Document:

Exhibit
10.6

 

EMPLOYMENT AGREEMENT

 

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

 

WHEREAS, the Corporation is a registered
bank holding company;

 

WHEREAS, the Bank is a subsidiary of the
Corporation;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

4.             Term of Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

(xii)          any act of fraud or misappropriation
by Executive;

 

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

 

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

 

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

 

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

 

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

 

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

 

 

compensation and employment obligations under
this Agreement shall terminate.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

5.             Employment Period
Compensation.

 

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

 

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

 

 

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

 

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

 

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

 

6.             Termination of
Employment Following Change in Control.

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

9.             Restrictive
Covenant.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

	
  If to the Executive:

  	
  Mr. David M. Diffenderffer

  
	
   

  	
  2826 Wimbledon Lane

  
	
   

  	
  Lancaster, PA 17601

  
	
   

  
	
  If to the Services Company:

  
	
   

  	
  Mr. Robert McCormack

  
	
   

  	
  President and CEO

  
	
   

  	
  SUBI Services, LLC

  
	
   

  	
  155 North 15th Street

  
	
   

  	
  Lewisburg, Pennsylvania  17837

  

 

 

	
  If to the Bank:

  
	
   

  	
  Mr. Robert McCormack

  
	
   

  	
  President and CEO

  
	
   

  	
  Sun Bank

  
	
   

  	
  155 North 15th Street

  
	
   

  	
  Lewisburg, Pennsylvania  17837

  
	
   

  	
   

  
	
  If to the Corporation:

  	
  Mr. Robert McCormack

  
	
   

  	
  President and CEO

  
	
   

  	
  Sun Bancorp, Inc.

  
	
   

  	
  155 North 15th Street

  
	
   

  	
  Lewisburg, Pennsylvania  17837

  

 

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

 

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

 

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

 

20.           Successors; Binding
Agreement.

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

[THIS
SPACE WAS INTENTIONALLY LEFT BLANK]

 

 

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

 

 

	
  ATTEST:

  	
   

  	
  SUN BANCORP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Sandra J. Miller

  	
   

  	
   

  	
  /s/ Robert J. McCormack

  	
   

  
	
   

  	
   

  	
  Robert J. McCormack, President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  SUN BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Sandra J. Miller

  	
   

  	
   

  	
  /s/ Robert J. McCormack

  	
   

  
	
   

  	
   

  	
  Robert J. McCormack, President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  SUBI SERVICES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Sandra J. Miller

  	
   

  	
   

  	
  /s/ Robert J. McCormack

  	
   

  
	
   

  	
   

  	
  Robert J. McCormack, President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Annette Sarsfield

  	
   

  	
   

  	
  /s/ David M. Diffenderffer

  	
   

  
	
   

  	
   

  	
  David M.
  DiffenderfferExhibit 10.7

 

EMPLOYMENT
AGREEMENT

 

THIS AGREEMENT is made as of the 12th day of
January, 2004, between SUN BANCORP, INC.
(“Corporation”), a Pennsylvania business corporation having a place of business
at 155 North 15th Street, Lewisburg, Pennsylvania 17837, SUNBANK (“Bank”), a Pennsylvania chartered
banking institution having a place of business at 155 North 15th
Street, Lewisburg, Pennsylvania 17837, SUBI
SERVICES, LLC (“Services Company”), a Pennsylvania limited liability
company having a place of business at 155 North 15th Street,
Lewisburg, Pennsylvania 17837 and James P.
Radick  (“Executive”), an
individual residing at 306 South 17th Street, Lewisburg, PA 17837  (collectively, the “Parties” and,
individually, sometimes a “Party”).

