Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This
EMPLOYMENT AGREEMENT (the “Agreement”) is entered into on this 31st day of
December, 2008 (the “Commencement Date”) by and between Penn National Gaming, Inc.,
a Pennsylvania corporation (the “Company”), and Timothy Wilmott, an individual
residing in New Jersey (“Executive”).

 

WHEREAS,
Executive and Company are party to that certain Employment Agreement dated February 5,
2008 (the “Existing Agreement”).

 

WHEREAS, the
parties wish to replace the Existing Agreement with the terms set forth below
in this Agreement, which are intended to be in compliance with the requirements
of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”,
see also Section 21 hereof).

 

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

 

1.     Employment.  The Company hereby agrees to employ Executive
and Executive hereby accepts such employment, in accordance with the terms,
conditions and provisions hereinafter set forth.

 

1.1.          Duties and Responsibilities.  Executive shall serve as President and Chief
Operating Officer of the Company. 
Executive shall perform all duties and accept all responsibilities
incident to such position as may be reasonably assigned to him by Peter M.
Carlino or the Board of Directors of the Company (the “Board”). Executive’s
principal place of employment shall be in Wyomissing, Pennsylvania.

 

1.2.          Term. The term of this
Agreement shall begin on the date hereof and shall terminate at the close of
business on July 3, 2013 (the “Initial Term”), unless earlier terminated
in accordance with Section 3 hereof. 
The term of this Agreement may be renewed for additional periods (each,
a “Renewal Term” and, together with the Initial Term, the “Employment Term”)
only upon the execution of a written renewal by the parties hereto.  Notwithstanding the foregoing to the
contrary, Sections 5 through 21 shall survive any termination of the Employment
Term until the expiration of any applicable time periods set forth in Sections
5, 6 and 7.

 

1.3.          Extent of Service.  Executive agrees to use Executive’s best
efforts to carry out Executive’s duties and responsibilities and, consistent
with the other provisions of this Agreement, to devote substantially all of
Executive’s business time, attention and energy thereto.  The foregoing shall not be construed as
preventing Executive from serving on the board of philanthropic organizations
or, as may be approved by the Board, other organizations, or providing
oversight with respect to his personal investments, so long as such service
does not materially interfere with Executive’s duties hereunder.

 

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2.     Compensation.  For all services rendered by Executive to the
Company, the Company shall compensate Executive as set forth below.

 

2.1.          Base Salary.  The Company shall pay Executive a base salary
(“Base Salary”), commencing on the Commencement Date, at the annual rate of at
least One Million Two Hundred Fifty Thousand Dollars ($1,250,000), payable in
installments at such times as the Company customarily pays its other senior
executives (“Peer Executives”). 
Executive’s performance and Base Salary shall be reviewed annually.  Any increase in Base Salary or other
compensation shall be made at the discretion of the Board or the compensation
committee of the Board (the “Compensation Committee”).

 

2.2.          Cash Bonuses.  Executive shall participate in the Company’s
annual incentive compensation plan applicable to Peer Executives.  Each annual bonus award earned in a fiscal
year shall be paid pursuant to the terms of the annual incentive plan document
(if any) by March 15 of the immediately following fiscal year, unless the
written bonus plan provides for a different payment date or unless Executive
shall elect to defer the receipt of such bonus award pursuant to an arrangement
that meets the requirements of Section 409A.

 

2.3.          Equity Compensation.  The Company may grant to Executive options or
other equity compensation pursuant to, and subject to the terms and conditions
of, the then current equity compensation plan of Penn National Gaming, Inc.  The Compensation Committee shall set the
amount and terms of such options or other equity compensation.

 

2.4.          Other Benefits.  Executive shall be entitled to participate in
all other employee benefit plans and programs, including, without limitation,
health, vacation, retirement, deferred compensation or SERP, made available to
other Peer Executives, as such plans and programs may be in effect from time to
time and subject to the eligibility requirements of the each plan.  Nothing in this Agreement shall prevent the
Company from amending or terminating any retirement, welfare or other employee
benefit plans or programs from time to time, as the Company deems appropriate.

 

2.5.          Vacation, Sick Leave and Holidays.  Executive shall be entitled in each calendar
year to four (4) weeks of paid vacation time.  Each vacation shall be taken by Executive at
such time or times as agreed upon by the Company and Executive, and any portion
of Executive’s allowable vacation time not used during the calendar year shall
be subject to the Company’s payroll policies regarding carryover vacation.  Executive shall be entitled to holiday and
sick leave in accordance with the Company’s holiday and other pay for time not
worked policies.

 

2.6.          Reimbursement of Expenses.  Executive shall be provided with
reimbursement of reasonable expenses related to Executive’s employment by the
Company on a basis no less favorable than that authorized from time to time for
Peer Executives.  Such reimbursements
shall be made in such manner and at such times as provided in the reimbursement
policies applicable to Peer Executives.

 

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2.7.          Life Insurance.  During the Employment Term, the Company shall
maintain, at its sole cost and expense, a term life insurance policy for
Executive with a face value equal to three (3) times Executive’s Base
Salary.  Executive shall  have the right to name the beneficiary of
such terms life insurance policy.

 

3.     Termination.  Executive’s employment may be terminated
prior to the end of the Employment Term in accordance with, and subject to the
terms and conditions, set forth below.

 

3.1.          Termination
by the Company.

 

(a)           Without
Cause.  The Company may terminate
Executive’s employment at any time without Cause (as such term is defined in
subsection (b) below) upon delivery of written notice to Executive, which
notice shall set forth the effective date of such termination.

 

(b)           With
Cause.  The Company may terminate
Executive’s employment at any time for Cause effective immediately upon
delivery of written notice to Executive. 
As used herein, the term “Cause” shall mean:

 

(i)            Executive
shall have been convicted of a felony or any misdemeanor involving allegations
of fraud, theft, perjury or conspiracy;

 

(ii)           Executive
is found disqualified or not suitable to hold a casino or other gaming license
by a governmental gaming authority in any jurisdiction where Executive is
required to be found qualified, suitable or licensed;

 

(iii)          Executive
materially breaches any material Company policy or any material term hereof,
including, without limitation, Sections 4 through 7 and, in each case, fails to
cure such breach within 15 days after receipt of written notice thereof; or

 

(iv)          Executive
misappropriates corporate funds as determined in good faith by the Board.

 

3.2.          Termination
by the Executive.  Executive may
voluntarily terminate employment for any reason effective upon 60 days’ prior
written notice to the Company, unless the Company waives such notice
requirement (in which case the Company shall notify Executive in writing as to
the effective date of termination).

 

3.3.          Termination
for Death or Disability.  In the
event of the death or total disability of Executive, Executive’s employment
shall terminate effective as of the date of Executive’s death or
disability.  The term “disability” shall
have the definition set forth in the Company’s Long Term Disability Insurance
Policy in effect at the time of such determination.

 

3.4.          Payments
Due Upon Termination.

 

(a)           Already
Accrued Base Salary and Expense. 
Upon any termination of employment during the Employment Term, Executive
shall be entitled to receive any amounts due for Base Salary accrued but unpaid
through the effective date of termination or any amounts due for benefits
accrued or earned on or prior to such date, and such amounts shall be paid, in 

 

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accordance with the Company’s then current payroll system for Peer
Executives or in accordance with the terms of any applicable benefit plans or
programs.  Any expenses incurred but not
reimbursed through the effective date of termination shall be paid at such time
and in such manner as provided under the Company’s expense reimbursement policy
applicable to Peer Executives.

