Document:

exv10w32

 

Exhibit 10.32

INCENTIVE RETENTION AGREEMENT

     Transmeta Corporation, a Delaware corporation (the “Company”), and John O’Hara Horsley
(“Employee”) have entered into this Incentive Retention Agreement (this
“Agreement”), dated as of February 27, 2007 (the “Effective Date”), on the basis of
the following facts:

R E C I T A L S

     WHEREAS, the Company has filed on October 11, 2006 (the “Filing Date”) a lawsuit against Intel
Corporation (“Intel”) in the United States District Court for the District of Delaware for
infringement of ten of the Company’s U.S. patents covering computer architecture and power
efficiency technologies. That action, including any additional claims and counterclaims asserted
therein or in any related case or action between Transmeta and Intel, is referred to herein as the
“Lawsuit”. For purposes of this Agreement, the “Company” means the Company or the
successor-in-interest, if any, to materially all of the Company’s rights in the Lawsuit.

     WHEREAS, Employee has substantial knowledge regarding the claims and matters at issue in the
Lawsuit as well as substantial professional expertise in the litigation of complex patent and
intellectual property claims such as those at issue in the Lawsuit.

     WHEREAS, in lieu of hiring legal counsel to manage the Lawsuit on a contingency basis, the
Company wishes to provide Employee incentives to continue to manage the Lawsuit on behalf of the
Company to a final determination or resolution.

     WHEREAS, it is typical to pay legal counsel, hired on a contingency basis, approximately 25%
to 40% of the amount of the judgment received by the legal counsel’s client in the related lawsuit.
Accordingly, the Potential Incentive Amount (defined below) payable to Employee is calculated
based on 25% of the net cash value received by the Company resulting from the Lawsuit, less out of
pocket costs and attorneys’ fees paid by the Company respecting the Lawsuit. The resulting amount
(the “Savings”) is then divided by four to derive the Potential Incentive Amount, as more fully
described below.

     WHEREAS, the Company and Employee desire to enter into this Agreement in consideration of
Employee’s continued employment with the Company upon the terms and conditions hereinafter
provided.

AGREEMENT

     NOW, THEREFORE, the parties hereto agree as follows:

     1.     Definitions.

     (a)     “Potential Incentive Amount” means the difference of (A) one-fourth of the Savings
minus (B) the Advance Payments. If the calculation of the Potential Incentive Amount results in a
negative number, then the Potential Incentive Amount equals zero.

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     (b)     “Cause” means: (i) a good faith determination by the Board of Directors of the
Company or the Company’s chief executive officer that Employee willfully failed to follow the
lawful written directions of the Board of Directors or the Company’s chief executive officer to the
material detriment of the Company; or (ii) engagement in gross misconduct that is materially
detrimental to the Company; or (iii) willful and repeated failure or refusal to comply in any
material respect with the Company’s proprietary information, inventions assignment and
confidentiality agreement, or any other policies of the Company applicable to Employee where
non-compliance would be materially detrimental to the Company, including the Company’s insider
trading policy; or (iv) conviction of, or plea of guilty to, a felony that the Company’s Board of
Directors or chief executive officer reasonably believes would reflect adversely on the Company.

     (c)     “Company Amount” means the sum of the present value (using a discount rate equal
to the lesser of the Company’s cost of capital on the Determination Date and 8%) on the
Determination Date of either (i) each payment made, or to be made, in cash to the Company by Intel
and its affiliates as a direct result of the final, non-appealable judgment resolving all claims
and counterclaims in the Lawsuit or (ii) if the Company and Intel instead enter into a settlement
resolving all claims and counterclaims made in the Lawsuit, then the amount paid to the Company by
Intel and its affiliates in cash pursuant to that settlement.

     (d)     “Determination Date” means the date of the final, non-appealable judgment
resolving all claims and counterclaims in the Lawsuit or, if the Company and Intel instead enter
into a settlement resolving all claims and counterclaims made in the Lawsuit, then the effective
date of that settlement.

     (e)     “Disability” means that Employee has been unable to perform with reasonable accommodation
his duties under this Agreement as the result of his incapacity due to physical or mental illness,
and such inability, at least 16 weeks after its commencement, is determined to be permanent by a
physician selected by the Company or its insurers and acceptable to Employee and his legal
representative, such agreement as to acceptability not to be unreasonably withheld.