 

WHEREAS, the Corporation is a registered
bank holding company;

 

WHEREAS, the Bank is a subsidiary of the
Corporation;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

4.             Term of Agreement.

 

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

 

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

 

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

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

  
	
   

  	
   

  
	
  (iii)

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

  
	
   

  	
   

  
	
  (iv)

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

  
	
   

  	
   

  
	
  (v)

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

  

 

 

	
  (vi)

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

  
	
   

  	
   

  
	
  (vii)

  	
  Executive’s breach of
  fiduciary duty involving personal profit;

  
	
   

  	
   

  
	
  (viii)

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

  
	
   

  	
   

  
	
  (ix)

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

  
	
   

  	
   

  
	
  (x)

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

  
	
   

  	
   

  
	
  (xi)

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

  
	
   

  	
   

  
	
  (xii)

  	
  any act of fraud or
  misappropriation by Executive;

  
	
   

  	
   

  
	
  (xiii)

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

  
	
   

  	
   

  
	
  (xiv)

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

  
	
   

  	
   

  
	
  (xv)

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

  
	
   

  	
   

  
	
  (xvi)

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

  
	
   

  	
   

  
	
  (xvii)

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

  
	
   

  	
   

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

  

 

 

compensation and
employment obligations under this Agreement shall terminate.

 

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

 

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

 

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

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

  
	
   

  	
   

  
	
  (iii)

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

  

 

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

 

 

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

 

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

 

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

 

5.             Employment Period
Compensation.

 

(a)                                  Annual Base Salary. 
For services performed by Executive under this Agreement, Corporation
shall pay Executive an Annual Base Salary in the aggregate during the
Employment Period at the rate of One Hundred Ten Thousand dollars ($110,000)
per year, payable at the same times as salaries are payable to other executive
employees of Corporation.  Corporation
may, from time to time, increase Executive’s Annual Base Salary, and any and
all such increases shall be deemed to constitute amendments to this
Section 5(a) to reflect the increased amounts, effective as of the date
established for such increases by the Board of Directors of Corporation or any
committee of such Board in the resolutions authorizing such increases.

 

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

 

 

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

 

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

 

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

 

6.             Termination of
Employment Following Change in Control.

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

9.                                       Restrictive Covenant.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

	
  If to the Executive:

  	
  Mr. James P. Radick

  
	
   

  	
  306 S. 17th
  Street

  
	
   

  	
  Lewisburg, PA 17837

  
	
   

  
	
  If to the Services
  Company:

  
	
   

  	
  Mr. Robert McCormack

  
	
   

  	
  President and CEO

  
	
   

  	
  SUBI Services, LLC

  
	
   

  	
  155 North 15th
  Street

  
	
   

  	
  Lewisburg,
  Pennsylvania  17837

  

 

 

	
  If to the Bank:

  
	
   

  	
  Mr. Robert McCormack

  
	
   

  	
  President and CEO

  
	
   

  	
  Sun Bank

  
	
   

  	
  155 North 15th
  Street

  
	
   

  	
  Lewisburg,
  Pennsylvania  17837

  
	
   

  	
   

  
	
  If to the Corporation:

  	
  Mr. Robert McCormack

  
	
   

  	
  President and CEO

  
	
   

  	
  Sun Bancorp, Inc.

  
	
   

  	
  155 North 15th
  Street

  
	
   

  	
  Lewisburg,
  Pennsylvania  17837

  

 

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

 

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

 

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

 

20.                                 Successors; Binding
Agreement.

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

[THIS SPACE WAS INTENTIONALLY LEFT BLANK]

 

 

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

 

 

	
  ATTEST:

  	
   

  	
  SUN BANCORP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Sandra J. Miller

  	
   

  	
   

  	
  /s/ Robert J.
  McCormack

  	
   

  
	
   

  	
   

  	
  Robert J. McCormack,
  President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  SUN BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Sandra J. Miller

  	
   

  	
   

  	
  /s/ Robert J.
  McCormack

  	
   

  
	
   

  	
   

  	
  Robert J. McCormack,
  President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  SUBI SERVICES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Sandra J. Miller

  	
   

  	
   

  	
  /s/ Robert J.
  McCormack

  	
   

  
	
   

  	
   

  	
  Robert J. McCormack,
  President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Karen Gaugler

  	
   

  	
   

  	
  /s/ James P. Radick

  	
   

  
	
   

  	
   

  	
  James P. Radick

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