to Sections
11(a) through 11(e), (x) the Board of Directors of the Bank,
may, by written notice to the Executive, immediately terminate
his employment at any time for a reason other than Just Cause
(a termination “Without Just Cause”) and (y) the Executive
may, by written notice to the Board of the Bank, immediately
terminate this Agreement at any time within ninety (90) days
following an event constituting “Good Reason” as defined below
(a termination “With Good Reason”).
	 
	ii.	 	Subject to Section 12 hereof, in the event of
termination under this Section 11(f), the Executive shall be
entitled to receive his annual base salary and the bonus that
would have been paid for the remaining term of the Agreement,
including any renewals or extensions thereof, determined by
reference to the highest annual rate of base salary in effect
pursuant to Section 4 of this Agreement in any of the twelve
(12) months immediately preceding the date of such termination
and the highest annual cash bonus paid (or accrued on behalf
of) the Executive in any of the three (3) completed calendar
years immediately preceding the date of termination. The sum
due under this Section 11(f) shall be paid in one lump sum
within thirty (30) calendar days of such termination. Also,
in such event, the Executive shall, for a thirty-six (36)
month period, continue to participate in any benefit plans of
the Company and the Bank that provide health (including
medical and dental), or life insurance, or similar coverage,
upon terms no less favorable than the most favorable terms
provided to senior executives of the Company or the Bank
during such period. In the event that the Company or the Bank
is unable to provide such coverage by reason of the Executive
no longer being an employee, the Company or the Bank shall
provide the Executive with comparable coverage on an
individual policy basis or, if individual coverage is not
available, provide a cash payment equivalent to the value of
such coverage.
	 
	iii.	 	“Good Reason” shall exist if, without the
Executive’s express written consent, the Company or the Bank
materially breach any of their respective obligations under
this Agreement. Without limitation, such a material breach
shall be deemed to occur upon any of the following:

	(1)	 	A material reduction in the
Executive’s responsibilities or authority, or a
requirement that the Executive report to any person
other than the Chief Executive Officer of the Bank (or
any other

6

 

	 	 	effective reduction in reporting responsibilities) in
connection with his employment with the Company or the
Bank;
	 
	(2)	 	Assignment to the Executive of duties
of a non-executive nature or duties for which he is not
reasonably equipped by his skills and experience;
	 
	(3)	 	A reduction in salary or benefits
contrary to the terms of this Agreement, or, following a
Change in Control as defined in Section 12 of this
Agreement, any reduction in salary or material reduction
in benefits below the amounts to which he was entitled
prior to the Change in Control;
	 
	(4)	 	Termination of incentive and benefit
plans, programs or arrangements, or reduction of the
Executive’s participation, to such an extent as to
materially reduce their aggregate value below their
aggregate value as of the Effective Date; or
	 
	(5)	 	A requirement that the Executive
relocate his principal business office or his principal
place of residence outside of the area consisting of a
thirty-five (35) mile radius from the current main
office of the Bank, or the assignment to the Executive
of duties that would reasonably require such a
relocation.

	iv.	 	Notwithstanding the foregoing, a reduction in
base salary or a reduction or elimination of the Executive’s
participation or benefits under one or more benefit plans
maintained by the Company or the Bank as part of a good faith,
overall reduction in salary or reduction or elimination of
such plan or plans or benefits thereunder, applicable to all
participants in a manner that does not discriminate against
the Executive (except as such discrimination may be necessary
to comply with law), shall not constitute an event of Good
Reason or a material breach of this Agreement, provided that
benefits of the type or to the general extent as those offered
under such plans prior to such reduction or elimination are
not available to other officers of the Company or the Bank, or
any company that controls either of them, under a plan or
plans in or under which the Executive is not entitled to
participate.
	 
	v.	 	Notwithstanding anything in this Agreement to the
contrary, during the twelve (12) month period beginning on the
effective date of a Change in Control (as defined in Section
12(a)), and continuing through the first anniversary of such
date, the Executive may voluntarily terminate his employment
under this Agreement for any reason and such termination shall
constitute termination With Good Reason.

7

 

	g.	 	Continuing Covenant Not to Compete or Interfere with
Relationships. Regardless of anything herein to the contrary,
following a termination by the Company, the Bank or the Executive
pursuant to Section 11(f) and continuing until the six month
anniversary of the effective date of such termination, (i) the
obligations of the Executive under Section 10(c) of this Agreement
will continue in effect (ii) the Executive shall not serve as an
officer, director or employee of any bank holding company, bank,
savings association, savings and loan holding company, or mortgage
company which offers products or services competing with those
offered by the Company or the Bank from any office within fifty (50)
miles from the main office or any branch of the Bank and shall not
interfere with the relationship of the Company or the Bank and any
of its employees, agents, or representatives.