     (f)     “Good
Reason” means the occurrence of any of the following conditions without Employee’s
informed written consent, which condition remains in effect ten (10) days after written notice to
the Company from Employee of such condition: (a) a significant diminution by the Company in
Employee’s authority or duties in managing the Lawsuit on behalf of the Company, or (b) a material
reduction in Employee’s regular base salary (except in connection with a comparable reduction in
salary applicable to all executive-level employees of the Company), or (c) the Company’s requiring
Employee to be based at any office or location more than fifty (50) miles from the Company’s
current offices, other than on a temporary professional basis for purposes of the trial or any
other litigation-related proceedings in the Lawsuit, or (d) any material breach by the Company of
the terms of this Agreement, including but not limited to the failure by the Company to require a
successor-in-interest to the Company’s rights in the Lawsuit (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to assume expressly and agree to perform the
Company’s obligations under this Agreement, as if no such succession had taken place.

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     (g)     “Intel Amount” means the sum of the present value (using a discount rate equal to
the lesser of the Company’s cost of capital on the Determination Date (as defined above) and 8%) on
the Determination Date of either (i) each payment made, or to be made, in cash to Intel and its
affiliates by the Company as a direct result of the final, non-appealable judgment resolving all
claims and counterclaims in the Lawsuit or (ii) if the Company and Intel instead enter into a
settlement resolving all claims and counterclaims made in the Lawsuit, then the amount paid to
Intel and its affiliates by the Company in cash value pursuant to that settlement.

     (h)     “Litigation Costs” means the sum of all out of pocket costs and expenses
(including all attorneys’ fees) incurred by the Company in connection with the Lawsuit (including
any settlement thereof) and ultimately paid by the Company.

     (i)     “Net Amount” means the Company Amount minus the Intel Amount.

     (j)     “Savings” means the difference of (A) 25% of the Net Amount minus (B) the
Litigation Costs.

     2.     Payment.

     (a)     On entry of the final, non-appealable judgment resolving all claims and counterclaims in
the Lawsuit or, if the Company and Intel instead enter a settlement resolving all claims and
counterclaims made in the Lawsuit and that settlement requires only the payment of cash or cash
equivalents by the parties to the Lawsuit, then the Company shall pay to Employee a bonus as
follows:

          (i)     If Employee is employed by the Company on the Determination Date, and has been
continuously employed by the Company on that date since the Effective Date, then the Company shall
pay to Employee, within 60 calendar days following the Determination Date, an amount in cash equal
to the Potential Incentive Amount.

          (ii)     If the Company terminates Employee’s employment without Cause prior to the Determination
Date (such date of termination referred to as the “Termination Date”), then the Company
shall pay to Employee, within 60 calendar days following the Determination Date, an amount in cash
equal to the greater of either: (1) the product of (A) the Potential Incentive Amount multiplied by
(B) the number of days from (and including) the Filing Date to (and including) the Termination Date
divided by the number of days from (and including) the Filing Date to (and including) the
Determination Date, or (2) in the event that the Termination Date occurs after judgment has been
entered in the Lawsuit but before the Determination Date, and to the extent that the final
non-appealable judgment resolving all claims and counterclaims in the Lawsuit substantially
reflects an affirmance of that judgment through regular appellate review, then the Potential
Incentive Amount.

          (iii)     If Employee resigns as an employee of the Company without Good Reason prior to the
Determination Date, then the Company will not be obligated to pay to Employee any portion of the
Potential Incentive Amount.

          (iv)     If Employee resigns as an employee of the Company with Good Reason prior to the
Determination Date, then the Company will pay to Employee, within 60 calendar

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days following the Determination Date, an amount in cash determined in accordance with the
same measure set out above in Section 2(a)(ii).

          (v)     If Employee’s employment is terminated prior to the Determination Date by reason of his
death or Disability, then the Board of Directors of the Company will have discretion to decide what
portion of the Potential Incentive Amount, if any, shall be payable to Employee or his heirs or
successors, based on a good faith assessment of Employee’s contribution to the litigation of the
Lawsuit up to the Termination Date, and consistent with the intent reflected in this Section 2(a)
and below in Section 11.

