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EXHIBIT 10.1

EMPLOYMENT AGREEMENT

     THIS AGREEMENT is made as of the 11th day of September, 2006 between ROYAL
BANCSHARES OF PENNSYLVANIA, INC. (“Corporation”), a Pennsylvania business corporation having a
place of business at 732 Montgomery Avenue, Narberth, Pennsylvania 19072, ROYAL BANK AMERICA
(“Bank”) a state chartered bank having a place of business at 732 Montgomery Avenue, Narberth
Pennsylvania 19072, and Joseph P. Campbell (“Executive”), an individual residing at 422 Glen Arbor
Court, King of Prussia, PA 19406.

WITNESSETH:

     WHEREAS, Corporation, Bank and Executive previously entered into an employment agreement dated
August 20, 2004, for Executive to serve in the capacity of President and Chief Executive Officer of
each of Corporation and Bank;

     WHEREAS, as a result of the American Jobs Creation Act, the Corporation and Bank desire to
enter into this amended and restated Agreement; and

     WHEREAS, Executive desires to accept employment with Corporation and Bank on the terms and
conditions set forth herein.

     AGREEMENT:

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

	1.	 	Employment. Corporation and Bank hereby employ Executive and Executive hereby
accepts employment with Corporation and Bank, under the terms and conditions set forth in this
Agreement.
	 
	2.	 	Duties of Employee.  Executive shall perform and discharge well and
faithfully such duties as an executive officer of Corporation and Bank as may be assigned to
Executive from time to time by the Board of Directors of Corporation and Bank. Executive
shall be employed as President and Chief Executive Officer of Corporation and Bank, and shall
hold such other titles as may be given to him from time to time by the Board of Directors of
Corporation and Bank. Executive shall devote his full time, attention and energies to the
business of Corporation and Bank during the Employment Period (as defined in Section 3 of this
Agreement); provided, however, that this Section 2 shall not be construed as preventing
Executive from (a) engaging in activities incident or necessary to personal investments, (b)
acting as a member of the Board of Directors of any other corporation or as a member of the
Board of Trustees of any other organization or (c) being involved in any other activity with
the prior approval of the Board of Directors of Corporation and Bank. Executive shall not
engage in

 

 

	 	 	any business or commercial activities, duties or pursuits which compete with the business
or commercial activities of Corporation or Bank, nor may Executive serve as a director or
officer or in any other capacity in a company which competes with Corporation or Bank.
	 
	3.	 	Term of Agreement.

	 	(a)	 	The period of Executive’s employment under this Agreement shall be deemed to
have commenced as of August 18, 2004 and shall continue for a period of thirty-six
(36) full calendar months thereafter (the “Employment Period”). Commencing on the
date of the execution of this Agreement, the term of this Agreement shall be extended
for one day each day until such time as the Board of Directors of the Corporation or
Bank or Executive elects not to extend the term of the Agreement by giving written
notice to the other party in accordance with Section 3 of this Agreement, in which
case the term of this Agreement shall be fixed and shall end on the third anniversary
of the date of such written notice.
	 
	 	(b)	 	Notwithstanding anything herein contained to the contrary: (i) Executive’s
employment with the Corporation or Bank may be terminated by the Corporation or Bank
or Executive during the term of this Agreement, subject to the terms and conditions of
this Agreement; (ii) nothing in this Agreement shall mandate or prohibit a
continuation of Employee’s employment following the expiration of the term of the
Agreement upon such terms as the Board and Executive may mutually agree.
	 
	 	(c)	 	Notwithstanding the previous provision of Section 3(a) of this Agreement,
this Agreement shall terminate automatically for Cause (as defined herein) upon
written notice from the Board of Directors of Corporation and Bank to Executive. As
used in this Agreement, “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 for a period of sixty (60)
consecutive days or more;
	 
	 	(ii)	 	Executive’s willful failure to follow the good faith lawful
instructions of the Board of Directors of Corporation or Bank with respect to
their operations, after written notice from Corporation or Bank and a failure
to cure such violation within ten (10) days of said written notice, unless it
is apparent under the circumstances that Executive is unable to cure such
violation; or
	 
	 	(iii)	 	Executive’s willful failure to substantially perform
Executive’s duties to Corporation or Bank, other than a failure resulting from

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	 	 	 	Executive’s incapacity because of physical or mental illness, as provided
in subsection (g) of this Section 3, after written notice from Corporation
or Bank and a failure to cure such violation within ten (10) days of said
written notice, unless it is apparent under the circumstances that
Executive is unable to cure such violation, which failure results in
injury to Corporation or Bank, monetarily or otherwise.
	 
	 	(iv)	 	Executive’s intentional violation of the provisions of this
Agreement, after written notice from Corporation or Bank and a failure to cure
such violation within ten (10) days of said written notice, unless it is
apparent under the circumstances that Executive is unable to cure such
violation;
	 
	 	(v)	 	dishonesty of Executive in the performance of his duties, as
reasonably determined by a vote of seventy-five percent (75%) of the directors
of the Board of Directors;
	 
	 	(vi)	 	Executive’s removal or prohibition from being an
institutional-affiliated party by a final order of an appropriate federal
banking agency pursuant to Section 9(e) of the Federal Deposit Insurance Act
or any applicable Regulatory Agency.
	 
	 	(vii)	 	the willful engaging by Executive in misconduct injurious to
the Corporation or Bank after notice from Corporation or Bank, and a failure
to cure such conduct within twenty (20) days;
	 
	 	(viii)	 	the breach of Executive’s fiduciary duty to the Corporation or Bank
involving personal profit;
	 
	 	(ix)	 	the willful violation of (1) any material law, rule or
regulation applicable to Corporation or Bank or (2) any final cease and desist
order issued by an applicable regulatory agency;
	 
	 	(x)	 	conduct on the part of Executive that brings public discredit
to Corporation or Bank or that is clearly contrary to the best interests of
Corporation or Bank as reasonably determined by a vote of seventy-five percent
(75%) of the directors of the Board of Directors;
	 
	 	(xi)	 	unlawful harassment by Executive against employees,
customers, business associates, contractors or vendors of Corporation or Bank
as reasonably determined by seventy-five percent (75%) of the disinterested
members of the Board of Directors following an investigation of the claims by
a third party;

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	 	(xii)	 	any act of fraud or misappropriation against the
Corporation, the Bank, or their customers, employees, contractors or business
associates;
	 
	 	(xiii)	 	intentional misrepresentation of a material fact, or intentional omission of
information necessary to make the information supplied materially misleading,
in application or other information provided by Executive to Corporation or
Bank in connection with Executive’s employment with Corporation or Bank; or
	 
	 	(xiv)	 	the existence of any material conflict between the interests
of Corporation or Bank and Executive that is not disclosed in writing by
Executive to Corporation or Bank prior to action and approved in writing by
the Board of Directors, and, after notice from Corporation or Bank, a failure
to cure such conflict within twenty (20) days of said notice.

	 	(d)	 	Notwithstanding the foregoing, Executive’s employment under this Agreement
shall not be deemed to have been terminated for “Cause” under this Section 3(c) above
if such termination took place solely as a result of:

	 	(i)	 	Questionable judgment on the part of Executive;
	 
	 	(ii)	 	Any act or omission believed by Executive, in good faith, to
have been in, or not opposed to, the best interests of Corporation or Bank (or
its affiliated companies); or
	 
	 	(iii)	 	Any act or omission in respect of which a determination
could properly be made that Executive met the applicable standard of conduct
prescribed for indemnification or reimbursement or payment of expenses under
the Charter or By-laws of Corporation or Bank or the directors’ and officers’
liability insurance of Corporation or Bank, in each case as in effect at the
time of such act or omission.
	 
	 	 	 	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.