 

(b)           Severance
Pay and Benefits.  Subject to the
conditions in subsection (c) hereof, if Executive’s employment is
terminated under Section 3.1(a) or Section 3.3, by Executive for
Good Reason or if Executive delivers a written notice of resignation within 30
days after the expiration of the Employment Term, the Company does not offer to
renew the Employment Term during such 30-day period on terms no less favorable
in the aggregate to the Executive than those contained herein and Executive
thereupon terminates his employment at the end of such 30-day period, then
Executive will be entitled to receive, and the Company will provide Executive
with, the following severance pay and benefits (in addition to any amounts
payable under subsection (a) hereof); provided, for purposes of Section 409A,
each payment (whether an installment or lump sum) of severance pay under this
subsection (b) shall be considered a separate payment:

 

(i)            Amount of Post-Employment
Base Salary and Bonus.  The Company shall pay to Executive an amount
equal to the product of (A) the sum of (1) Executive’s monthly Base
Salary at the highest rate in effect during the 24-month period immediately
preceding the date of Executive’s termination of employment (the “Termination
Date”), and (2) Executive’s monthly bonus value (determined by dividing by
12 the highest amount of annual cash bonus compensation paid to Executive in
respect of either the first or second full calendar year immediately preceding
the Termination Date; and (B) the greater of (1) the number of full
and partial months remaining in the Employment Term as of the Termination Date,
and (2) 24 months (with the period described in clause (B) hereof
being referred to as the “Severance Period”).

 

(ii)           Payment of
Post-Employment Base Salary and Bonus. 
The amount described in subsection (b)(i) shall be paid to
Executive in cash in two lump-sum payments as follows: (A) 75% of such
amount shall be paid within 15 days after the Termination Date but no later
than March 15 of the calendar year following the year in which this
payment vests; and (B) the remaining 25% of such amount shall be paid in a
lump sum by March 15 of the calendar year following the calendar year in
which this payment vests.

 

(iii)          Continued
Medical Benefits Coverage.  For a
period beginning on the date of his separation from service and ending the
earlier of (A) the 3rd anniversary of his separation from
service, or (B) the date on which Executive accepts employment with or
provides service to, in any capacity, any other business or entity, the Company
shall provide Executive, and, if any, Executive’s spouse and dependents with
medical benefits coverage substantially similar to the coverage in effect on
the effective date of termination (the earlier of (A) and (B) being,
the “Benefits Termination Date”). 
Following the Benefits Expiration Date, Executive, and, if any,
Executive’s spouse and dependents shall be permitted to continue the above
referenced medical benefits coverage at Executive’s sole expense for the
remainder of Executive’s life (the “Life Coverage 

 

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Period”). 
Notwithstanding anything in the previous sentence to the contrary, if,
during the Life Coverage Period, (x) Executive engages in any of the
activities described in Sections 5, 6(b) or 7 herein, or (y) Executive
accepts employment with or provides service to, in any capacity, any other
business or entity, upon commencement of such employment or services, the
entitlement of Executive and his then-eligible dependents (including his
spouse) to participate in the above referenced medical benefits plan shall
terminate automatically, without any further action or notice by either party,
subject to COBRA rights.  Additionally,
in the event that Executive become eligible for Medicare coverage, the above
referenced medical benefits coverage shall become secondary to Medicare.

 

(iv)          Vesting of Stock
Options.  All options granted to
Executive that would have vested during the Severance Period shall vest as of
the Termination Date, provided , however, that any such options may not be
exercised during the Severance Period until the same time(s) as such
options would have vested had Executive continued to be employed through the
Severance Period.  Any options that would
not have vested during the Severance Period shall terminate on the Termination
Date.

 

(c)           Release
Agreement.  Executive’s entitlement
to any severance pay and benefit subsidies under Section 3(b) is
conditioned upon Executive’s first entering into a release agreement in
substantially the form attached hereto as Exhibit “A”; provided, such
release agreement shall be delivered to Executive within 7 days after the
Termination Date.  Any payment of
severance pay or benefit subsidies due under subsection (b) hereof shall
be delayed until after the expiration of the 7-day revocation period required
for an effective age-based release, and any amount otherwise due under said
subsection (b) before the end of such revocation period shall be paid upon
the day after the end of such period in a single lump-sum payment, but not
later than March 15 of the calendar year following the calendar year in
which the Termination Date occurs.

 

(d)           No Other Payments
or Benefits.  Except as otherwise
provided in this Section 3.4, Section 8 or Section 9, no other
payments or benefits shall be due under this Agreement to Executive

 

3.5.          Notice
of Termination.  Any termination of
Executive’s employment shall be communicated by a written notice of termination
delivered within the time period specified in this Section 3.  The notice of termination shall (i) indicate
the specific termination provision in this Agreement relied upon, (ii) briefly
summarize the facts and circumstances deemed to provide a basis for a
termination of employment and the applicable provision hereof, and (iii) specify
the termination date in accordance with the requirements of this Agreement.

 

4.     No Conflicts of Interest.  Executive agrees that throughout the period
of Executive’s employment hereunder or otherwise, Executive will not perform
any activities or services, or accept other employment that would materially
interfere with or present a conflict of interest concerning Executive’s
employment with the Company.  Executive
agrees and acknowledges that Executive’s employment by the Company is
conditioned upon Executive adhering to and complying with the business
practices and requirements of ethical conduct set forth in writing from time to
time by the Company in its employee manual or similar publication.  Executive 

 

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represents and
warrants that no other contract, agreement or understanding to which Executive
is a party or may be subject will be violated by the execution of this
Agreement by Executive.

 

5.     Confidentiality.  Executive recognizes and acknowledges that
Executive will have access to certain confidential information of the Company
and that such information constitutes valuable, special and unique property of
the Company (including, but not limited to, information such as business
strategies, identity of acquisition or growth targets, marketing plans,
customer lists, and other business related information for the Company’s
customers).  Executive agrees that
Executive will not, for any reason or purpose whatsoever, during or after the
term of employment, disclose any of such confidential information to any party,
and that Executive will keep inviolate and secret all confidential information
or knowledge which Executive has access to by virtue of Executive’s employment
with the Company, except as otherwise may be necessary in the ordinary course
of performing Executive’s duties with the Company.

 

6.     Non-Competition.

 

(a)        As
used herein, the term “Restriction Period” shall mean a period equal to: (i) the
remainder of the Employment Term in effect on the effective date of termination
if Executive resigns other than for Good Reason, or (ii) the Severance
Period if Executive’s employment is terminated for one of the events specified
in Section 3.4(b).  In the event the
Executive is terminated by the Company for one of the events specified in Section 3.4(b),
during the Severance Period Executive may elect to terminate the Restriction
Period at any time by delivering written notice to the Company that Executive
has made such election and that, in consideration therefore, is forfeiting the
right to receive any payment or the right to receive any future payments under Section 3.4(b) or
an equivalent amount under Section 8; provided however, if Executive
elects to reduce the geographic limitation of this non-competition provision,
and Executive has already received payment pursuant to Section 3.4(b) or
an equivalent amount under Section 8, Executive shall reimburse the
Company for that portion of the severance payments already received by
Executive which relates to the number of days left in the Severance
Period.  For clarity, regardless of
whether Executive shall receive payments pursuant to Section 3.4(b) or
Section 8 of this Agreement in order to reduce the Restriction Period,
Executive shall only be required to forfeit or re-pay the amounts that
Executive would have received pursuant to Section 3.4(b).  In that case, Executive may nevertheless
receive payments and/or need not reimburse the Company for any amounts paid to
Executive pursuant to Section 8 which are in excess of the payments and
benefits that Executive would have been entitled to receive under Section 3.4(b).  If Executive terminates his employment for
good Reason, then Executive shall not be subject to the provisions of this Section 6.

 

(b)        During
Executive’s employment by the Company and for the duration of the Restriction
Period thereafter, Executive shall not, except with the prior written consent
of the Company, directly or indirectly, own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with, or use or
permit Executive’s name to be used in connection with, any business or
enterprise which owns or operates, or is actively seeking to own or operate, a
gaming or pari-mutuel located within North America.

 

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(c)        The
foregoing restrictions shall not be construed to prohibit Executive’s ownership
of less than 5% of any class of securities of any corporation which is engaged
in any of the foregoing businesses and has a class of securities registered
pursuant to the Securities Exchange Act of 1934, provided that such ownership
represents a passive investment and that neither Executive nor any group of
persons including Executive in any way, either directly or indirectly, manages
or exercises control of any such corporation, guarantees any of its financial
obligations, otherwise takes any part in its business, other than exercising
Executive’s rights as a shareholder, or seeks to do any of the foregoing.