     (b)     If the final, non-appealable judgment resolving all claims and counterclaims in the
Lawsuit or, if the Company and Intel instead enter a settlement resolving all claims and
counterclaims in the Lawsuit and that settlement involves consideration other than cash or cash
equivalents, then the Company shall pay to Employee a bonus, in an amount and on such date as
determined by the Company’s Board of Directors in good faith, consistent with the intent reflected
in Section 2(a) above.

     (c)     Unless in contravention of any express terms of this Agreement, any determination made by
the Company’s Board of Directors respecting the interpretation or meaning of any provision of
Sections 1 or 2 will be made in its sole discretion. Any such determination will be final and
binding on the Company and Employee.

     3.     Advance Payments. If Employee is employed by the Company on December 31, 2007,
and, on that date, has been continuously employed by the Company since the Effective Date, then the
Company will pay, within five days following December 31, 2007, to Employee an amount equal to
$250,000. The Company shall not be obligated to make that payment if the Determination Date occurs
prior to December 31, 2007. In addition, on each successive yearly anniversary date of December
31, 2007 that Employee is employed by the Company, and, on that date, has been continuously
employed by the Company since the Effective Date, then the Company will pay, within five days
following that date, to Employee an amount equal to $250,000; provided, that the Company shall not
be obligated to make such payment if the Determination Date occurs prior to that date. The
aggregate of the $250,000 payments actually paid to Employee pursuant to this Section 3, without
regard to withholdings made in accordance with Section 5, are referred to herein as the
“Advance Payments.” For avoidance of doubt, any Advance Payment to Employee under this
Agreement is in addition to Employee’s regular salary as an employee of the Company, and the
Company has no right of return or refund from Employee relating to any Advance Payment made under
this Agreement. Advance Payments are intended and expected to be the fundamental element of
Employee’s annual target bonus compensation during the pendency of the Lawsuit, and the Board of
Directors of the Company will determine from time to time, in good faith and in its sole discretion
consistent with the applicable compensation policies of the Company, the extent to which Employee
may also be eligible to continue to participate in the Company’s regular management incentive bonus
program based upon his other management contributions to the Company during the pendency of the
Lawsuit.

     4.     No Service or Employment Contract; No Delegation by the Board. This Agreement does
not confer upon Employee any right with respect to continuance of employment

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by or service with the Company, nor does it interfere in any way with the right of the Company
to terminate Employee’s employment by or service with the Company at any time for any reason.
Further, this Agreement does not diminish the authority of the Company’s Board of Directors to
determine and approve any and all actions of the Company respecting the Lawsuit, nor delegate to
Employee any such authority of the Company’s Board of Directors.

     5.     Withholding. The Company is authorized to withhold from any benefit provided or
payment due hereunder the amount of withholding taxes due under any federal, state or local
authority in respect of such benefit or payment and to take such action as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of such withholding taxes.

     6.     Governing Law. This Agreement shall be governed and construed in accordance with
the laws of the State of California without regard to its conflict of laws provisions. The parties
agree that any action or proceeding with respect to this Agreement shall be brought in the courts
located in Santa Clara County, California, and the parties agree to the jurisdiction thereof. The
parties hereby irrevocably waive any objection they may now or hereafter have to the laying of
venue of any such action in the said court(s), and further irrevocably waive any claim they may now
or hereafter have that any such action brought in said court(s) has been brought in an inconvenient
forum.

     7.     Validity and Construction. This Agreement has been fully negotiated by the
Company, Employee and their respective independent legal counsel. The Company understands that the
Potential Incentive Amount and the Advance Payments in this Agreement are not set by law but rather
are fully negotiable between the Company and the Employee. This Agreement will be interpreted
fairly in accordance with its terms and without any strict construction in favor of or against
either the Company or Employee. The provisions of this Agreement are severable. If any provision
of this Agreement is determined by a court of law to be invalid or unenforceable, then such
provision will be enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable. In such contingency, the Company and Employee will also negotiate
in good faith, if necessary, a valid and enforceable substitute provision or agreement that most
nearly effects the intent of the Company and Employee in entering into this Agreement.

     8.     Amendment; Waivers. This Agreement may not be modified, altered or changed except
upon the express written consent of both parties wherein specific reference is made to this
Agreement. No delay on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder.