	 	(e)	 	Notwithstanding the previous provisions of Section 3 of this Agreement, this
Agreement shall terminate automatically upon Executive’s voluntary termination of
employment (other than in accordance with Section 5 of this Agreement) for Good
Reason. The term “Good Reason” shall mean (i) the assignment of duties and
responsibilities inconsistent with Executive’s status as President and Chief Executive
Officer of

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	 	 	 	Corporation or Bank, (ii) a reassignment which requires Executive to move his
principal residence, (iii) any removal of Executive from office or any adverse
change in the terms and conditions of Executive’s employment, except for any
termination of Executive’s employment under the provisions of Section 3 hereof,
(iv) any reduction in Executive’s Annual Base Salary as in effect on the date
hereof or as the same may be increased from time to time, (v) any failure of
Corporation and Bank to provide Executive with benefits at least as favorable as
those enjoyed by Executive under any of the pension, life insurance, medical,
health and accident, disability or other employee plans of Corporation and Bank, or
the taking of any action that would materially reduce any of such benefits unless
such reduction is part of a reduction applicable to all employees. If such
termination occurs for Good Reason, then Corporation and Bank shall pay Executive
an amount equal to 2.99 times Executive’s Base Amount as defined in subsection (j)
of this Section 3, and shall be subject to federal, state and local tax
withholdings. Such payment shall be paid to Executive in a lump sum. In addition,
for a period of three (3) 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 life,
disability, medical insurance and other normal health and welfare benefits in
effect with respect to Executive during the two (2) years prior to his termination
of employment, or, if Corporation and Bank 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), not to exceed One
Hundred and Twenty percent (120%) of Bank’s cost to provide such benefits to an
employee. However, in the event the payment described herein, when added to all
other amounts of benefits provided to or on behalf of Executive in connection with
termination of his employment, would result in the imposition of an excise tax
under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”),
such payments shall be retroactively (if necessary) increased to the extent
necessary to cover such excise tax imposition.
	 
	 	 	 	At the option of Executive, exercisable by Executive within ninety (90) days after
the occurrence of the event constituting “Good Reason,” Executive may resign from
employment under this Agreement by a notice in writing (the “Notice of
Termination”) delivered to Corporation and Bank and the provisions of this Section
3(e) hereof shall thereupon apply.
	 
	 	(f)	 	Executive may file with the Company an election to receive the severance
amount provided for pursuant to Section 3(e) in installments.

	 	(i)	 	If Executive elects installment payments then the severance
amount described in Section 3(e) shall be paid in thirty-six (36) equal
monthly installments beginning on the 5th anniversary of the

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	 	 	 	payment date that the lump-sum severance amount would have been paid.
	 
	 	(ii)	 	Notwithstanding anything to the contrary, Executive’s
election to receive installment payments of the severance amount pursuant to
this Section 3(f) must be made at least twelve (12) months prior to
Executive’s termination of employment. An election by Executive made within
the twelve (12) month period prior to Executive’s termination of employment
shall be null and void and the severance amount shall be paid in accordance
with Section 3(e).

	 	(g)	 	Notwithstanding the previous provisions of Section 3 of this Agreement, this
Agreement shall terminate automatically upon Executive’s Disability and Executive’s
rights under this Agreement shall cease as of the date of such termination without
further compensation due Executive.
	 
	 	(h)	 	Notwithstanding the previous provisions of Section 3 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 without further
compensation due Executive.
	 
	 	(i)	 	Executive agrees that in the event his employment under this Agreement is
terminated, unless (1) Executive maintains an ownership interest in the Corporation of
five percent (5%) or more, or (2) termination is due to retirement, Executive shall
resign as a director of Corporation and Bank, or any affiliate or subsidiary thereof,
if he is then serving as a director of any of such entities.
	 
	 	(j)	 	The term “Base Amount” shall equal the base amount as defined by 26 U.S.C.
§280G(b)(3) which generally includes all compensation for services (excluding
directors’ fees, if any) for five years prior to the year during which the Change in
Control occurs divided by five, except that the calculation of the Base Amount shall
not include any compensation resulting from director fees; or the granting, the
vesting or exercise of any stock options.

	4.	 	Employment Period Compensation.

	 	(a)	 	Annual Base Salary. For services performed by Executive under this
Agreement, Corporation and Bank shall pay Executive an Annual Base Salary during the
Employment Period at the rate of $385,000 per year, minus applicable withholdings and
deductions, payable at the same times as salaries are payable to other executive
employees of Corporation or Bank. Corporation and/or Bank may, from time to time,
increase Executive’s Annual Base Salary, and any and all such increases shall be
deemed to constitute amendments to this Section 4(a) to reflect the

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	 	 	 	increased amounts, effective as of the date established for such increases by the
Board of Directors of Corporation or Bank or any committee of such Board in the
resolutions authorizing such increases.
	 
	 	(b)	 	Bonus. For services performed by Executive under this Agreement,
Corporation and/or Bank may, from time to time, pay a bonus or bonuses (including
payments made under Bank Profit Sharing Incentive Plan) to Executive as Corporation
and/or Bank, in their sole discretion, deem appropriate. The payment of any such
bonuses shall not reduce or otherwise affect any other obligation of Corporation
and/or Bank to Executive provided for in this Agreement.
	 
	 	(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 Boards of Directors of Corporation and Bank. However, Executive
shall not be entitled to receive any additional compensation from Corporation and Bank
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 Boards
of Directors of Corporation and Bank.
	 
	 	(d)	 	Automobile. During the term of this Agreement, Corporation and Bank
shall provide Executive with an automobile or automobile allowance consistent with the
current practice at the date of signing of this agreement.
	 
	 	(e)	 	Employee Benefit Plans. During the term of this Agreement, Executive
shall be entitled to participate in or receive the benefits of any employee benefit
plan currently in effect at Corporation and Bank, subject to the terms of said plan,
until such time that the Boards of Directors of Corporation and Bank authorize a
change in such benefits. Corporation and Bank shall provide Executive with disability
coverage. Corporation and Bank shall not make any changes in such plans or benefits
which would adversely affect Executive’s rights or benefits thereunder, unless such
change occurs pursuant to a program applicable to all executive officers of
Corporation and Bank and does not result in a proportionately greater adverse change
in the rights of or benefits to Executive as compared with any other executive officer
of Corporation and Bank. Nothing paid to Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in lieu of
the salary payable to Executive pursuant to Section 4(a) hereof.
	 
	 	(f)	 	Retirement Health Benefits. Provided that Executive’s employment has
not been terminated prior to retirement, Executive shall be entitled to receive
medical insurance benefits comparable to the benefits received by full-time employees
of the bank, commencing with the later of (1) the date

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	 		 	of Executive’s retirement, or (2) the date of Executive’s 60th birthday,
and terminating on the earlier of (1) the date that Executive becomes eligible for
Medicaid, or (2) the date of Executive’s 65th birthday. If Corporation
and Bank cannot provide such benefits because Executive is no longer an employee,
Executive shall annually receive a dollar amount equal to the cost to Executive of
obtaining such benefits (or substantially equal benefits), not to exceed one
hundred and twenty percent (120%) of Bank’s cost to provide such benefits to other
employees.
	 
	 	(g)	 	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 and Bank for their executive
officers. For the purpose of this Agreement, business expenses shall include dues
paid for a country club membership, with said country club membership reimbursement
subject to an annual cap established by the Compensation Committee.