     12. Termination in Connection with a Change in Control.

	a.	 	“Change in Control” means any one of the following events occurs:

	i.	 	Merger: the Company merges into or consolidates
with another corporation, or merges another corporation into
the Company and as a result less than a majority of the
combined voting power of the resulting corporation immediately
after the merger or consolidation is held by persons who were
stockholders of the Company immediately before the merger or
consolidation;
	 
	ii.	 	Acquisition of Significant Share Ownership: a
report on Schedule 13D or another form or schedule (other than
Schedule 13G) is filed or is required to be filed under
Sections 13(d) or 14(d) of the Securities Exchange Act of
1934, if the schedule discloses that the filing person or
persons acting in concert has or have become the beneficial
owner of 25% or more of a class of the Company’s voting
securities, but this clause (b) shall not apply to beneficial
ownership of Company voting shares held in a fiduciary
capacity by an entity of which the Company directly or
indirectly beneficially owns fifty percent (50%) or more of
its outstanding voting securities;
	 
	iii.	 	Change in Board Composition: during any period
of two consecutive years, individuals who constitute the
Company’s Board of Directors at the beginning of the two-year
period cease for any reason to constitute at least a majority
of the Company’s Board of Directors; provided, however, that
for purposes of this clause (c) each director who is first
elected by the board (or first nominated by the board for
election by stockholders) by a vote of at least three-fourths
(3/4) (b) of the directors who were directors

8

 

	 	 	at the beginning of the period shall be deemed to have been a
director at the beginning of the two-year period; or
	 
	iv.	 	Sale of Assets: The Company sells to a third
party all or substantially all of the Company’s assets.

	b.	 	If within the period beginning six (6) months prior to and
ending three (3) years after a Change in Control, (i) the Company or
the Bank shall terminate the Executive’s employment Without Just
Cause, or (ii) the Executive shall voluntarily terminate his
employment With Good Reason, the Company and the Bank shall, within
thirty (30) calendar days of the termination of the Executive’s
employment, make a lump-sum cash payment to him equal to three (3)
times the sum of the Executive’s (x) highest annual rate of base
salary during the thirty-six (36) month period preceding the
effective date of the Change in Control and (y) the highest annual
bonus or similar incentive compensation paid to the Executive or
accrued on the Executive’s behalf during the three (3) most recently
completed calendar years preceding the effective date of the Change
in Control. This cash payment shall be made in lieu of any payment
also required under Section 11(f) of this Agreement because of a
termination in such period. Also, in such event, the Executive
shall, for a thirty six (36) month period, continue to participate
in any benefit plans of the Company and the Bank that provide health
(including medical and dental) or life insurance, or similar
coverage upon terms no less favorable than the most favorable terms
provided to senior executives of the Bank during such period. In
the event that the Company or the Bank is unable to provide the
coverage referred to in the preceding sentence by reason of the
Executive no longer being an employee, the Company and the Bank
shall provide the Executive with comparable coverage on an
individual policy basis or, if individual coverage is not available,
provide a cash payment equivalent to the value of such coverage.

     13. Indemnification and Liability Insurance.

	a.	 	Indemnification. The Company and the Bank agree to indemnify
the Executive (and his heirs, executors, and administrators), and to
advance expenses related thereto, to the fullest extent permitted
under applicable law and regulations against any and all expenses
and liabilities reasonably incurred by him in connection with or
arising out of any action, suit, or proceeding in which he may be
involved by reason of his having been a director or executive of the
Company or the Bank or any of their subsidiaries (whether or not he
continues to be a director or Executive at the time of incurring any
such expenses or liabilities). Such expenses and liabilities shall
include, but shall not be limited to, judgments, court costs, and
attorney’s fees and the cost of reasonable settlements, such
settlements to be approved by the Boards of Directors of the Company
or the Bank, if such action is brought against the Executive in his
capacity as an Executive or director of the Company or the Bank or
any of their subsidiaries.

9

 

	 	 	Indemnification for expenses shall not extend to matters for which
the Executive has been terminated for Just Cause. Nothing
contained herein shall be deemed to provide indemnification
otherwise prohibited by applicable law or regulation.
Notwithstanding anything herein to the contrary, the obligations of
this Section 13 shall survive the term of this Agreement by a
period of six (6) years.
	 
	b.	 	Insurance. During the period in which indemnification of the
Executive is required under this Section 13, the Company or the Bank
shall provide the Executive (and his heirs, executors, and
administrators) with coverage under a directors’ and officers’
liability policy at the expense of the Company and the Bank, at
least equivalent to such coverage provided to directors and senior
Executives of the Company or the Bank.