     9.     Entire Agreement. This Agreement sets forth the entire agreement between the
parties hereto, and fully supersedes any prior agreements or understandings between the parties.
Notwithstanding the foregoing, however, the payments contemplated by this Agreement are in addition
to, and not in lieu of, compensation arrangements set forth in other agreements or understandings
between the parties that do not relate to the subject matter hereof, including without limitation
the Company’s Retention and Severance Plan.

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     10.     Headings. Section headings are used herein for convenience or reference only and
shall not affect the meaning of any provision of this Agreement.

     11.     Successors. This Agreement shall inure to the benefit of and shall be binding
upon the Company and its successors and assigns. The rights and obligations of Employee under this
Agreement are personal in nature and shall neither be transferred nor assigned in whole or in part
by Employee. Subject to the restrictions on transfer set forth in the preceding sentence of this
Section 11, in the event of Employee’s death, the rights of Employee under this Agreement shall
inure to the benefit of and shall be binding on Employee’s heirs, executors, administrators, legal
representatives, successors and assigns.

     12.     Counterparts. This Agreement may be executed in two counterparts, each of which
shall be deemed an original but both of which together shall constitute one and the same
instrument.

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

	 	 	 	 	 
	 	COMPANY:

Transmeta Corporation

 	 
	 	By:  	/s/ LESTER M. CRUDELE
 	 
	 	 	Name:  	Lester M. Crudele 	 
	 	 	Title:  	President & Chief Executive Officer 	 
	 
	 	EMPLOYEE:

John O’Hara Horsley

 	 
	 	/s/ JOHN O’HARA HORSLEY
 	 
	 	 	 
	 	 	 
	 

- Page 6 of 6 -exv10w2

 

Exhibit 10.2

CHANGE IN CONTROL AGREEMENT

     THIS AGREEMENT (“Agreement”) made as of the 30th day of December, 2005, between First Priority
Bank, a Pennsylvania banking corporation (the “Bank”), and David E. Sparks, an individual (the
“Executive”).

W I T N E S S E T H :

     WHEREAS, the Executive will initially be serving as Chairman and Chief Executive Officer of
the Bank following the commencement of business by the Bank; and

     WHEREAS, the Bank desires to induce the Executive to remain in its employ on an impartial and
objective basis in the event of a transaction pursuant to which a Change in Control (as defined in
Section 2(c)) of the Bank occurs.

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

     1. Term of Agreement.

     (a) In General. Except as otherwise provided herein, the term of this
Agreement will be for a period commencing on the date of this Agreement and ending on
December 31, 2007; provided, however, that this Agreement will automatically be renewed on
January 1 of each year (the “Annual Renewal Date”) for the two calendar years from each
Annual Renewal Date, unless either the Executive or the Bank gives written notice to the
other at least 120 days prior to an Annual Renewal Date (in which case this Agreement will
continue in effect only for the two calendar years following such notice).

     (b) Termination for Cause. Notwithstanding the provisions of Section l(a),
this Agreement will terminate automatically upon termination of the Executive’s employment
by the Bank for Cause. As used in this Agreement, the term “Cause” means:

     (i) prior to a Change in Control, termination for any reason; and

     (ii) concurrent with or following a Change in Control, termination following
(A) the Executive’s conviction or plea of guilty or nolo contendere
to a felony, a crime of falsehood, or a crime involving fraud or moral turpitude, or
the actual incarceration of the Executive for a period of 45 consecutive days, (B)
the Executive’s willful and repeated failure to follow the lawful instructions of
the Bank after receipt of written notice of such instructions from an appropriate
corporate official, other than a failure resulting from the Executive’s incapacity
because of physical. or mental illness, or (C) the removal or prohibition of the

 

 

Executive from being an institution-affiliated party by a final order of an
applicable federal banking agency pursuant to Section 8(c) of the Federal Deposit
Insurance Act or any other provision of applicable law.

If the Executive’s employment is terminated for Cause, the Executive’s rights under this
Agreement will cease as of the effective date of such termination.