	5.	 	Termination of Employment Following Change in Control.

	 	(a)	 	If a Change in Control (as defined in Section 5(b) of this Agreement) shall
occur and, thereafter, if at any time during the term of this Agreement there shall
be:

	 	(i)	 	any involuntary termination of Executive’s employment (other
than for the reasons set forth in Section 3(c) of this Agreement;
	 
	 	(ii)	 	any reduction in Executive’s title, responsibilities,
including reporting responsibilities, or authority, including such title,
responsibilities or authority as such may be increased from time to time
during the term of this Agreement;
	 
	 	(iii)	 	the assignment to Executive of duties inconsistent with
Executive’s office on the date of the Change in Control or as the same may be
increased from time to time after the Change in Control;
	 
	 	(iv)	 	any reassignment of Executive to a location greater than
fifty (50) miles from the location of Executive’s office on the date of the
Change in Control;
	 
	 	(v)	 	any significant reduction in Executive’s compensation as
provided in Section 4 in effect on the date of the Change in Control or as the
same may be increased from time to time after the Change in Control;

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	 	(vi)	 	any failure to provide Executive with benefits at least as
favorable as those enjoyed by Executive under any of Corporation or Bank’s
retirement or pension, life insurance, medical, health and accident,
disability or other employee plans in which Executive participated at the time
of the Change in Control, or the taking of any action that would materially
reduce any of such benefits in effect at the time of the Change in Control;
	 
	 	(vii)	 	any requirement that Executive travel in performance of his
duties on behalf of Corporation or Bank for a significantly greater period of
time during any year than was required of Executive during the year preceding
the year in which the Change in Control occurred; or
	 
	 	(viii)	 	any sustained pattern of interruption or disruption of Executive for matters
substantially unrelated to Executive’s discharge of Executive’s duties on
behalf of Corporation and Bank;
	 
	 	 	 	then, at the option of Executive, exercisable by Executive within ninety
(90) days of the Change in Control and occurrence of any of the foregoing
events, Executive may resign from employment with Corporation and Bank
(or, if involuntarily terminated, 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 6 of this Agreement shall apply. In addition, notwithstanding the
payments to Executive contemplated by Section 6, if Executive is requested
by the Corporation, Bank, or a successor thereto to remain in the employ
of the Corporation, Bank, or a successor to the Corporation or Bank
following the Date of Change of Control, Executive expressly agrees,
subject to the condition set forth below, to remain in the employ of the
Corporation, Bank, or a successor to the Corporation or Bank for not less
than six months following the Date of Change of Control. The Corporation,
Bank, or successor to the Corporation or Bank shall have the right to
request Executive remain in the employ of the Corporation, Bank, or a
successor to the Corporation or Bank for a period of less than six months
following the Date of Change of Control. Executive agrees to remain an
employee of the Corporation, Bank or successor to the Corporation or Bank
pursuant to their request conditioned upon Executive being compensated in
the same amount and on the same terms as he was compensated immediately
prior to the Date of Change of Control, including participation in all
employee benefit plans to which he would otherwise be entitled.

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	 	(b)	 	As used in this Agreement, “Change in Control” shall mean the occurrence of
any of the following:

	 	(i)	 	(A) a merger, consolidation or division involving Corporation
or Bank, (B) a sale, exchange, transfer or other disposition of substantially
all of the assets of Corporation or Bank, or (C) a purchase by Corporation or
Bank of substantially all of the assets of another entity, unless (y) such
merger, consolidation, division, sale, exchange, transfer, purchase or
disposition is approved in advance by seventy percent (70%) or more of the
members of the Board of Directors of Corporation or Bank 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 the Board of Directors of such entity’s parent corporation, if
any, are former members of the Board of Directors of Corporation or Bank; or
	 
	 	(ii)	 	any “person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)), other than
Corporation or Bank or any “person” who on the date hereof is a director or
officer of Corporation or Bank is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Corporation or Bank representing twenty-five percent (25%) or
more of the combined voting power of Corporation or Bank’s then outstanding
securities; provided; however, that for the purposes of this Agreement, a
Change-in-Control shall not result from any transfer of ownership, which would
otherwise cause the transferee to be a beneficial owner (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly through any contract,
arrangement, understanding, relationship or otherwise, to a family member of
Daniel M. Tabas, who is not currently a director or an officer of the
Corporation or the Bank, of securities of the Corporation, which are solely or
jointly owned or titled in the name of Daniel M. Tabas, the estate of Daniel
M. Tabas, or any trust, proxy, power of attorney, pooling arrangement or any
other contract or arrangement or other special purpose entity in which Daniel
M. Tabas either is the grantor, settlor, or he otherwise caused to be formed;
or controls the voting rights or disposition of shares of the Corporation; or
	 
	 	(iii)	 	during the 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 or
Bank cease for any reason to constitute at least a majority thereof, unless
the election of each director who was not a director at the beginning of such
period has been approved in

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	 	 	 	advance by directors representing at least sixty-seven percent (67%) of
the directors then in office who were directors at the beginning of the
period; or
	 
	 	(iv)	 	any other change in control of Corporation and Bank similar
in effect to any of the foregoing.

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

	 	(a)	 	In the event that Executive delivers a Notice of Termination (as defined in
Section 5(a) of this Agreement) to Corporation and Bank, Executive shall be absolutely
entitled to receive the compensation and benefits set forth below:

	 	(i)	 	If, at the time of termination of Executive’s employment, a
“Change in Control” (as defined in Section 5(b)(i) of this Agreement) has also
occurred, Corporation or Bank shall pay Executive an amount equal to and no
greater than 2.99 times Executive’s Base Amount as defined in subsection (j)
of Section 3, minus applicable taxes and withholdings. Such payment shall be
paid in a lump sum. In addition, for a period of three (3) 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 life, disability, medical
insurance and other normal health and welfare benefits in effect with respect
to Executive during the two (2) years prior to his termination of employment,
or, if Corporation and Bank 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), not to exceed One
Hundred and Twenty percent (120%) of Bank’s cost to provide such benefits to
an employee. However, if the payment described herein, when added to all
other amounts or benefits provided to or on behalf of 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) increased to the extent necessary to cover such excise tax
imposition.

	 	(b)	 	Executive may file with the Company an election to receive the severance
amount provided for pursuant to Section 6(a)(i) in installments.

	 	(i)	 	If Executive elects installment payments then the severance
amount described in Section 6(a)(i) shall be paid in thirty-six (36) equal
monthly installments beginning on the 5th anniversary of the

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	 	 	 	payment date that the lump-sum severance amount would have been paid.
	 
	 	(ii)	 	Notwithstanding anything to the contrary, Executive’s
election to receive installment payments of the severance amount pursuant to
this Section 6(b) must be made at least twelve (12) months prior to
Executive’s termination of employment. An election by Executive made within
the twelve (12) month period prior to Executive’s termination of employment
shall be null and void and the severance amount shall be paid in accordance
with Section 6(a)(i).

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

	 	(a)	 	In the event that Executive’s employment is involuntarily terminated by
Corporation and/or Bank without Cause and no Change in Control shall have occurred at
the date of such termination, Corporation and Bank shall pay Executive an amount equal
to 2.99 times Executive’s Base Amount as defined in subsection (j) of this Section 3,
and shall be subject to federal, state and local tax withholdings. Such payment shall
be paid in a lump sum. In addition, for a period of three (3) 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 life, disability, medical insurance and other normal health and
welfare benefits in effect with respect to Executive during the two (2) years prior to
his termination of employment, or, if Corporation and Bank 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) not to
exceed one hundred twenty percent (120%) of Bank’s cost to provide such benefits to an
employee. However, if the payment described herein, when added to all other amounts
or benefits provided to or on behalf of 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) increased to the extent
necessary to cover such imposition.
	 
	 	(b)	 	Executive may file with the Company an election to receive the severance
amount provided for pursuant to Section 7(a) in installments.

	 	(i)	 	If Executive elects installment payments then the severance
amount described in Section 7(a) shall be paid in thirty-six (36) equal
monthly installments beginning on the 5th anniversary of the
payment date that the lump-sum severance amount would have been paid.