 

(d)        Executive
acknowledges that the covenants contained in Sections 5 through 7 hereof are
reasonable and necessary to protect the legitimate interests of the Company and
its affiliates and, in particular, that the duration and geographic scope of
such covenants are reasonable given the nature of this Agreement and the
position that Executive will hold within the Company.    Executive further agrees to disclose the
existence and terms of such covenants to any employer that Executive works for
during the Restriction Period.

 

7.     Non-Solicitation.  During Executive’s employment by the Company
and for a period equal to the greater of the Restriction Period or one year
after the effective date of termination, Executive will not, except with the
prior written consent of the Company, (i) directly or indirectly, solicit
or hire, or encourage the solicitation or hiring of, any person who is, or was
within a six month period prior to such solicitation or hiring, an executive or
management employee of the Company or any of its affiliates for any position as
an employee, independent contractor, consultant or otherwise or (ii) divert
or attempt to divert any existing business of the Company or any of its
affiliates.

 

8.     Change of Control.

 

8.1.          Consideration

 

(a)           Change of Control.  In the event of a Change of Control (as
defined below), Executive shall be entitled to receive a cash payment in an
amount equal to the product of three times the sum of (i) the highest
annual rate of Base Salary in effect for Executive during the 24-month period
immediately preceding the effective date of the Change in Control (the “Trigger
Date”) and (ii) the highest amount of annual cash bonus compensation paid
to Executive in respect of either the first or second full calendar year
immediately preceding the Trigger Date.

 

(b)           Restrictive
Provisions.  As consideration for the
foregoing payments, Executive agrees not to challenge the enforceability of any
of the restrictions contained in Sections 5, 6 or 7 of this Agreement upon or
after the occurrence of a Change of Control.

 

8.2.          Payment
Terms.  This change of control
payment shall be made in two lump sum payments as follows: (i) 75% of such
amount shall be paid to Executive in a lump-sum cash payment upon the Trigger
Date; and (ii) 25% of such amount shall be paid to Executive in a lump-sum
cash payment upon the 75th day following the Trigger Date, but not
later than March 15 of the calendar year following the calendar year in
which the Trigger Date occurs. 
Notwithstanding any of the foregoing to the contrary, the payment
contemplated by clause (ii) 

 

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shall be paid immediately upon the earlier occurrence of any of the
following: (a) Executive’s employment is terminated by the Company; or (b) Executive
terminates employment for Good Reason (as defined below).

 

8.3.          Certain
Other Terms.  In the event payments
are being made to Executive under this Section 8, no payments shall be due
under Section 3.4(b)(i) with respect to any termination of Executive’s
employment following a Change of Control. 
At the option of the Company, the Company may require Executive to
execute the release attached hereto as Exhibit A; provided, however, that
this requirement shall not in any way alter the timing of the payments to be
made under Section 8.2.  In the
event that the Company announces that it has signed a definitive agreement with
respect to a Change of Control, the provisions of this Section 8 shall
continue to apply to Executive if, during the period after the public announcement
and immediately preceding the date such transaction is consummated or
terminated, the Company terminates Executive’s employment without Cause or due
to a disability; provided, however, that, in such event, any amount payable
under this Section 8 shall be reduced by any payments received pursuant to
Section 3.4(b)(i).

 

8.4.          Defined
Terms.

 

(a)           The term Change of
Control shall have the meaning given to such term in the Company’s 2008 Long
Term Incentive Compensation Plan, as such may be amended or modified.

 

(b)           Good Reason.  The occurrence of any of the following events
that the Company fails to cure within 10 days after receiving written notice
thereof from Executive: (i) assignment to Executive of any duties
inconsistent in any material respect with Executive’s position (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities or inconsistent with Executive’s legal or fiduciary
obligations; (ii) any reduction in Executive’s compensation or substantial
reduction in Executive’s benefits taken as a whole; (iii) any travel
requirements materially greater than Executive’s travel requirements prior to
the Change of Control; (iv) failure to appoint Executive as the Chief
Executive Officer of the Company within thirty (30) days of the 3rd
anniversary of the Commencement Date, (iv) breach of any material term of
this Agreement by the Company.

 

9.     Certain Tax Matters.

 

9.1.          Generally.  In the event Executive becomes entitled to
receive the payments (the “Severance Payments”) provided under Section 3
or Section 8 hereof or under any other plan or arrangement providing for
payments under circumstances similar to those contemplated by such sections,
and if any of the Severance Payments will be subject to the tax (the “Excise Tax”)
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the “Code”), the Company shall pay to Executive at the time specified for such
payments, an additional amount (the “Gross-Up Payment”) such that the net
amount retained by Executive shall be equal to the amount of the Severance
Payments after deducting normal and ordinary taxes but not deducting (a) the
Excise Tax and (b) any federal, state and local income tax and Excise Tax
payable on the payment provided for by this Section 9.

 

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9.2.          Illustration.  For example, if the Severance Payments are
$1,000,000 and if Executive is subject to the Excise Tax, then the Gross-Up
Payment will be such that Executive will retain an amount of $1,000,000 less
only any normal and ordinary taxes on such amount. The Excise Tax and federal,
state and local taxes and any Excise Tax on the payment provided by this Section 9
will not be deemed normal and ordinary taxes.

 

9.3.          Certain Terms.  For purposes of determining whether any of
the Severance Payments will be subject to the Excise Tax and the amount of such
Excise Tax, the following will apply:

 

(a)           Any other payments or
benefits received or to be received by Executive in connection with a Change in
Control of the Company or Executive’s termination of employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company shall be treated as “parachute payments” within the
meaning of Section 280G(b)(2) of the Code, and all “excess parachute
payments” within the meaning of Section 280G(b)(1) shall be treated
as subject to the Excise Tax, unless in the opinion of tax counsel selected by
the Company’s Compensation Committee and acceptable to Executive, such other
payments or benefits (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of
the Code in excess of the base amount within the meaning of Section 280G(b)(3) of
the Code, or are otherwise not subject to the Excise Tax;

 

(b)           The amount of the Severance
Payments which shall be treated as subject to the Excise Tax shall be equal to
the lesser of (y) the total amount of the Severance Payments or (z) the
amount of excess parachute payments within the meaning of Section 280G(b)(1) (after
applying subsection (a), above); and

 

(c)           The value of any non-cash
benefits or any deferred payment or benefit shall be determined by the Company’s
independent auditors in accordance with proposed, temporary or final
regulations under Sections 280G(d)(3) and (4) of the Code or, in the
absence of such regulations, in accordance with the principles of Section 280G(d)(3) and
(4) of the Code. For purposes of determining the amount of the Gross-Up
Payment, Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of Executive on the Trigger
Date, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes; and

 

(d)           In the event that the amount
of Excise Tax attributable to Severance Payments is subsequently determined to
be less than the amount taken into account hereunder at the time of
determination then, subject to applicable law, appropriate adjustments will be
made with respect to future payment(s) hereunder (if any).  If Executive becomes entitled to a Gross-Up
Payment in excess of the amount initially determined and paid under Section 9.1,
the Company shall pay the additional Gross-Up Payment within five (5) business
days of the date on which the Company is notified of the amount of the Gross-Up
Payment, but only to the extent that the Gross-Up Payment would be made by the March 15
following the calendar year in which 

 

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the
Executive would be considered to have vested in the Gross-Up Payment for
purposes of Section 409A.  To the
extent any Gross-Up Payment is greater than initially determined and paid under
Section 9.1 and cannot be made by the March 15 following the end of
the calendar year in which the Executive vests in such payment, then the
Company shall instead make the payment promptly following the date on which the
Executive remits the taxes to which the Gross-Up Payment relates to the
applicable taxing authority, and in no event later than the last day of the
calendar year following the calendar year in which such taxes are remitted;
provided, however, that if the Executive is a key employee (within the meaning
of Section 409A) and the Gross-Up Payment would be considered deferred compensation
payable on account of Executive’s separation from service (as defined in Section 409A),
payment will in no event be made prior to 6 months after the date of Executive’s
separation from service.