     (c) Voluntary Termination, Retirement, or Death. Notwithstanding the
provisions of Section l(a), this Agreement will terminate automatically upon the voluntary
termination of the Executive’s employment (other than in accordance with Section 2), the
Executive’s retirement or the Executive’s death. In any such event, the Executive’s rights
under this Agreement will cease as of the effective date of such termination; provided,
however, that if the Executive dies after a Notice of Termination (as defined in Section
2(b)) is delivered by the Executive in accordance with such section, the payments described
in Section 3 will nonetheless be made to the person or persons determined pursuant to
Section 9(b).

     (d) Disability. Notwithstanding the provisions of Section l(a), this Agreement
will terminate automatically upon the termination of the Executive’s employment by reason of
the Executive’s Disability. In such event, the Executive’s rights under this Agreement will
cease as of the effective date of such termination; provided, however, that if the Executive
becomes disabled after a Notice of Termination is delivered by the Executive in accordance
with Section 2(b), he will nonetheless be entitled to receive the payments described in
Section 3. As used in this Agreement, the term “Disability” means incapacitation, by
accident, sickness or otherwise, such that the Executive is rendered unable to perform the
essential duties required of the Executive by the Executive’s position with the Bank at that
time, notwithstanding reasonable accommodation, for a period of six (6) consecutive months.

2. Termination Following a Change in Control.

     (a) Events Giving Right To Terminate For Good Reason. If a Change in Control
occurs and, concurrently therewith or thereafter during the term of this Agreement, an event
constituting Good Reason also occurs with respect to the Executive, he may terminate the
Executive’s employment in accordance with the provisions of Section 2(b) and, thereupon,
will become entitled to the payments described in Section 3. As used in this Agreement, the
term “Good Reason” means any of the following events:

     (i) the involuntary termination of the Executive, other than an involuntary
termination permitted in Sections 1 (b) and (d);

     (ii) a reduction in the Executive’s title, responsibilities (including
reporting responsibilities) or authority as in effect immediately prior to the
Change in Control;

     (iii) the assignment to the Executive of duties inconsistent with the

 

 

Executive’s position immediately prior to the Change in Control, except for an
assignment of duties consistent with a position permitted in Clause (ii);

     (iv) reassignment of the Executive to a principal office which is more than 50
miles from Malvern, Pennsylvania;

     (v) a reduction in the Executive’s annual base salary in effect immediately
prior to the Change in Control;

     (vi) the failure to provide the Executive with welfare, pension, incentive
compensation, fringe and other benefits of an equivalent value, in the aggregate, to
which he was entitled immediately prior to the Change in Control, unless such
failure occurs by reason of a reduction or change in such benefits for employees
generally of the corporation which is the acquiring, resulting or successor
corporation in the Change in Control (or an affiliate thereof); or

     (vii) any material breach of this Agreement by the Bank, coupled with the
failure to cure the same within 30 days after receipt of written notice of such
breach from the Executive.

     (b) Notice of Termination. Upon the occurrence of a Change in Control and an
event of Good Reason, the Executive may, within 180 days of the occurrence of any such
event, resign from employment by a notice in writing (“Notice of Termination”) delivered to
the Bank, whereupon he will become entitled to the payments described in Section 3. In the
case of a termination described in Clause (i) of Section 2(a), the Executive will confirm
the Executive’s involuntary termination, in writing, within 90 days of the date of such
termination, and such confirmation will be deemed a Notice of Termination.

     (c) Change in Control Defined. As used in this Agreement, the term “Change in
Control” means any of the following:

     (i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities and Exchange Act of 1934 (the “Exchange Act”)) other than a subsidiary of
the Bank or an employee benefit plan of the Bank or a subsidiary of the Bank
(including a related trust), becomes the beneficial owner (as determined pursuant to
Rule 13d-3 under the Exchange Act, whether or not such rule then applies to the
Bank), directly or indirectly of securities of the Bank representing more than 20%
of the combined voting power of the Bank’s then outstanding securities;

     (ii) the occurrence of, or execution of an agreement providing for, a sale of
all or substantially all of the assets of the Bank to an entity which is not a
direct or indirect subsidiary of the Bank;

     (iii) the occurrence of, or execution of an agreement providing for, a

 