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	 	(ii)	 	Notwithstanding anything to the contrary, Executive’s
election to receive installment payments of the severance amount pursuant to
this Section 7(b) must be made at least twelve (12) months prior to
Executive’s termination of employment. An election by Executive made within
the twelve (12) month period prior to Executive’s termination of employment
shall be null and void and the severance amount shall be paid in accordance
with Section 7(a).

	8.	 	Payment to Key Employees. Notwithstanding anything to contrary, if Executive is a
Key Employee of the Corporation or designated as a Key Employee as such term is defined in
Section 409A(a)(2)(B)(i) of the Code, then any payment under this Agreement to be made as a
result of Executive’s termination of employment shall not be made before the date which is six
(6) months after the date of Executive’s termination of employment with the Corporation and
the Bank.
	 
	9.	 	Covenant Not to Compete.

	 	(a)	 	Executive hereby acknowledges and recognizes the highly competitive nature of
the business of Corporation and Bank 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 (including bank holding company) or
financial services industry, or (2) any other activity in which Corporation or
Bank or any of their subsidiaries are engaged during the Employment Period, in
any county in which, at any time during the Employment Period, or at the date
of termination of Executive’s employment, a branch, office or other facility
of Corporation or Bank or any of their subsidiaries 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 engage in (1) the banking (including bank holding
company) or financial services industry, or (2) any other activity in which
Corporation or Bank or any of their subsidiaries are engaged during the
Employment Period, in the Non-Competition Area; or
	 
	 	(iii)	 	solicit current and former customers of Corporation, Bank or
any Corporation subsidiary in the Non-Competition Area; or

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	 	(iv)	 	solicit current or former employees of Corporation, Bank or
any Corporation subsidiary.

	 	 	 	Notwithstanding the foregoing, Executive shall not be prohibited from making
personal investments, loans, or real estate transactions comparable to such
transactions which would have been permitted during Executive’s employment with the
Corporation or Bank.
	 
	 	(b)	 	It is expressly understood and agreed that, although Executive and
Corporation and Bank consider the restrictions contained in Section 9(a) hereof
reasonable for the purpose of preserving for Corporation and Bank and their
subsidiaries their good will and other proprietary rights, if a final judicial
determination is made by a court having jurisdiction that the time or territory or any
other restriction contained in Section 9(a) hereof is an unreasonable or otherwise
unenforceable restriction against Executive, the provisions of Section 9(a) hereof
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 the third anniversary date of the effective date of
termination of employment.
	 
	 	(d)	 	The provision of Section 10 will apply during the period of enforcement of
the Covenant not to Compete as defined in Section 9(c).
	 
	 	(e)	 	In the event that Bank breaches this Agreement, this Section 9 of the
Agreement and specifically the time periods set forth in Section 9(c) shall be voided.
	 
	 	(f)	 	Executive agrees that any breach of the restrictions set forth in this
Section will result in irreparable injury to Corporation and Bank for which they will
have no adequate remedy at law and the Corporation and Bank shall be entitled to
injunctive relief in order to enforce the provisions hereof and/or seek specific
performance and damages. Executive agrees to personal jurisdiction in the Common
Pleas Court of Montgomery County, Pennsylvania or the U.S. District Court for the
Eastern District of Pennsylvania. In the event that Corporation or Bank obtains
injunctive relief, Executive will promptly reimburse the Corporation and Bank for
reasonable attorney fees and any other costs associated with the litigation.

	10.	 	Unauthorized Disclosure. During the term of his employment hereunder, or at any
later time, Executive shall not, without the written consent of the Boards of Directors of
Corporation and Bank or a person authorized thereby, knowingly

14

 

	 	 	disclose to any person, other than an employee of Corporation or Bank or a person to whom
disclosure is reasonably necessary or appropriate in connection with the performance by
Executive of his duties as an executive of Corporation and Bank, any material confidential
information obtained by him while in the employ of Corporation and Bank with respect to any
of Corporation and Bank’s services, products, improvements, formulas, designs or styles,
processes, customers, methods of business or any business practices the disclosure of which
could be or will be damaging in Corporation or Bank; provided, however, that confidential
information shall not include any information known generally to the public (other than as
a result of unauthorized disclosure by Executive or any person with the assistance, consent
or direction of Executive) or any information of a type not otherwise considered
confidential by persons engaged in the same business of a business similar to that
conducted by Corporation and Bank or any information that must be disclosed as required by
law.
	 
	11.	 	Liability Insurance. Corporation and Bank shall use their best efforts to obtain
insurance coverage for Executive under an insurance policy covering officers and directors of
Corporation and Bank against lawsuits, arbitrations or other legal or regulatory proceedings;
however, nothing herein shall be construed to require Corporation and/or Bank to obtain such
insurance, if the Board of Directors of the Corporation and/or Bank determine that such
coverage cannot be obtained at a reasonable price.
	 
	12.	 	Notices. Except as otherwise provided in this Agreement, any notice required or
permitted to be given under this Agreement shall be deemed properly given if in writing and if
mailed by registered or certified mail, postage prepaid with return receipt requested, to
Executive’s residence, in the case of notices to Executive, and to the principal executive
offices of Corporation and Bank, in the case of notices to Corporation and Bank.
	 
	13.	 	Waiver. No provision of this Agreement many 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 Boards of Directors of Corporation and Bank.
No waiver by either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
	 
	14.	 	Assignment. This Agreement shall not be assignable by any party, except by
Corporation and Bank to any successor in interest to their respective businesses.
	 
	15.	 	Entire Agreement. This Agreement contains the entire agreement of the parties
relating to the subject matter of this Agreement.

15

 

16. 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. Failure
by Corporation and Bank to obtain such assumption and agreement prior to the
effectiveness of any such succession shall constitute a breach of this Agreement and
the provisions of Section 3 of this Agreement shall apply. As used in this Agreement,
“Corporation” and “Bank” shall mean Corporation and Bank, as defined previously and
any successor to their respective businesses and/or assets as aforesaid which assumes
and agrees to perform this Agreement by operation of law or otherwise.
	 
	 	(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.

	17.	 	Arbitration. Corporation, Bank and Executive recognize that in the event a dispute
should arise between them concerning the interpretation or implementation of this Agreement,
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 roles then in effect (“Rules”). Corporation, Bank or Executive may initiate
an arbitration proceeding at any time by giving notice to the other in accordance with the
Rules. Corporation and Bank 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

16

 

	 	 	subsequently filed litigation concerning this Agreement, except as otherwise provided
herein. In the event that Executive terminates pursuant to Section 6 herein, and any
dispute arising under or in conjunction with Executive’s termination is resolved in
Executive’s favor, whether by judgment, arbitration or settlement, Executive shall be
entitled to the reimbursement by Corporation or Bank of all reasonable legal fees paid or
incurred by Executive in resolving such dispute.
	 
	18.	 	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.
	 
	19.	 	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.
	 
	20.	 	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.

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

	 	 	 	 	 	 	 
	ATTEST:	ROYAL BANCSHARES OF PENNSYLVANIA, INC.	 	 
	 
	 	 	 	 	 	 
	/s/ George McDonough
 

	 	By
	 	/s/ Robert R. Tabas
 

	 	 
	George McDonough, Secretary	 	 	 	Robert R. Tabas, Chairman	 	 
	 
	 	 	 	 	 	 
	 	ROYAL BANK AMERICA	 	 
	 
	 	 	 	 	 	 
	/s/ George McDonough
 

	 	By
	 	/s/ Jack R. Loew
 

	 	 
	George McDonough, Secretary	 	Jack R. Loew, Chairman	 	 
	 	 	Compensation Committee	 	 
	 
	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Patricia Bilotta
 

	 	By
	 	/s/ Joseph P. Campbell
 

	 	 
	Patricia Bilotta	 	Joseph P. Campbell	 	 
	 	 	President and Chief Executive Officer, “Executive”	 	 

17exv10w2

 

Exhibit 10.2

EMPLOYMENT AGREEMENT

     THIS AGREEMENT is made as of the 22 day of September, 2006 between ROYAL BANCSHARES OF
PENNSYLVANIA, INC. (“Corporation”), a Pennsylvania business corporation having a place of business
at 732 Montgomery Avenue, Narberth, Pennsylvania 19072, ROYAL BANK AMERICA (“Bank”) a state
chartered bank having a place of business at 732 Montgomery Avenue, Narberth Pennsylvania 19072,
and James J. McSwiggan, Jr. (“Executive”), an individual residing at 211 Twinings Lane, Wayne, PA
19087.