 

9.4.          Fees and Expenses.  The Company shall reimburse Executive for all
reasonable legal fees and expenses incurred by Executive in connection with any
tax audit or proceeding to the extent attributable to the application of Section 4999
of the Code or any regulations pertaining thereto to any payment or benefit
provided hereunder.  Any expense
reimbursements made to satisfy the terms of this section shall be paid as soon
as practicable but no later than 90 days after Employee submits evidence of
such expenses to the Company (which payment date shall in no event be later
than the last day of the calendar year following the calendar year in which the
expense was incurred).  The amount of
such reimbursements during any calendar year shall not affect the benefits
provided in any other calendar year, and the right to any benefits under this
paragraph shall not be subject to liquidation or exchange for another benefit.

 

10.   Document Surrender.  Upon the termination of Executive’s
employment for any reason, Executive shall immediately surrender and deliver to
the Company all documents, correspondence and any other information, of any
type whatsoever, from the Company or any of its agents, servants, employees,
suppliers, and existing or potential customers, that came into Executive’s
possession by any means whatsoever, during the course of employment.

 

11.   Governing Law.  This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts)
of the Commonwealth of Pennsylvania.

 

12.   Jurisdiction.  The parties hereby irrevocably consent to the
jurisdiction of the courts of the Commonwealth of Pennsylvania for all purposes
in connection with any action or proceeding which arises out of or relates to
this Agreement and agree that any action instituted under this Agreement shall
be commenced, prosecuted and continued only in the state or federal courts
having jurisdiction for matters arising in Wyomissing, Pennsylvania, which
shall be the exclusive and only proper forum for adjudicating such a claim.

 

13.   Notices.  All notices and other communications required
or permitted under this Agreement or necessary or convenient in connection
herewith shall be in writing and shall be deemed to have been given when hand
delivered, delivered by guaranteed next-day delivery or sent by facsimile (with
confirmation of transmission) or shall be deemed given on the third business
day when mailed by registered or certified mail, as follows (provided that
notice of change of address shall be deemed given only when received):

 

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If to the Company, to:

 

Penn National Gaming, Inc.

825 Berkshire Boulevard, Suite 200

Wyomissing, PA 19610

Fax: (610) 376-2842

 

Attention:
Chairman

 

If to Executive, to:

 

His then current home address.

 

or to such other names or
addresses as the Company or Executive, as the case may be, shall designate by
notice to each other person entitled to receive notices in the manner specified
in this Section.

 

14.   Contents of Agreement;
Amendment and Assignment.

 

14.1.        This Agreement sets forth
the entire understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior or contemporaneous agreements or
understandings with respect to thereto, including without limitation, the
Initial Agreement which is hereby terminated. 
This Agreement cannot be changed, modified, extended, waived or
terminated except upon a written instrument signed by the party against which
it is to be enforced.

 

14.2.        Executive may not assign any
of his rights or obligations under this Agreement.  The Company may assign its rights and
obligations under this Agreement to any successor to all or substantially all
of its assets or business by means of liquidation, dissolution, merger, consolidation,
transfer of assets or otherwise.

 

15.           Severability.  If any provision of this Agreement or
application thereof to anyone or under any circumstances is adjudicated to be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect any other provision or application of this
Agreement which can be given effect without the invalid or unenforceable
provision or application and shall not invalidate or render unenforceable such
provision or application in any other jurisdiction.  If any provision is held void, invalid or
unenforceable with respect to particular circumstances, it shall nevertheless
remain in full force and effect in all other circumstances.  In
addition, if any court determines that any part of Sections 5, 6 or 7 hereof is
unenforceable because of its duration, geographical scope or otherwise, such
court will have the power to modify such provision and, in its modified form,
such provision will then be enforceable.

 

11

 

16.   Remedies.

 

16.1.        No remedy conferred upon a
party by this Agreement is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to any
other remedy given under this Agreement or now or hereafter existing at law or
in equity.

 

16.2.        No delay or omission by a
party in exercising any right, remedy or power under this Agreement or existing
at law or in equity shall be construed as a waiver thereof, and any such right,
remedy or power may be exercised by such party from time to time and as often
as may be deemed expedient or necessary by such party in its sole discretion.

 

16.3.        Executive acknowledges that
money damages would not be a sufficient remedy for any breach of this Agreement
by Executive and that the Company shall be entitled to specific performance and
injunctive relief as remedies for any such breach, in addition to all other
remedies available at law or equity to the Company.

 

17.           Construction.  This Agreement is the result of thoughtful
negotiations and reflects an arms’ length bargain between two sophisticated
parties, each represented by counsel. 
The parties agree that, if this Agreement requires interpretation,
neither party should be considered “the drafter” nor be entitled to any
presumption that ambiguities are to be resolved in his or her favor.

 

18.           Beneficiaries/References.  Executive shall be entitled, to the extent
permitted under any applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit payable under this
Agreement following Executive’s death by giving the Company written notice
thereof.  In the event of Executive’s
death or a judicial determination of Executive’s incompetence, reference in
this Agreement to Executive shall be deemed, where appropriate, to refer to
Executive’s beneficiary, estate or other legal representative.

 

19.           Withholding. 
All payments under this Agreement shall be made subject to applicable
tax withholding, and the Company shall withhold from any payments under this
Agreement all federal, state and local taxes, as the Company is required to
withhold pursuant to any law or governmental rule or regulation.  Except as specifically provided otherwise in
this Agreement, Executive shall bear all expense of, and be solely responsible
for, all federal, state and local taxes due with respect to any payment
received under this Agreement.

 

20.           Regulatory Compliance.  The terms and provisions hereof shall be
conditioned on and subject to compliance with all laws, rules, and regulations
of all jurisdictions, or agencies, boards or commissions thereof, having
regulatory jurisdiction over the employment or activities of Executive
hereunder.

 

21.           Section 409A.  This Agreement is intended to comply with the
requirements of Section 409A and shall be construed accordingly.  Any payments or distributions to be made to
Employee under this Agreement upon a separation from service (as defined in Section 409A)
of amounts classified as “nonqualified deferred compensation” for purposes of
Code Section 409A, shall in no event be made or commence until 6 months
after such separation from service.  Each
payment of nonqualified deferred compensation under this Agreement shall be
treated as a separate payment for purposes of Code Section 409A.  Any reimbursements made pursuant to this
Agreement shall be paid as soon as practicable but no later than 90 days after
Employee 

 

12

 

submits
evidence of such expenses to Corporation (which payment date shall in no event
be later than the last day of the calendar year following the calendar year in
which the expense was incurred).  The
amount of such reimbursements during any calendar year shall not affect the
benefits provided in any other calendar year, and the right to any such
benefits shall not be subject to liquidation or exchange for another benefit.

 

IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, have executed this Agreement as of the date first above written.

 

 

	
   

  	
   

  	
  PENN NATIONAL GAMING, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/ Peter M. Carlino

  
	
   

  	
   

  	
  Name:

  	
  Peter M.
  Carlino

  
	
   

  	
   

  	
  Title:

  	
  Chairman
  and Chief Executive

  
	
   

  	
   

  	
   

  	
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
    /s/
  Timothy Wilmott

  
	
   

  	
   

  	
  Timothy
  Wilmott

  
						

 

13

 

Exhibit A

 

SEPARATION AGREEMENT AND GENERAL RELEASE

 

This
is a Separation Agreement and General Release (hereinafter referred to as the “Agreement”)
between
                          
(hereinafter referred to as the “Employee”) and Penn National Gaming, Inc.
(hereinafter referred to as the “Employer”). 
In consideration of the mutual promises and commitments made in this
Agreement, and intending to be legally bound, Employee, on the one hand, and
the Employer on the other hand, agree to the terms set forth in this Agreement.