     14. Reimbursement of Executive’s Expenses to Enforce this Agreement. The
Company or the Bank shall reimburse the Executive for all out-of-pocket
expenses, including, without limitation, reasonable attorney’s fees, incurred
by the Executive in connection with successful enforcement by the Executive of
the obligations of the Company or the Bank to the Executive under this
Agreement. Successful enforcement shall mean the grant of an award of money or
the requirement that the Company or the Bank take some action specified by this
Agreement (i) as a result of court order; or (ii) otherwise by the Company or
the Bank following an initial failure of the Company or the Bank to pay such
money or take such action promptly after written demand therefor from the
Executive stating the reason that such money or action is or was due under this
Agreement.

     15. Adjustment of Certain Payments and Benefits.

	a.	 	Tax Indemnification. Anything in this Agreement to the
contrary notwithstanding and except as set forth below, in the event
it shall be determined that any payment, benefit or distribution
made or provided by the Company or the Bank to or for the benefit of
the Executive (whether made or provided pursuant to the terms of
this Agreement or otherwise) (each referred to herein as a
“Payment”), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the “Code”)
or any interest or penalties are incurred by the Executive with
respect to such excise tax (the excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as
the “Excise Tax”), the Executive shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that,
after payment by the Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
	 
	b.	 	Determination of Gross-Up Payment. Subject to the provisions
of Section 15(c),

10

 

	 	 	all determinations required to be made under this Section 15,
including whether and when a Gross-Up Payment is required, the
amount of such Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, shall be made by a certified
public accounting firm reasonably acceptable to the Company and the
Bank as may be designated by the Executive (the “Accounting Firm”)
which shall provide detailed supporting calculations to the
Company, the Bank and the Executive within fifteen (15) business
days of the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by the Company
and the Bank. All fees and expenses of the Accounting Firm shall
be borne solely by the Company and the Bank. Any Gross-Up Payment,
as determined pursuant to this Section 15, shall be paid by the
Company to the Executive within five business days of the later of
(i) the due date for the payment of any Excise Tax, and (ii) the
receipt of the Accounting Firm’s determination. Any determination
by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of
Section 4999 of the Code, at the time of the initial determination
by the Accounting Firm hereunder, it is possible that a Gross-Up
Payment will not have been made by the Company and the Bank which
should have been made (an “Underpayment”), consistent with the
calculations required to be made hereunder. In the event that the
Company and the Bank exhaust their remedies pursuant to Section
15(c) and the Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall
be promptly paid by the Company or the Bank to or for the benefit
of the Executive.
	 
	c.	 	Treatment of Claims. The Executive shall notify the Company
and the Bank in writing of any claim by the Internal Revenue Service
that, if successful, would require a Gross-Up Payment to be made.
Such notification shall be given as soon as practicable, but no
later than ten business days, after the Executive is informed in
writing of such claim and shall apprise the Company and the Bank of
the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior
to the expiration of the thirty (30) day period following the date
on which it gives such notice to the Company and the Bank (or any
shorter period ending on the date that payment of taxes with respect
to such claim is due). If the Company or the Bank notifies the
Executive in writing prior to the expiration of this period that it
desires to contest such claim, the Executive shall:

	i.	 	give the Company and the Bank any information
reasonably requested by the Company and the Bank relating to
such claim;
	 
	ii.	 	take such action in connection with contesting
such claim as the Company and the Bank shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect

11

 

	 	 	to such claim by an attorney reasonably selected by the
Company and the Bank;
	 
	iii.	 	cooperate with the Company and the Bank in good
faith in order to effectively contest such claim; and
	 
	iv.	 	permit the Company and the Bank to participate in
any proceedings relating to such claim; provided, however,
that the Company and the Bank shall bear and pay directly all
costs and expenses (including additional interest and
penalties) incurred in connection with such contest and
indemnity and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or related taxes, interest or
penalties imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 15(c), the Company and
the Bank shall control all proceedings taken in connection
with such contest and, at their option, may pursue or forgo
any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority with respect to such
claim and may, at their option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim
in any permissible manner. Further, the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company and the
Bank shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund,
the Company and the Bank shall advance the amount of such
payment to the Executive, on an interest-free basis (including
interest or penalties with respect thereto). Furthermore, the
Company’s and the Bank’s control of the contest shall be
limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issues
raised by the Internal Revenue Service or any other taxing
authority.

	d.	 	Adjustments to the Gross-Up Payment. If, after the receipt
by the Executive of an amount advanced by the Company pursuant to
Section 15(c), the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to the
Company’s compliance with the requirements of Section 15(c))
promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after applicable taxes). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 15(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such
claim and such denial of refund occurs prior to the expiration of
thirty (30) days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of
such advance shall offset, to the extent thereof, the amount of the
Gross-Up Payment required to be paid.