WITNESSETH:

     WHEREAS, Corporation, Bank and Executive previously entered into an employment agreement dated
August 20, 2004, for Executive to serve in the capacity of Executive Vice President of each of
Corporation and Bank;

     WHEREAS, as a result of the American Jobs Creation Act, the Corporation and Bank desire to
enter into this amended and restated Agreement; and

     WHEREAS, Executive desires to accept employment with Corporation and Bank on the terms and
conditions set forth herein.

     AGREEMENT:

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

	1.	 	Employment. Corporation and Bank hereby employ Executive and Executive hereby
accepts employment with Corporation and Bank, under the terms and conditions set forth in this
Agreement.
	 
	2.	 	Duties of Employee. Executive shall perform and discharge well and
faithfully such duties as an executive officer of Corporation and Bank as may be assigned to
Executive from time to time by the Board of Directors of Corporation and Bank. Executive
shall be employed as Chief Operating Officer of Corporation and Bank, and shall hold such
other titles as may be given to him from time to time by the Board of Directors of Corporation
and Bank. Executive shall devote his full time, attention and energies to the business of
Corporation and Bank during the Employment Period (as defined in Section 3 of this Agreement);
provided, however, that this Section 2 shall not be construed as preventing Executive from (a)
engaging in activities incident or necessary to personal investments, (b) acting as a member
of the Board of Directors of any other corporation or as a member of the Board of Trustees of
any other organization or (c) being involved in any other

 

 

	 	 	activity with the prior approval of the Board of Directors of Corporation and Bank.
Executive shall not engage in any business or commercial activities, duties or pursuits
which compete with the business or commercial activities of Corporation or Bank, nor may
Executive serve as a director or officer or in any other capacity in a company which
competes with Corporation or Bank.
	 
	3.	 	Term of Agreement.

	 	(a)	 	The period of Executive’s employment under this Agreement shall be deemed to
have commenced as of August 18, 2004 and shall continue for a period of thirty-six
(36) full calendar months thereafter (the “Employment Period”). Commencing on the
date of the execution of this Agreement, the term of this Agreement shall be extended
for one day each day until such time as the Board of Directors of the Corporation or
Bank or Executive elects not to extend the term of the Agreement by giving written
notice to the other party in accordance with Section 3 of this Agreement, in which
case the term of this Agreement shall be fixed and shall end on the third anniversary
of the date of such written notice.
	 
	 	(b)	 	Notwithstanding anything herein contained to the contrary: (i) Executive’s
employment with the Corporation or Bank may be terminated by the Corporation or Bank
or Executive during the term of this Agreement, subject to the terms and conditions of
this Agreement; (ii) nothing in this Agreement shall mandate or prohibit a
continuation of Employee’s employment following the expiration of the term of the
Agreement upon such terms as the Board and Executive may mutually agree.
	 
	 	(c)	 	Notwithstanding the previous provision of Section 3(a) of this Agreement,
this Agreement shall terminate automatically for Cause (as defined herein) upon
written notice from the Board of Directors of Corporation and Bank to Executive. As
used in this Agreement, “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 for a period of sixty (60)
consecutive days or more;
	 
	 	(ii)	 	Executive’s willful failure to follow the good faith lawful
instructions of the Board of Directors of Corporation or Bank with respect to
their operations, after written notice from Corporation or Bank and a failure
to cure such violation within ten (10) days of said written notice, unless it
is apparent under the circumstances that Executive is unable to cure such
violation; or

2

 

	 	(iii)	 	Executive’s willful failure to substantially perform
Executive’s duties to Corporation or Bank, other than a failure resulting from
Executive’s incapacity because of physical or mental illness, as provided in
subsection (g) of this Section 3, after written notice from Corporation or
Bank and a failure to cure such violation within ten (10) days of said written
notice, unless it is apparent under the circumstances that Executive is unable
to cure such violation, which failure results in injury to Corporation or
Bank, monetarily or otherwise.
	 
	 	(iv)	 	Executive’s intentional violation of the provisions of this
Agreement, after written notice from Corporation or Bank and a failure to cure
such violation within ten (10) days of said written notice, unless it is
apparent under the circumstances that Executive is unable to cure such
violation;
	 
	 	(v)	 	dishonesty of Executive in the performance of his duties, as
reasonably determined by a vote of seventy-five percent (75%) of the directors
of the Board of Directors;
	 
	 	(vi)	 	Executive’s removal or prohibition from being an
institutional-affiliated party by a final order of an appropriate federal
banking agency pursuant to Section 9(e) of the Federal Deposit Insurance Act
or any applicable Regulatory Agency.
	 
	 	(vii)	 	the willful engaging by Executive in misconduct injurious to
the Corporation or Bank after notice from Corporation or Bank, and a failure
to cure such conduct within twenty (20) days;
	 
	 	(viii)	 	the breach of Executive’s fiduciary duty to the Corporation or Bank
involving personal profit;
	 
	 	(ix)	 	the willful violation of (1) any material law, rule or
regulation applicable to Corporation or Bank or (2) any final cease and desist
order issued by an applicable regulatory agency;
	 
	 	(x)	 	conduct on the part of Executive that brings public discredit
to Corporation or Bank or that is clearly contrary to the best interests of
Corporation or Bank as reasonably determined by a vote of seventy-five percent
(75%) of the directors of the Board of Directors;
	 
	 	(xi)	 	unlawful harassment by Executive against employees,
customers, business associates, contractors or vendors of Corporation or Bank
as reasonably determined by seventy-five percent (75%) of the

3

 

	 	 	 	disinterested members of the Board of Directors following an investigation
of the claims by a third party;
	 
	 	(xii)	 	any act of fraud or misappropriation against the
Corporation, the Bank, or their customers, employees, contractors or business
associates;
	 
	 	(xiii)	 	intentional misrepresentation of a material fact, or intentional omission of
information necessary to make the information supplied materially misleading,
in application or other information provided by Executive to Corporation or
Bank in connection with Executive’s employment with Corporation or Bank; or
	 
	 	(xiv)	 	the existence of any material conflict between the interests
of Corporation or Bank and Executive that is not disclosed in writing by
Executive to Corporation or Bank prior to action and approved in writing by
the Board of Directors, and, after notice from Corporation or Bank, a failure
to cure such conflict within twenty (20) days of said notice.

	 	(d)	 	Notwithstanding the foregoing, Executive’s employment under this Agreement
shall not be deemed to have been terminated for “Cause” under this Section 3(c) above
if such termination took place solely as a result of:

	 	(i)	 	Questionable judgment on the part of Executive;
	 
	 	(ii)	 	Any act or omission believed by Executive, in good faith, to
have been in, or not opposed to, the best interests of Corporation or Bank (or
its affiliated companies); or
	 
	 	(iii)	 	Any act or omission in respect of which a determination
could properly be made that Executive met the applicable standard of conduct
prescribed for indemnification or reimbursement or payment of expenses under
the Charter or By-laws of Corporation or Bank or the directors’ and officers’
liability insurance of Corporation or Bank, in each case as in effect at the
time of such act or omission.
	 
	 	 	 	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.