 

1.             Employer and Employee hereby acknowledge that [the
Company notified Employee/Employee notified the Company on
                                      
that Executive’s employment pursuant to that certain Employment Agreement
executed on                           
(“Employment Agreement”) would be terminated as of
[                    ].  Upon the termination of the Employment
Agreement, Employee will be subject to the obligations and be the beneficiary
of the surviving benefits, all as described in the Employment Agreement.  Employee’s last day of work will be
                        .

 

2.             (a)           When used in this Agreement, the word “Releasees”
means the Employer and all or any of its past and present parent, subsidiary
and affiliated corporations, companies, partnerships, joint ventures and other
entities and their groups, divisions, departments and units, and their past and
present directors, trustees, officers, managers, partners, supervisors,
employees, attorneys, agents and consultants, and their predecessors,
successors and assigns.

 

                (b)           When used in this Agreement, the word “Claims”
means each and every claim, complaint, cause of action, and grievance, whether
known or unknown and whether fixed or contingent, and each and every promise,
assurance, contract, representation, guarantee, warranty, right and commitment
of any kind, whether known or unknown and whether fixed or contingent.

 

3.             In consideration of the promises
of the Employer set forth in this Agreement and the Employment Agreement, and
intending to be legally bound, Employee hereby irrevocably remises, releases
and forever discharges all Releasees of and from any and all Claims that he (on
behalf of either himself or any other person or persons) ever had or now has
against any and all of the Releasees, or which he (or his heirs, executors,
administrators or assigns or any of them) hereafter can, shall or may have
against any and all of the Releasees, for or by reason of any cause, matter,
thing, occurrence or event whatsoever through the effective date of this
Agreement.  Employee acknowledges and
agrees that the Claims released in this paragraph include, but are not limited
to, (a) any and all Claims based on any law, statute or constitution or
based on contract or in tort on common law, and (b) any and all Claims
based on or arising under any civil rights laws, such as any Pennsylvania
employment laws, or Title VII of the Civil Rights Act of 1964 (42 U.S.C. §
2000e et seq.), or the Federal Age Discrimination in Employment Act (29 U.S.C.
§ 621 et seq.) (hereinafter referred to as the “ADEA”), and (c) any and
all Claims under any grievance or complaint procedure of any kind, and (d) any
and all Claims based on or arising out of or related to his recruitment by,
employment with, the termination of his employment with, his performance of any
services in any capacity for, or any business transaction with, each or any of
the Releasees.  Employee also
understands, that by signing this Agreement, he is waiving all Claims against
any and all of the Releasees released by this Agreement; provided, however,
that as set forth in section 7 (f) (1) (c) of the ADEA, as added
by the Older Workers Benefit Protection Act of 1990, nothing in this Agreement
constitutes or shall (i) be construed to constitute a waiver by Employee
of any rights or claims that may arise after this Agreement is executed by
Employee, or (ii) impair Employee’s right to file a charge with the U.S.
Equal Employment Opportunity Commission (“EEOC”) or any state agency or to
participate in an investigation or proceeding conducted by the EEOC or any
state agency.

 

4.             In consideration of the promises of the Employee set
forth in this Agreement and the Employment Agreement and intending to be
legally bound, Employer hereby irrevocably remises, releases and forever
discharges Employee and his heirs, successors and assigns from any and all
Claims that the Employer ever had or now has though the effective date of this
Agreement.

 

14

 

5.             Employee and Employer covenant
and agree not to sue each other or any of the Releasees for any Claims released
by this Agreement and to waive any recovery related to any Claims covered by
this Agreement.

 

6.             Employee agrees to provide
reasonable transition assistance to Employer (including without limitation
assistance on regulatory matters, operational matters and in connection with
litigation) for a period of one year from the execution of this Agreement at no
additional cost; provided, such assistance shall not unreasonably interfere
with Employee’s pursuit of gainful employment or result in Employee not having
a separation from service (as defined in Section 409A of the Internal
Revenue Code of 1986).  Any assistance
beyond this period will be provided at a mutually agreed cost.  Employee further agrees that he will return
to the Employer all property in his possession, including, but not limited to,
keys, identification cards and credit cards, files, records, publications, address
lists and documents that belong to each or any of the Releasees.  Such documents also include, without
limitation, any documents created or made by Employee during his employment
with the Employer.

 

7.             Employee agrees that, except as
specifically provided in this Agreement and the Employment Agreement, there are
no compensation, benefits, or other payments due or owed to him by each or any
of the Releasees.

 

8.             Except where disclosure has been
made by the Company pursuant to applicable federal or state law, rule or
regulation, Employee agrees that the terms of this Agreement are confidential
and that he will not disclose or publicize the terms of this Agreement and the
amounts paid or agreed to be paid pursuant to this Agreement to any person or
entity, except to his spouse, his attorney, his accountant, and to a government
agency for the purpose of payment or collection of taxes or application for
unemployment compensation benefits. 
Employee agrees that his disclosure of the terms of this Agreement to his
spouse, his attorney and his accountant shall be conditioned upon his obtaining
agreement from them, for the benefit of the Employer, not to disclose or
publicize to any person or entity the terms of this Agreement and the amounts
paid or agreed to be paid under this Agreement. Further, Employer and Employee
agree not to make any false, misleading, defamatory or disparaging
communications about the other party (including without limitation Employer’s
products, services, partners, investors or personnel) and to refrain from
taking any action designed to harm the public perception of the other party or
the Releasees.  Employee further agrees
that he has disclosed to Employer all information, if any, in his possession,
custody or control related to any legal, compliance or regulatory obligations of
Employer and any failures to meet such obligations.

 

9.             The terms of this Agreement are
not to be considered as an admission on behalf of either party.  Neither this Agreement nor its terms shall be
admissible as evidence of any liability or wrongdoing by each or any of the
Releasees in any judicial, administrative or other proceeding now pending or
hereafter instituted by any person or entity. 
The Employer is entering into this Agreement solely for the purpose of
effectuating a mutually satisfactory separation of Employee’s employment.

 

10.           All provisions of this Agreement
are severable and if any of them is determined to be invalid or unenforceable
for any reason, the remaining provisions and portions of this Agreement shall
be unaffected thereby and shall remain in full force to the fullest extent
permitted by law.

 

11.           This Agreement shall be governed
by and interpreted under and in accordance with the laws of Pennsylvania.  Any suit, claim or cause of action arising
under or related to this Agreement shall be submitted by the parties hereto to
the exclusive jurisdiction of the courts of Pennsylvania or to the federal
courts located therein if they otherwise have jurisdiction.  The breach of any promise in this Agreement
by any party shall not invalidate this Agreement or the release and shall not
be a defense to the enforcement of the Agreement against any party.

 

12.           This Agreement constitutes a
complete and final agreement between the parties and supersedes and replaces
all prior or contemporaneous agreements, offer letters, negotiations, or
discussions relating to the subject matter of this Agreement.  With the exception of the Employment
Agreement, no other agreement shall be binding upon each or any of the Releasees,
including, but not limited to, any agreement made hereafter, unless in writing
and signed by an officer of the Employer, and only such agreement shall be
binding against the Employer.

 

13.           Employee is advised, and
acknowledges that he has been advised, to consult with an attorney before
signing this Agreement.

 

15

 

14.           Employee acknowledges that he is
signing this Agreement voluntarily, with full knowledge of the nature and
consequences of its terms.

 

15.           All executed copies of this
Agreement and photocopies thereof shall have the same force and effect and
shall be as legally binding and enforceable as the original.

 

16.           Employee acknowledges that he has
been given up to twenty-one (21) days within which to consider this Agreement
before signing it.  Subject to paragraph
17 below, this Agreement will become effective on the date of Employee’s
signature hereof.

 

17.           For a period of seven (7) calendar
days following his signature of this Agreement, Employee may revoke the
Agreement, and the Agreement shall not become effective or enforceable until
the seven (7) day revocation period has expired.  Employee may revoke this Agreement at any
time within that seven (7) day period, by sending a written notice of
revocation to the
                                                        .  Such written notice must be actually received
by the Employer within that seven (7) day period in order to be
valid.  If a valid revocation is received
within that seven (7) day period, this Agreement shall be null and void
for all purposes.  Payment of the
severance pay amount set forth in the Employment Agreement will be paid in the
manner and at the time(s) described in the Employment Agreement.