12

 

     16. Injunctive Relief. If there is a breach or threatened breach of
Section 11(g) of this Agreement, the Company or the Bank and the Executive
agree that there is no adequate remedy at law for such breach, and that the
Company and the Bank each shall be entitled to injunctive relief restraining
the Executive from such breach or threatened breach, but such relief shall not
be the exclusive remedy hereunder for such breach. The parties hereto likewise
agree that the Executive, without limitation, shall be entitled to injunctive
relief to enforce the obligations of the Company and the Bank under Section 12
of this Agreement.

     17. Successors and Assigns.

	a.	 	This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Company or the Bank
that acquires, directly or indirectly, by merger, consolidation,
purchase or otherwise, all or substantially all of the assets or
stock of the Company or the Bank.
	 
	b.	 	Since the Bank and the Company are contracting for the unique
and personal skills of the Executive, the Executive shall be
precluded from assigning or delegating his rights or duties
hereunder without first obtaining the written consent of the Bank
and the Company.

     18. No Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Executive in any
subsequent employment.

     19. Notices. All notices, requests, demands and other communications in
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch office of the United States Postal Service, by registered or
certified mail, postage prepaid, addressed to the Company and/or the Bank at
their principal business offices and to the Executive at his home address as
maintained in the records of the Company and the Bank.

     20. Joint and Several Liability; Payments by the Company and the Bank. To
the extent permitted by law, except as otherwise provided herein, the Company
and the Bank shall be jointly and severally liable for the payment of all
amounts due under this Agreement. The Company hereby agrees that it shall be
jointly and severally liable with the Bank for the payment of all amounts due
under this Agreement and shall guarantee the performance of the Bank’s
obligations hereunder, provided that the Company shall not be required by this
Agreement to pay to the Executive a salary or any bonuses or any other cash
payments, except in the event that the Bank does not fulfill its obligations to
the Executive for such payments.

     21. No Plan Created by this Agreement. The Executive, the Company and the
Bank expressly declare and agree that this Agreement was negotiated among them
and that no

13

 

provisions of this Agreement are intended to, or shall be deemed to, create any
“plan” for purposes of the Employee Retirement Income Security Act of 1974
(ERISA) or any other law or regulation, and each party expressly waives any
right to assert the contrary. Any assertion in any judicial or administrative
filing, hearing, or process that such a plan was created by this Agreement
shall be deemed a material breach of this Agreement by the party making such an
assertion.

     22. Amendments. No amendments or additions to this Agreement shall be
binding unless made in writing and signed by all of the parties, except as
otherwise specifically provided for herein.

     23. Applicable Law. Except to the extent preempted by federal law, the
laws of the State of New Jersey shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.

     24. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the remaining provisions hereof.

     25. Headings. Headings contained herein are for convenience of reference
only.

     26. Entire Agreement. This Agreement, together with any understandings or
modifications agreed to in writing by the parties, shall constitute the entire
agreement among the parties with respect to the subject matter hereof, other
than written agreements with respect to specific plans, programs or
arrangements described in Sections 5 and 6. This agreement supercedes and
replaces in its entirety any previous employment agreements between or among
the Company, the Bank and the Executive.

14

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.

	 	 	 	 	 	 	 
	Attest:	 	YARDVILLE NATIONAL BANCORP
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Patrick M. Ryan	 	 
	

	 	 	 	
	 	 
	 
	 	 	 	 	 	 
	/s/ Daniel J. O’Donnell	 	Title:  President/CEO
	

	 	 	 	 	 	 
	Daniel J. O’Donnell, Secretary
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Attest:	 	YARDVILLE NATIONAL BANK
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Patrick M. Ryan	 	 
	

	 	 	 	
	 	 
	 
	 	 	 	 	 	 
	/s/ Daniel J. O’Donnell	 	Title: President/CEO
	

	 	 	 	 	 	 
	Daniel J. O’Donnell, Secretary
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Daniel J. O’Donnell	 	/s/ Stephen R. Walker
	
	 	

	Witness, Daniel J. O’Donnell	 	Stephen R. Walker

15

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