	 	(e)	 	Notwithstanding the previous provisions of Section 3 of this Agreement, this
Agreement shall terminate automatically upon Executive’s voluntary termination of
employment (other than in accordance with Section 5 of

4

 

	 	 	 	this Agreement) for Good Reason. The term “Good Reason” shall mean (i) the
assignment of duties and responsibilities inconsistent with Executive’s status as
Chief Operating Officer of Corporation or Bank, (ii) a reassignment which requires
Executive to move his principal residence, (iii) any removal of Executive from
office or any adverse change in the terms and conditions of Executive’s employment,
except for any termination of Executive’s employment under the provisions of
Section 3 hereof, (iv) any reduction in Executive’s Annual Base Salary as in effect
on the date hereof or as the same may be increased from time to time, (v) any
failure of Corporation and Bank to provide Executive with benefits at least as
favorable as those enjoyed by Executive under any of the pension, life insurance,
medical, health and accident, disability or other employee plans of Corporation and
Bank, or the taking of any action that would materially reduce any of such benefits
unless such reduction is part of a reduction applicable to all employees. If such
termination occurs for Good Reason, then Corporation and Bank shall pay Executive
an amount equal to 2.99 times Executive’s Base Amount as defined in subsection (j)
of this Section 3, and shall be subject to federal, state and local tax
withholdings. Such payment shall be paid to Executive in a lump sum. In addition,
for a period of three (3) 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 life,
disability, medical insurance and other normal health and welfare benefits in
effect with respect to Executive during the two (2) years prior to his termination
of employment, or, if Corporation and Bank 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), not to exceed One
Hundred and Twenty percent (120%) of Bank’s cost to provide such benefits to an
employee. However, in the event the payment described herein, when added to all
other amounts of benefits provided to or on behalf of Executive in connection with
termination of his employment, would result in the imposition of an excise tax
under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”),
such payments shall be retroactively (if necessary) increased to the extent
necessary to cover such excise tax imposition.
	 
	 	 	 	At the option of Executive, exercisable by Executive within ninety (90) days after
the occurrence of the event constituting “Good Reason,” Executive may resign from
employment under this Agreement by a notice in writing (the “Notice of
Termination”) delivered to Corporation and Bank and the provisions of this Section
3(e) hereof shall thereupon apply.
	 
	 	(f)	 	Executive may file with the Company an election to receive the severance
amount provided for pursuant to Section 3(e) in installments.

5

 

	 	(i)	 	If Executive elects installment payments then the severance
amount described in Section 3(e) shall be paid in thirty-six (36) equal
monthly installments beginning on the 5th anniversary of the
payment date that the lump-sum severance amount would have been paid.
	 
	 	(ii)	 	Notwithstanding anything to the contrary, Executive’s
election to receive installment payments of the severance amount pursuant to
this Section 3(f) must be made at least twelve (12) months prior to
Executive’s termination of employment. An election by Executive made within
the twelve (12) month period prior to Executive’s termination of employment
shall be null and void and the severance amount shall be paid in accordance
with Section 3(e).

	 	(g)	 	Notwithstanding the previous provisions of Section 3 of this Agreement, this
Agreement shall terminate automatically upon Executive’s Disability and Executive’s
rights under this Agreement shall cease as of the date of such termination without
further compensation due Executive.
	 
	 	(h)	 	Notwithstanding the previous provisions of Section 3 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 without further
compensation due Executive.
	 
	 	(i)	 	Executive agrees that in the event his employment under this Agreement is
terminated, unless (1) Executive maintains an ownership interest in the Corporation of
five percent (5%) or more, or (2) termination is due to retirement, Executive shall
resign as a director of Corporation and Bank, or any affiliate or subsidiary thereof,
if he is then serving as a director of any of such entities.
	 
	 	(j)	 	The term “Base Amount” shall equal the base amount as defined by 26 U.S.C.
§280G(b)(3) which generally includes all compensation for services (excluding
directors’ fees, if any) for five years prior to the year during which the Change in
Control occurs divided by five, except that the calculation of the Base Amount shall
not include any compensation resulting from director fees; or the granting, the
vesting or exercise of any stock options.

	4.	 	Employment Period Compensation.

	 	(a)	 	Annual Base Salary. For services performed by Executive under this
Agreement, Corporation and Bank shall pay Executive an Annual Base Salary during the
Employment Period at the rate of $245,000 per year, minus applicable withholdings and
deductions, payable at the same times as salaries are payable to other executive
employees of Corporation or

6

 

	 	 	 	Bank. Corporation and/or Bank may, from time to time, increase Executive’s Annual
Base Salary, and any and all such increases shall be deemed to constitute
amendments to this Section 4(a) to reflect the increased amounts, effective as of
the date established for such increases by the Board of Directors of Corporation or
Bank or any committee of such Board in the resolutions authorizing such increases.
	 
	 	(b)	 	Bonus. For services performed by Executive under this Agreement,
Corporation and/or Bank may, from time to time, pay a bonus or bonuses (including
payments made under Bank Profit Sharing Incentive Plan) to Executive as Corporation
and/or Bank, in their sole discretion, deem appropriate. The payment of any such
bonuses shall not reduce or otherwise affect any other obligation of Corporation
and/or Bank to Executive provided for in this Agreement.
	 
	 	(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 Boards of Directors of Corporation and Bank. However, Executive
shall not be entitled to receive any additional compensation from Corporation and Bank
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 Boards
of Directors of Corporation and Bank.
	 
	 	(d)	 	Automobile. During the term of this Agreement, Corporation and Bank
shall provide Executive with an automobile or automobile allowance consistent with the
current practice at the date of signing of this agreement.
	 
	 	(e)	 	Employee Benefit Plans. During the term of this Agreement, Executive
shall be entitled to participate in or receive the benefits of any employee benefit
plan currently in effect at Corporation and Bank, subject to the terms of said plan,
until such time that the Boards of Directors of Corporation and Bank authorize a
change in such benefits. Corporation and Bank shall provide Executive with disability
coverage. Corporation and Bank shall not make any changes in such plans or benefits
which would adversely affect Executive’s rights or benefits thereunder, unless such
change occurs pursuant to a program applicable to all executive officers of
Corporation and Bank and does not result in a proportionately greater adverse change
in the rights of or benefits to Executive as compared with any other executive officer
of Corporation and Bank. Nothing paid to Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in lieu of
the salary payable to Executive pursuant to Section 4(a) hereof.

7

 

	 	(f)	 	Retirement Health Benefits. Provided that Executive’s employment has
not been terminated prior to retirement, Executive shall be entitled to receive
medical insurance benefits comparable to the benefits received by full-time employees
of the bank, commencing with the later of (1) the date of Executive’s retirement, or
(2) the date of Executive’s 60th birthday, and terminating on the earlier
of (1) the date that Executive becomes eligible for Medicaid, or (2) the date of
Executive’s 65th birthday. If Corporation and Bank cannot provide such
benefits because Executive is no longer an employee, Executive shall annually receive
a dollar amount equal to the cost to Executive of obtaining such benefits (or
substantially equal benefits), not to exceed one hundred and twenty percent (120%) of
Bank’s cost to provide such benefits to other employees.
	 
	 	(g)	 	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 and Bank for their executive
officers. For the purpose of this Agreement, business expenses shall include dues
paid for a country club membership, with said country club membership reimbursement
subject to an annual cap established by the Compensation Committee.