 

IN
WITNESS WHEREOF, the Parties have read, understand and do voluntarily execute
this Separation Agreement and General Release which consists of four pages.

 

 

	
  EMPLOYER

  	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  
						

 

16_

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into this 31st day of December, 2008 (the “Effective Date”), by and among Coastal Banking Company, Inc. (the “Company”), CBC National Bank (formerly known as and currently doing business as First National Bank of Nassau County), a national banking association (the “Bank”) (the Company and the Bank are collectively referred to herein as the “Employer”), and Michael G. Sanchez (the “Executive”). 

WHEREAS, pursuant to the agreement and plan of merger (the “Merger Agreement”) dated as of April 6, 2005 by and between the Company and First Capital Bank Holding Corporation (“First Capital”), First Capital merged with and into the Company. 

WHEREAS, the Executive is currently a party to an employment agreement dated April 6, 2005 (the “Prior Agreement”) with the Employer which was effective upon the date of the consummation of the Merger pursuant to the Merger Agreement (the “Merger Effective Date”); 

WHEREAS, the Executive is willing to terminate his interests and rights under the Prior Agreement in consideration for entering into a new employment agreement with the Employer; 

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein including without limitation Section 5(a)(iv), $10.00, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree that on the Effective Date: 

1.

Interpretation with Other Agreements.  This Agreement supersedes the Prior Agreement in its entirety and is the only agreement between Executive and Employer with respect to the general terms and conditions of Executive’s employment with Employer.  However, this Agreement shall not be construed as superseding any other written compensatory benefit plan, arrangement or agreement that is in effect on the Effective Date.

2.

Employment.  The Employer shall employ the Executive, and the Executive shall serve the Employer, as President and Chief Executive Officer of the Company and President and Chief Executive Officer of the Bank upon the terms and conditions set forth herein. The Executive shall have such authority and responsibilities as are consistent with his position and which may be set forth in this Agreement or assigned by the Board of Directors of the Company or the Bank (each a “Board”) from time to time. The Executive shall devote his full business time, attention, skill and efforts to the performance of his duties hereunder, except during periods of illness or periods of vacation and leaves of absence consistent with the Employer’s policy. The Executive may devote reasonable periods of time to perform charitable and other community activities and to manage his personal investments; provided, however, that such activities will not materially interfere with the performance of his duties hereunder and will not be in conflict or competitive with, or adverse to, the interests of the Employer. Under no circumstances will the Executive work for any competitor or have any financial interest in any 

competitor of the Employer; provided, however, that the Executive may invest in up to 1% of the publicly-traded stock or securities of any company whose stock or securities are traded on a national exchange. 

3.

Term.  Unless earlier terminated as provided herein, the Executive’s employment under this Agreement commenced on the Merger Effective Date and shall be for a term (the “Term”) of five years. Upon the expiration of the Term (and successive one year terms), if this Agreement is not terminated by either party at least 90 days before it would expire, it shall automatically renew for successive one year extensions until terminated as set forth in this paragraph or elsewhere in this Agreement. 

4.

Compensation and Benefits.    

a.  Salary.  Employer shall pay the Executive a base salary at a rate of $201,000 per annum. The Board (or an appropriate committee of the Board) shall review the Executive’s base salary at least annually, focusing primarily upon the Bank’s size and performance, and the Board may increase the Executive’s base salary if the Board determines in its sole discretion that an additional increase is appropriate 

b.  Bonus.  For a given fiscal year during the Term, the Executive shall be eligible to receive a cash bonus equaling up to 5% of the net pretax income of the Company for that fiscal year (determined in accordance with generally accepted accounting principals), provided that, (i) the overall condition of the Bank must be “satisfactory” in the most recent report of the Bank released by the Office of the Comptroller of the Currency; (ii) the Bank’s most recent Uniform Financial Institution Rating shall be at least “2”; and (iii) the Bank shall be “well capitalized” (the “Bonus Plan”). Any bonus payable for a fiscal year pursuant to this Section 4(b) shall be paid on or after January 1 and on or before March 15 of the succeeding fiscal year, unless the bonus can not reasonably be calculated by March 15 in which case as soon as administratively practicable after March 15 but not later than April 30 of such fiscal year.  So long as Employer continues the Executive Supplemental Retirement Income Agreement for Michael Sanchez between the Executive and the Bank dated October 20, 2004 or a deferred compensation plan providing substantially similar benefits, then any bonus paid under the Bonus Plan as set forth in this paragraph shall not exceed 50% of Executive’s then current base salary. 

c.  Insurance.  During the Term, Employer shall pay for the premiums necessary to maintain the Executive’s life insurance policy identified as Prudential policy number L8345722, with Executive’s estate being the beneficiary of 50% of the proceeds and Employer being the beneficiary of 50% of the proceeds. Additionally, Employer shall pay for the premiums on Executive’s Long Term Disability insurance policy in existence on the date hereof identified as Auto Owners policy number 0250447000. 

d.  Company Car.  During the Term, Executive shall be entitled to the use of an automobile supplied by Employer. The automobile shall be of a size and quality mutually agreed upon by the parties and consistent with the make and quality of the automobile used by the Executive on the date hereof. The Employer shall make a new automobile available for the use of the Executive no less frequently than every three years. 

-2-

e.  Stock Options.  The Executive shall continue to be eligible to participate in the Bank’s long-term equity incentive program and be eligible for the grant of stock options, restricted stock, and other awards thereunder or under any similar plan adopted by the Company, provided that the grant of any such awards is not required by this Agreement. Nothing herein shall be deemed to preclude the granting to the Executive of warrants or options under a director option plan in addition to the options granted hereunder. 

f.  Other Benefits.  In addition to the benefits set forth in Sections 4(c) through (e) above, the Executive shall participate in any other retirement, welfare, deferred compensation, life and health insurance, and other benefit plans or programs of the Employer now or hereafter applicable to the Executive or applicable generally to employees of the Employer, as determined by the Board of Directors of the Company. 

g.  Expenses.  The Employer shall continue to reimburse the Executive for reasonable travel and other expenses related to the Executive’s duties which are incurred and accounted for in accordance with the Employer’s standard business practices. 

h.  Rules Governing Reimbursements and In-Kind Benefits.  All expenses eligible for reimbursement and all in-kind benefits provided under this Section 4 must be incurred by or provided to, as applicable, the Executive during the Term of this Agreement (including, to the extent applicable, the Continuation Period (as defined below)) for the Executive to be eligible for the reimbursement or the in-kind benefit.  All taxable reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred, nor shall the amount of taxable, reimbursable expenses incurred or in-kind benefits provided in one taxable year affect the expenses eligible for reimbursement or the in-kind benefits provided, as applicable, in any other taxable year.  The right to a taxable reimbursement or an in-kind benefit under this Agreement will not be subject to liquidation or exchange for another benefit.

5.

Termination.    

a.

The Executive’s employment under this Agreement may be terminated prior to the end of the Term only as follows: 

(i)

upon the death of the Executive; 

(ii)

upon the disability of the Executive for a period of no less than 180 consecutive days which, in the opinion of the Board, renders him unable to perform the essential functions of his job and for which reasonable accommodation is unavailable (or, if less than 180 days, until the Executive becomes eligible for payments under the long-term disability policy covering the Executive).  For purposes of this Agreement, a “disability” is defined as a physical or mental impairment that substantially limits one or more major life activities, and a “reasonable accommodation” is one that does not impose an undue hardship on the Employer; 

-3-

(iii)

upon the determination by the Employer of Cause for termination, in which event such employment may be terminated by written notice at the election of the Employer; 

(iv)

by the Executive for Good Reason pursuant to (A) Section 5(e) or (B) Section 5(f), as applicable; 

(v)

by the Employer by written notice for any reason other than Cause, the Executive’s death, or the Executive’s disability (termination “Without Cause”), or 

(vi)

by written notice by the Executive for any reason (a “Resignation”). 

b.