 

reorganization, merger, consolidation or similar transaction involving the
Bank, unless (A) the shareholders of the Bank immediately prior to the consummation
of any such transaction will initially own securities representing at least a
majority of the voting power of the surviving or resulting corporation, and (B) the
directors of the Bank immediately prior to the consummation of such transaction will
initially represent at least a majority of the directors of the surviving o r
resulting corporation;

     (iv) during any period of two consecutive years, individuals who, at the
beginning of such period, constituted the Board of Directors of the Bank cease to
constitute the majority of such Board (unless the election of each new director was
expressly or by implication approved by a majority of the Board members who were
still in office and who were directors at the beginning of such period); and

     (v) any other event which is at any time irrevocably designated as a “Change
in Control” for purposes of this Agreement by resolution adopted by a majority of
the then non-employee directors of the Bank.

     3. Rights in the Event of Certain Terminations Following Change in Control. In the
event the Executive validly and timely delivers a Notice of Termination to the Bank, he will be
entitled to receive the following payments and benefits:

     (a) Basic Payments. The Executive will be paid an amount equal to two times
the sum of (i) the highest annualized base salary paid to the Executive by the Bank during
the year of termination or the immediately preceding two calendar years, and (ii) the
highest bonus paid to the Executive by the Bank with respect to one of the two calendar
years immediately preceding the year of termination. Such amount will be paid to the
Executive in one lump sum within 30 days following the later of the date of termination of
employment or the delivery of a Notice of Termination.

     (b) Supplemental Payment in Lieu of Certain Benefits. In lieu of continued
pension, welfare and other benefits, a lump sum cash payment equal to 45% of the amount
determined under Section 3(a)(i) will be paid to the Executive within 30 days following the
later of the date of termination of employment or the delivery of a Notice of Termination.

     (c) Excise Tax Matters in General. In the event that the amounts and benefits
payable under this section, when added to other amounts and benefits which may become
payable to the Executive by the Bank, are such that he becomes subject to the excise tax
provisions of Section 4999 of the Internal Revenue Code of 1996, as amended (the “Code”),
the Bank will pay the Executive (or cause the Executive to be paid) such additional amount
or amounts as will result in the Executive’s retention (after the payment of all federal,
state and local excise, employment, and income taxes on such payments and the value of such
benefits) of a net amount equal to the net amount he would have retained had the initially
calculated payments and benefits been subject only

 

 

to income and employment taxation. For purposes of the preceding sentence, the
Executive will be deemed to be subject to the highest marginal federal, state and local tax
rates. All calculations required to be made under this subsection will be made by the Bank’s
independent certified public accountants, subject to the right of Executive’s representative
to review the same. All such amounts required to be paid will be paid at the time any
withholding may be required under applicable law, and any additional amounts to which the
Executive may be entitled will be paid or reimbursed no later than 15 days following
confirmation of such amount by the Bank’s accountants. In the event any amounts paid
hereunder are subsequently determined to be in error because estimates were required or
otherwise, the parties agree to reimburse each other to correct such error, as appropriate,
and to pay interest thereon at the applicable federal rate (as determined under Code Section
1274 for the period of time such erroneous amount remained outstanding and unreimbursed).
The parties recognize that the actual implementation of the provisions of this subsection
are complex and agree to deal with each other in good faith to resolve any questions or
disagreements arising hereunder.

     4. Legal Expenses. The Bank will pay (or cause to be paid) to the Executive all
reasonable legal fees, other professional fees, and expenses when incurred by the Executive in
seeking to obtain or enforce any right or benefit provided by this Agreement, provided the
Executive pursues the action in good faith.

     5. Notices. Any notice required or permitted to be given under this Agreement will,
to be effective hereunder, be given to the Bank, in the case of notices given by the Executive, and
will, to be effective hereunder, be given by the Bank, in the case of notices given to the
Executive. Any such notice will be deemed properly given if in writing and if mailed by registered
or certified mail, postage prepaid with return receipt requested, to the residence of the
Executive, in the case of notices to the Executive, and to the principal office of the Bank, in the
case of notices to the Bank.

     6. 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 the Executive
and an executive officer of the Bank specifically designated by the Board of Directors of the Bank.
No waiver by any party hereto at any time of any breach by another party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other party will be
deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.

     7. Assignment. This Agreement is not assignable by any party hereto, except by the
Bank to any successor in interest to the business of the Bank.