	5.	 	Termination of Employment Following Change in Control.

	 	(a)	 	If a Change in Control (as defined in Section 5(b) of this Agreement) shall
occur and, thereafter, if at any time during the term of this Agreement there shall
be:

	 	(i)	 	any involuntary termination of Executive’s employment (other
than for the reasons set forth in Section 3(c) of this Agreement;
	 
	 	(ii)	 	any reduction in Executive’s title, responsibilities,
including reporting responsibilities, or authority, including such title,
responsibilities or authority as such may be increased from time to time
during the term of this Agreement;
	 
	 	(iii)	 	the assignment to Executive of duties inconsistent with
Executive’s office on the date of the Change in Control or as the same may be
increased from time to time after the Change in Control;
	 
	 	(iv)	 	any reassignment of Executive to a location greater than
fifty (50) miles from the location of Executive’s office on the date of the
Change in Control;
	 
	 	(v)	 	any significant reduction in Executive’s compensation as
provided in Section 4 in effect on the date of the Change in Control or as the

8

 

	 	 	 	same may be increased from time to time after the Change in Control;
	 
	 	(vi)	 	any failure to provide Executive with benefits at least as
favorable as those enjoyed by Executive under any of Corporation or Bank’s
retirement or pension, life insurance, medical, health and accident,
disability or other employee plans in which Executive participated at the time
of the Change in Control, or the taking of any action that would materially
reduce any of such benefits in effect at the time of the Change in Control;
	 
	 	(vii)	 	any requirement that Executive travel in performance of his
duties on behalf of Corporation or Bank for a significantly greater period of
time during any year than was required of Executive during the year preceding
the year in which the Change in Control occurred; or
	 
	 	(viii)	 	any sustained pattern of interruption or disruption of Executive for matters
substantially unrelated to Executive’s discharge of Executive’s duties on
behalf of Corporation and Bank;
	 
	 	 	 	then, at the option of Executive, exercisable by Executive within ninety
(90) days of the Change in Control and occurrence of any of the foregoing
events, Executive may resign from employment with Corporation and Bank
(or, if involuntarily terminated, 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 6 of this Agreement shall apply. In addition, notwithstanding the
payments to Executive contemplated by Section 6, if Executive is requested
by the Corporation, Bank, or a successor thereto to remain in the employ
of the Corporation, Bank, or a successor to the Corporation or Bank
following the Date of Change of Control, Executive expressly agrees,
subject to the condition set forth below, to remain in the employ of the
Corporation, Bank, or a successor to the Corporation or Bank for not less
than six months following the Date of Change of Control. The Corporation,
Bank, or successor to the Corporation or Bank shall have the right to
request Executive remain in the employ of the Corporation, Bank, or a
successor to the Corporation or Bank for a period of less than six months
following the Date of Change of Control. Executive agrees to remain an
employee of the Corporation, Bank or successor to the Corporation or Bank
pursuant to their request conditioned upon Executive being compensated in
the same amount and on the same terms as he was compensated immediately
prior to the Date of Change of Control, including participation in

9

 

	 	 	 	all employee benefit plans to which he would otherwise be entitled.

	 	(b)	 	As used in this Agreement, “Change in Control” shall mean the occurrence of
any of the following:

	 	(i)	 	(A) a merger, consolidation or division involving Corporation
or Bank, (B) a sale, exchange, transfer or other disposition of substantially
all of the assets of Corporation or Bank, or (C) a purchase by Corporation or
Bank of substantially all of the assets of another entity, unless (y) such
merger, consolidation, division, sale, exchange, transfer, purchase or
disposition is approved in advance by seventy percent (70%) or more of the
members of the Board of Directors of Corporation or Bank 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 the Board of Directors of such entity’s parent corporation, if
any, are former members of the Board of Directors of Corporation or Bank; or
	 
	 	(ii)	 	any “person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)), other than
Corporation or Bank or any “person” who on the date hereof is a director or
officer of Corporation or Bank is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Corporation or Bank representing twenty-five percent (25%) or
more of the combined voting power of Corporation or Bank’s then outstanding
securities; provided; however, that for the purposes of this Agreement, a
Change-in-Control shall not result from any transfer of ownership, which would
otherwise cause the transferee to be a beneficial owner (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly through any contract,
arrangement, understanding, relationship or otherwise, to a family member of
Daniel M. Tabas, who is not currently a director or an officer of the
Corporation or the Bank, of securities of the Corporation, which are solely or
jointly owned or titled in the name of Daniel M. Tabas, the estate of Daniel
M. Tabas, or any trust, proxy, power of attorney, pooling arrangement or any
other contract or arrangement or other special purpose entity in which Daniel
M. Tabas either is the grantor, settlor, or he otherwise caused to be formed;
or controls the voting rights or disposition of shares of the Corporation; or
	 
	 	(iii)	 	during the 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

10

 

	 	 	 	Corporation or Bank cease for any reason to constitute at least a majority
thereof, unless the election of each director who was not a director at
the beginning of such period has been approved in advance by directors
representing at least sixty-seven percent (67%) of the directors then in
office who were directors at the beginning of the period; or
	 
	 	(iv)	 	any other change in control of Corporation and Bank similar
in effect to any of the foregoing.

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

	 	(a)	 	In the event that Executive delivers a Notice of Termination (as defined in
Section 5(a) of this Agreement) to Corporation and Bank, Executive shall be absolutely
entitled to receive the compensation and benefits set forth below:

	 	(i)	 	If, at the time of termination of Executive’s employment, a
“Change in Control” (as defined in Section 5(b)(i) of this Agreement) has also
occurred, Corporation or Bank shall pay Executive an amount equal to and no
greater than 2.99 times Executive’s Base Amount as defined in subsection (j)
of Section 3, minus applicable taxes and withholdings. Such payment shall be
paid in a lump sum. In addition, for a period of three (3) 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 life, disability, medical
insurance and other normal health and welfare benefits in effect with respect
to Executive during the two (2) years prior to his termination of employment,
or, if Corporation and Bank 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), not to exceed One
Hundred and Twenty percent (120%) of Bank’s cost to provide such benefits to
an employee. However, if the payment described herein, when added to all
other amounts or benefits provided to or on behalf of 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) increased to the extent necessary to cover such excise tax
imposition.

	 	(b)	 	Executive may file with the Company an election to receive the severance
amount provided for pursuant to Section 6(a)(i) in installments.

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	 	(i)	 	If Executive elects installment payments then the severance
amount described in Section 6(a)(i) shall be paid in thirty-six (36) equal
monthly installments beginning on the 5th anniversary of the
payment date that the lump-sum severance amount would have been paid.
	 
	 	(ii)	 	Notwithstanding anything to the contrary, Executive’s
election to receive installment payments of the severance amount pursuant to
this Section 6(b) must be made at least twelve (12) months prior to
Executive’s termination of employment. An election by Executive made within
the twelve (12) month period prior to Executive’s termination of employment
shall be null and void and the severance amount shall be paid in accordance
with Section 6(a)(i).

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

	 	(a)	 	In the event that Executive’s employment is involuntarily terminated by
Corporation and/or Bank without Cause and no Change in Control shall have occurred at
the date of such termination, Corporation and Bank shall pay Executive an amount equal
to 2.99 times Executive’s Base Amount as defined in subsection (j) of this Section 3,
and shall be subject to federal, state and local tax withholdings. Such payment shall
be paid in a lump sum. In addition, for a period of three (3) 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 life, disability, medical insurance and other normal health and
welfare benefits in effect with respect to Executive during the two (2) years prior to
his termination of employment, or, if Corporation and Bank 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) not to
exceed one hundred twenty percent (120%) of Bank’s cost to provide such benefits to an
employee. However, if the payment described herein, when added to all other amounts
or benefits provided to or on behalf of 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) increased to the extent
necessary to cover such imposition.
	 
	 	(b)	 	Executive may file with the Company an election to receive the severance
amount provided for pursuant to Section 7(a) in installments.

	 	(i)	 	If Executive elects installment payments then the severance
amount described in Section 7(a) shall be paid in thirty-six (36) equal
monthly installments beginning on the 5th anniversary of the

12

 

	 	 	 	payment date that the lump-sum severance amount would have been paid.
	 