If the Executive’s employment is terminated because of the Executive’s death, the Executive’s estate shall receive within fifteen (15) days after his death any sums due him as base salary and/or reimbursement of expenses through the end of the month during which death occurred, plus any bonus earned or accrued under the Bonus Plan through the date of death (including any amounts awarded for previous years but which were not yet vested) and a pro rata share of any bonus with respect to the current fiscal year which had been earned as of the date of the Executive’s death equal to the Executive’s target bonus for the fiscal year in which the death occurs multiplied by a fraction, the numerator of which is the number of days in such fiscal year during which the Executive was employed and the denominator of which is 365.  

c.

If the Employer determines that the Executive is subject to a disability, then during the period leading up to the termination of the Executive’s employment by the Employer as a result of disability, the Employer shall continue to employ the Executive and he shall continue to receive compensation and benefits provided for by this Agreement through the date the Employer terminates the Executive’s employment.  The Executive’s employment hereunder shall not be terminated by the Employer due to the Executive’s disability prior to the time the Executive becomes eligible for payments under the long-term disability policy covering the Executive. 

d.

If the Executive’s employment is terminated by the Employer for Cause as provided above, or in the event of a Resignation (except under the circumstances described in Sections 5(e) or 5(f)), the Executive shall receive any sums due him as base salary and/or reimbursement of expenses through the date of such termination or Resignation, but Executive will thereby forfeit any rights in any unpaid bonus, including, without limitation, any bonus amounts awarded for previous years which were not yet vested and any share of any bonus with respect to the current fiscal year which had been earned as of the date of such termination or Resignation.

e.

If the Executive’s employment is terminated Without Cause or the Executive effects a Resignation for Good Reason pursuant to Section 5(a)(iv)(A), the Employer shall: (i) pay to the Executive within fifteen (15) days (A) any sums due him as base salary and/or reimbursement of expenses through the end of the month during which 

-4-

the termination or Resignation occurred, (B) any bonus earned or accrued under the Bonus Plan through the date of termination or Resignation (including any amounts awarded for previous years but which were not yet vested) and (C) a pro rata share of any bonus with respect to the current fiscal year which had been earned as of the date of the Executive’s termination or Resignation equal to the Executive’s target bonus for the fiscal year in which the termination or Resignation occurs multiplied by a fraction, the numerator of which is the number of days in such fiscal year during which the Executive was employed and the denominator of which is 365; (ii) pay to the Executive within fifteen (15) days a cash amount in a lump sum equal to two hundred percent (200%) of his then-current annual base salary; and (iii) convey to Executive the vehicle then provided to him pursuant to this Agreement free of any liens within fifteen (15) days following the Executive’s termination or Resignation. 

f.

If Executive’s employment is terminated (i) upon or following a Change in Control for any reason upon delivery by the Executive of notice to the Employer within a twelve-month period after the effective date of the Change in Control, (ii) by the Executive for Good Reason in connection with a Change in Control pursuant to Section 5(a)(iv)(B); or (iii) by the Employer Without Cause in connection with a Change in Control, then, in addition to other rights and remedies available in law or equity, the Employer shall (i) pay to the Executive within fifteen (15) days (A) any sums due him as base salary and/or reimbursement of expenses through the end of the month during which the termination or Resignation occurred, (B) any bonus earned or accrued under the Bonus Plan through the date of termination or Resignation (including any amounts awarded for previous years but which were not yet vested) and (C) a pro rata share of any bonus with respect to the current fiscal year which had been earned as of the date of the Executive’s termination or Resignation equal to the Executive’s target bonus for the fiscal year in which the termination or Resignation occurs multiplied by a fraction, the numerator of which is the number of days in such fiscal year during which the Executive was employed and the denominator of which is 365; (ii)  convey to Executive the vehicle then provided to him pursuant to this Agreement free of any liens within fifteen (15) days following the Executive’s termination or Resignation; and (iii)  pay the Executive a cash amount in a lump sum equal to equal to 2.99 times the average of the Executive’s three (3) highest calendar years of annual compensation, as reported in Box 1 of Form W-2, during the five-consecutive calendar year period ending immediately prior to the calendar year in which the termination or Resignation occurs.  Any termination of the Executive’s employment described in clauses (ii) or (iii) above which occurs within ninety (90) days prior to a Change in Control but which the Executive reasonably demonstrates (x) was at the request of a third party, or (y) otherwise arose in connection with, or in anticipation of, a Change in Control which actually occurs, shall be deemed to be “in connection with” a Change in Control for purposes of this Agreement, notwithstanding that it occurred prior to the Change in Control. 

g.

With the exceptions of the provisions of this Section 5, and the express terms of any benefit plan under which the Executive is a participant, upon termination of the Executive’s employment, the Employer shall have no obligation to the Executive for, and the Executive waives and relinquishes, any further compensation or benefits 

-5-

(exclusive of COBRA benefits). At the time of termination of employment, the Executive shall enter into a form of release acknowledging such remaining obligations and discharging the Employer, as well as the Employer’s officers, directors and employees with respect to their actions for or on behalf of the Employer, from any other claims or obligations arising out of or in connection with the Executive’s employment by the Employer, including the circumstances of such termination. 

h.

Notwithstanding Section 5(g) of this Agreement, if the Executive’s employment is terminated in accordance with Section 5(e) or (f) of this Agreement, subject to any generally limiting provisions of any employee benefit plan pursuant to which such benefits are provided, Employer shall at its expense continue for a period of twelve (12) months following the date of such termination (the “Continuation Period”) on behalf of Executive the benefits provided (x) to Executive at any time during the 90-day period immediately prior to the date of his termination or of the Change in Control, as applicable, or at any time thereafter or (y) to other similarly situated employees who continue in the employ of Employer during the Continuation Period.  The benefits (including deductibles and costs) provided during the Continuation Period shall be no less favorable to Executive than the most favorable of such benefits during any of the periods referred to in clauses (x) and (y) above.  Employer’s obligation with respect to the foregoing benefits shall be limited to the extent that Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case Employer may reduce the coverage of any benefits it is required to provide Executive as long as the aggregate benefits of the combined benefit plans is no less favorable to Executive than the benefits required to be provided under this provision.  This Section shall not be interpreted so as to limit any benefits to which Executive may be entitled under any of Employer’s employee benefit plans, programs or practices following Executive’s termination of employment, including without limitation, retiree medical and life insurance benefits.  Employer shall not, by virtue of this provision, be under any obligation to continue to maintain any particular plan or program.

If any benefit, including any reimbursement or in-kind benefit, described in the immediately preceding paragraph:

(i) 

is not excludible from the Executive’s gross income;

(ii) 

is not for an expense the Executive could otherwise deduct under Section 162 or 167 of the Internal Revenue Code of 1986, as amended (the “Code”) as business expenses incurred in connection with the performance of services (ignoring any applicable limitation based on adjusted gross income);

(iii) 

is not for reasonable outplacement or moving expenses actually incurred by the Executive and directly related to the termination of his services for the Employer;

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(iv) 

is not for a medical expense the Executive could otherwise deduct under Code Section 213 (disregarding the requirement of Section 213(a) that the deduction is available only to the extent that such expenses exceed 7.5 percent of adjusted gross income) during the COBRA period applicable or otherwise applicable to the Executive; or 

(v)

if not otherwise excluded pursuant to (i) through (iv) above, does not, in the aggregate with all other non-excludible benefits, exceed the applicable dollar amount under Code Section 402(g)(1)(B) for the year of the Executive’s termination of employment, 

then, notwithstanding anything in the first paragraph of this Section 5(h) to the contrary, the payment of any such benefit by the Employer shall be made in accordance with the rules described in Section 4(h) above, subject to any delay required by Section 5(p) below.

i.