     8. Entire Agreement. This Agreement contains the entire agreement of the parties
relating to the subject matter of this Agreement and, in accordance with the provisions of Section
18, supersedes any prior understanding of the parties.

     9. Successors; Binding Agreement.

 

 

     (a) The Bank will require any successor (whether direct or indirect, by purchase,
merger, consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Bank to expressly assume and agree to perform this Agreement (or cause it to
be performed) in the same manner and to the same extent that the Bank would be required to
perform it if no such succession had taken place. Failure by the Bank to obtain such
assumption and agreement prior to the effectiveness of any such succession will constitute a
material breach of this Agreement. As used in this Agreement, the “Bank” means the Bank as
hereinbefore defined and any successor to the business and/or assets of the Bank as
aforesaid which assumes and agrees to perform this Agreement by operation of law, or
otherwise.

     (b) This Agreement will inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, heirs, distributees, devisees,
and legatees. If the Executive should die while any amount is payable to the Executive under
this Agreement if the Executive had continued to live, all such amounts, unless otherwise
provided herein, will be paid in accordance with the terms of this Agreement to the
Executive’s devisee, legatee, or other designee, or, if there is no such designee, to the
Executive’s estate.

     10. Continuation of Certain Provisions. Any termination of the Executive’s employment
under this Agreement or of this Agreement will not affect the benefit provisions of Section 3 or 4,
which will, if relevant, survive any such termination and remain in full force and effect in
accordance with their respective terms.

     11. Other Rights. Except as provided in Section 18, nothing herein will be construed
as limiting, restricting or eliminating any rights the Executive may have under any plan, contract
or arrangement to which he is a party or in which he is a vested participant; provided, however,
that any termination payments required hereunder will be in lieu of any severance benefits to which
he may be entitled under a severance plan or arrangement of the Bank; and provided further, that if
the benefits under any such plan or arrangement may not legally be eliminated, then the payments
hereunder will be reduced (but not below zero) by the amount payable under such plan or
arrangement.

     12. No Mitigation or Offset. The Executive will not be required to mitigate the
amount of any payment provided for in this Agreement by seeking employment or otherwise; nor will
any amounts or benefits payable or provided hereunder be reduced in the event he does secure
employment.

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

     14. Applicable Law. Except to the extent preempted by federal law, this Agreement
will be governed by and construed in accordance with the domestic internal law of the Commonwealth
of Pennsylvania.

 

 

     15. Number. Words used herein in the singular will be construed as being used in the
plural, as the context requires, and vice versa.

     16. Headings. The headings of the sections and subsections of this Agreement are for
convenience only and will not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.

     17. References to the Bank. All references to the Bank shall be deemed to include
references to companies affiliated with the Bank, as appropriate in the relevant context.

     18. Effective Date; Termination of Prior Understandings. This Agreement will become
effective immediately upon the execution and delivery of this Agreement by the parties hereto.
Upon the execution and delivery of this Agreement, any prior understanding relating to the subject
matter hereof will be deemed automatically terminated and be of no further force or effect.

     19. Withholding For Taxes. All amounts and benefits paid or provided hereunder will
be subject to withholding for taxes as required by law.

     20. Individual Agreement. This Agreement is an agreement solely between and among the
parties hereto. It is intended to constitute a nonqualified unfunded arrangement for the benefit of
a key management employee and will be construed and interpreted in a manner consistent with such
intention.

     21. Compliance with American Jobs Creation Act of 2004. To the extent any provision
of this Agreement (or any document referred to herein) is in conflict with the American Jobs
Creation Act of 2004 (the “2004 Act”), the parties agree to modify this Agreement, in good faith
and to the extent possible, to mitigate any adverse tax consequences that may otherwise result to
the Executive or the Bank. Such modification(s) shall include, among other things, the deferral of
the commencement of severance benefits for six months to the extent required by the 2004 Act and
Code Section 409A.

 

 

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

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	FIRST PRIORITY BANK	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By	 	/s/ Mary Ann Messmer	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(SEAL)	 	 	 	Attest:	 	/s/ Lawrence E. Donato	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	          (Assistant) Secretary	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	          (the “Bank”)	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Witness :
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	/s/ David E. Sparks	 	 	 	(SEAL)	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	          (the “Executive”)

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