	 	(ii)	 	Notwithstanding anything to the contrary, Executive’s
election to receive installment payments of the severance amount pursuant to
this Section 7(b) must be made at least twelve (12) months prior to
Executive’s termination of employment. An election by Executive made within
the twelve (12) month period prior to Executive’s termination of employment
shall be null and void and the severance amount shall be paid in accordance
with Section 7(a).

	8.	 	Payment to Key Employees. Notwithstanding anything to contrary, if Executive is a
Key Employee of the Corporation or designated as a Key Employee as such term is defined in
Section 409A(a)(2)(B)(i) of the Code, then any payment under this Agreement to be made as a
result of Executive’s termination of employment shall not be made before the date which is six
(6) months after the date of Executive’s termination of employment with the Corporation and
the Bank.
	 
	9.	 	Covenant Not to Compete.

	 	(a)	 	Executive hereby acknowledges and recognizes the highly competitive nature of
the business of Corporation and Bank 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 (including bank holding company) or
financial services industry, or (2) any other activity in which Corporation or
Bank or any of their subsidiaries are engaged during the Employment Period, in
any county in which, at any time during the Employment Period or at the date
of termination of Executive’s employment, a branch, office or other facility
of Corporation or Bank or any of their subsidiaries 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 engage in (1) the banking (including bank holding
company) or financial services industry, or (2) any other activity in which
Corporation or Bank or any of their subsidiaries are engaged during the
Employment Period, in the Non-Competition Area; or

13

 

	 	(iii)	 	solicit current and former customers of Corporation, Bank or
any Corporation subsidiary in the Non-Competition Area; or
	 
	 	(iv)	 	solicit current or former employees of Corporation, Bank or
any Corporation subsidiary.

	 	 	 	Notwithstanding the foregoing, Executive shall not be prohibited from making
personal investments, loans, or real estate transactions comparable to such
transactions which would have been permitted during Executive’s employment with the
Corporation or Bank.
	 
	 	(b)	 	It is expressly understood and agreed that, although Executive and
Corporation and Bank consider the restrictions contained in Section 9(a) hereof
reasonable for the purpose of preserving for Corporation and Bank and their
subsidiaries their good will and other proprietary rights, if a final judicial
determination is made by a court having jurisdiction that the time or territory or any
other restriction contained in Section 9(a) hereof is an unreasonable or otherwise
unenforceable restriction against Executive, the provisions of Section 9(a) hereof
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 the third anniversary date of the effective date of
termination of employment.
	 
	 	(d)	 	The provision of Section 10 will apply during the period of enforcement of
the Covenant not to Compete as defined in Section 9(c).
	 
	 	(e)	 	In the event that Bank breaches this Agreement, this Section 9 of the
Agreement and specifically the time periods set forth in Section 9(c) shall be voided.
	 
	 	(f)	 	Executive agrees that any breach of the restrictions set forth in this
Section will result in irreparable injury to Corporation and Bank for which they will
have no adequate remedy at law and the Corporation and Bank shall be entitled to
injunctive relief in order to enforce the provisions hereof and/or seek specific
performance and damages. Executive agrees to personal jurisdiction in the Common
Pleas Court of Montgomery County, Pennsylvania or the U.S. District Court for the
Eastern District of Pennsylvania. In the event that Corporation or Bank obtains
injunctive relief, Executive will promptly reimburse the Corporation and Bank for
reasonable attorney fees and any other costs associated with the litigation.

14

 

	10.	 	Unauthorized Disclosure. During the term of his employment hereunder, or at any
later time, Executive shall not, without the written consent of the Boards of Directors of
Corporation and Bank or a person authorized thereby, knowingly disclose to any person, other
than an employee of Corporation or Bank or a person to whom disclosure is reasonably necessary
or appropriate in connection with the performance by Executive of his duties as an executive
of Corporation and Bank, any material confidential information obtained by him while in the
employ of Corporation and Bank with respect to any of Corporation and Bank’s services,
products, improvements, formulas, designs or styles, processes, customers, methods of business
or any business practices the disclosure of which could be or will be damaging in Corporation
or Bank; provided, however, that confidential information shall not include any information
known generally to the public (other than as a result of unauthorized disclosure by Executive
or any person with the assistance, consent or direction of Executive) or any information of a
type not otherwise considered confidential by persons engaged in the same business of a
business similar to that conducted by Corporation and Bank or any information that must be
disclosed as required by law.
	 
	11.	 	Liability Insurance. Corporation and Bank shall use their best efforts to obtain
insurance coverage for Executive under an insurance policy covering officers and directors of
Corporation and Bank against lawsuits, arbitrations or other legal or regulatory proceedings;
however, nothing herein shall be construed to require Corporation and/or Bank to obtain such
insurance, if the Board of Directors of the Corporation and/or Bank determine that such
coverage cannot be obtained at a reasonable price.
	 
	12.	 	Notices. Except as otherwise provided in this Agreement, any notice required or
permitted to be given under this Agreement shall be deemed properly given if in writing and if
mailed by registered or certified mail, postage prepaid with return receipt requested, to
Executive’s residence, in the case of notices to Executive, and to the principal executive
offices of Corporation and Bank, in the case of notices to Corporation and Bank.
	 
	13.	 	Waiver. No provision of this Agreement many 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 Boards of Directors of Corporation and Bank.
No waiver by either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
	 
	14.	 	Assignment. This Agreement shall not be assignable by any party, except by
Corporation and Bank to any successor in interest to their respective businesses.
	 
	15.	 	Entire Agreement. This Agreement contains the entire agreement of the parties
relating to the subject matter of this Agreement.

15

 

	16.	 	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. Failure
by Corporation and Bank to obtain such assumption and agreement prior to the
effectiveness of any such succession shall constitute a breach of this Agreement and
the provisions of Section 3 of this Agreement shall apply. As used in this Agreement,
“Corporation” and “Bank” shall mean Corporation and Bank, as defined previously and
any successor to their respective businesses and/or assets as aforesaid which assumes
and agrees to perform this Agreement by operation of law or otherwise.
	 
	 	(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.

	17.	 	Arbitration. Corporation, Bank and Executive recognize that in the event a dispute
should arise between them concerning the interpretation or implementation of this Agreement,
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 roles then in effect (“Rules”). Corporation, Bank or Executive may initiate
an arbitration proceeding at any time by giving notice to the other in accordance with the
Rules. Corporation and Bank 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

16

 

	 	 	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. In the event
that Executive terminates pursuant to Section 6 herein, and any dispute arising under or in
conjunction with Executive’s termination is resolved in Executive’s favor, whether by
judgment, arbitration or settlement, Executive shall be entitled to the reimbursement by
Corporation or Bank of all reasonable legal fees paid or incurred by Executive in resolving
such dispute.
	 
	18.	 	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.
	 
	19.	 	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.
	 
	20.	 	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.

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

	 	 	 	 	 	 	 
	ATTEST:	 	ROYAL BANCSHARES OF PENNSYLVANIA, INC.	 	 
	 
	 	 	 	 	 	 
	/s/ George McDonough
 

	 	By
	 	/s/ Robert R. Tabas
 

	 	 
	George McDonough, Secretary	 	 	 	Robert R. Tabas, Chairman	 	 
	 
	 	 	 	 	 	 
	 	 	ROYAL BANK AMERICA	 	 
	 
	 	 	 	 	 	 
	/s/ George McDonough
 

	 	By
	 	/s/ Joseph P. Campbell
 

	 	 
	George McDonough, Secretary	 	 	 	Joseph P. Campbell, President and CEO	 	 
	 
	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Patricia Bilotta	 	/s/ James J. McSwiggan	 	 
	 	 	 	 	 
	Patricia Bilotta	 	James J. McSwiggan	 	 
	 	 	Chief Executive Officer, “Executive”	 	 

17

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