In the event that the Executive’s employment is terminated for any reason and the Executive serves as a director of the Company, the Bank, or any other subsidiary of the Company, the Executive shall (and does hereby) tender his resignation from such positions effective as of the date of termination. 

j.

The parties intend that the severance payments and other compensation provided for herein are reasonable compensation for the Executive’s services to the Employer and shall not constitute “excess parachute payments” within the meaning of Code Section 280G(b) and any regulations thereunder. In the event that the Employer’s independent accountants acting as auditors for the Employer on the date of a Change in Control determine that the payments provided for herein and other arrangements among the parties constitute “excess parachute payments,” then the Executive’s compensation payable hereunder shall be decreased, so as to equal an amount that is $1.00 less than three times the Executive’s “base amount,” as that term is defined in Code Section 280G(b). In the event the payments are required to be reduced pursuant to this Section, the last payments in time shall be reduced first. 

k.

For purposes of this Agreement, the terms “termination” and “termination of employment” (and variations thereof) shall mean the Executive’s “separation from service” within the meaning of Section 1.409A-1(h) of the Treasury Regulations under Code Section 409A, as amended, applying the default terms thereof.  

l.

Notwithstanding anything to the contrary herein, if the Executive is suspended or temporarily prohibited from participating in the conduct of the Employer’s affairs by a notice served under section 8(e)(3) or (g)(1) of Federal Deposit Insurance Act (12 U.S.C. 1818 (e)(3) and (g)(1)), the Employer’s obligations under this Agreement shall be suspended as of the date of service unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Employer may in its discretion (i) pay the Executive all or part of the compensation withheld while the obligations under this 

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Agreement were suspended and (ii) reinstate (in whole or in part) any of such obligations which were suspended. 

m.

Notwithstanding anything to the contrary herein, if the Executive is removed or permanently prohibited from participating in the conduct of the Employer’s affairs by an order issued under section 8 (e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818 (e)(4) or (g)(1)), all obligations of the Executive under this Agreement shall terminate as of the effective date of the order, but any vested rights of the parties hereto shall not be affected. 

n.

Notwithstanding anything to the contrary herein, if the Employer is in default (as defined in section 3(x)(1) of the Federal Deposit Insurance Act), all obligations under this Agreement shall terminate as of the date of default, but this Section 5(n) shall not affect any vested rights of the parties hereto. 

o.

Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder. 

p.

Notwithstanding anything to the contrary herein, if the Executive is a “specified employee” within the meaning of Code Section 409A and the regulations and related guidance thereunder at the date of the Executive’s termination of employment, then such portion of the payments that would result in a tax under Code Section 409A if paid during the first six (6) months after termination of employment shall be suspended, starting with the payments latest in time during such six (6)-month period, and paid to the Executive in a single lump sum during the earlier of (A) the seventh month following the date of the Executive’s termination of employment or (B) the fifteen-day period following the Executive’s death.  “Payment” for this purpose includes, but is not limited to, any transfer of ownership of the vehicle provided to Executive under Section 4(d) above and any payment of any non-excludible benefit described in Section 5(h) above. 

6.

Ownership of Work Product.    The Employer shall own all Work Product arising during the course of the Executive’s employment (prior, present or future). For purposes hereof, “Work Product” shall mean all intellectual property rights, including all Trade Secrets, U.S. and international copyrights, patentable inventions, and other intellectual property rights, in any programming, documentation, technology, work of authorship or other work product that relates to the Employer, its business or its customers and that Executive conceives, develops, or delivers to the Employer or that otherwise arises out of the services provided by the Executive to the Employer hereunder, at any time during his employment, during or outside normal working hours, in or away from the facilities of the Employer, and whether or not requested by the Employer. If the Work Product contains any materials, programming or intellectual property rights that the Executive conceived or developed prior to, and independent of, the Executive’s work for the Employer, the Executive agrees to identify the pre-existing items to the Employer, and the Executive grants the Employer a worldwide, unrestricted, royalty-free right, including the right to sublicense such items. The Executive agrees to take such actions and execute such 

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further acknowledgments and assignments as the Employer may reasonably request to give effect to this provision. 

7.

Protection of Trade Secrets.    The Executive agrees to maintain in strict confidence and, except as necessary to perform his duties for the Employer, the Executive agrees not to use or disclose any Trade Secrets of the Employer during or after his employment. For the purposes hereof, “Trade Secret” means information, including, without limitation, technical or non-technical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a process, a drawing, financial data, financial plans, product plans, information on customers or a list of actual or potential customers or suppliers, which: (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 

8.

Protection of Other Confidential Information.    In addition, the Executive agrees to maintain in strict confidence and, except as necessary to perform his duties for the Employer, not to use or disclose any Confidential Business Information of the Employer during his employment and for a period of 24 months following termination of the Executive’s employment. “Confidential Business Information” shall mean any internal, non-public information (other than Trade Secrets already addressed above) concerning the Employer’s financial position and results of operations (including revenues, assets, net income, etc.); annual and long-range business plans; product or service plans; marketing plans and methods; training, educational and administrative manuals; customer and supplier information and purchase histories; and employee lists. The provisions of Sections 6 and 7 above shall also apply to protect Trade Secrets and Confidential Business Information of third parties provided to the Employer under an obligation of secrecy. 

9.

Return of Materials.    The Executive shall surrender to the Employer, promptly upon its request and in any event upon termination of the Executive’s employment, all media, documents, notebooks, computer programs, handbooks, data files, models, samples, price lists, drawings, customer lists, prospect data, or other material of any nature whatsoever (in tangible or electronic form) in the Executive’s possession or control, including all copies thereof, relating to the Employer, its business, or its customers. Upon the request of the Employer, Executive shall certify in writing compliance with the foregoing requirement. 

10.

Restrictive Covenants.

a.

No Solicitation of Customers.  During the Executive’s employment with the Employer and for a period of 12 months thereafter, the Executive shall not (except on behalf of or with the prior written consent of the Employer), either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, solicit or attempt to solicit Customers to induce or encourage them to acquire or obtain from anyone other than the Employer or its subsidiaries any product or service competitive with or as a substitute for any of the Employer’s Products. For purposes of this Section, “Customer” 

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refers to any person or group of persons with whom the Executive had direct material contact with regard to the selling, delivery, or support of the Employer’s Products, including servicing such person’s or group’s account, during the period of 12 months preceding the termination date of Executive’s employment. The “Employer’s Products” refers to the products and services that the Employer or any of its subsidiaries or affiliates offered or sold within six months of the he termination date of Executive’s employment. This restriction does not apply after a Change in Control. 

b.

No Recruitment of Personnel.  During the Executive’s employment with the Employer and for a period of 12 months thereafter, the Executive shall not, either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, solicit or induce any employee of or consultant to the Employer or any of its subsidiaries or affiliates to leave his or her position with the Employer (or the subsidiary or affiliate) for the purpose of providing banking services to another business, or recruit or attempt to recruit such persons to accept employment or any other position with another business that is providing banking services. This restriction does not apply after a Change in Control. 

c.

Non-Competition Agreement.  During the Executive’s employment with the Employer and for a period of 12 months thereafter, the Executive shall not (without the prior written consent of the Employer) compete with the Employer or any of its affiliates by, directly or indirectly, forming, serving as an organizer, director, officer or employee of, or consultant to, or acquiring or maintaining more than a 1% passive investment in, a depository financial institution or holding company therefor if such depository institution or holding company has one or more offices or branches located within a radius of 35 miles from the Employer’s headquarters. 

d.

Independent Provisions.  The provisions in each of the above Sections 10(a), 10(b), and 10(c) are independent, and the unenforceability of any one provision shall not affect the enforceability of any other provision. 

11.

Successors; Binding Agreement.  This Agreement shall be binding upon and shall inure to the benefit of the Employer and its successors and assigns. Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal personal representative. 

12.

Notice.  For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by each party to the other; provided, however, that all notices to the Employer shall be directed to the attention of the Employer with a copy to the Secretary of the Employer. All notices and communications shall be deemed to have been received on the date of delivery thereof. 

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13.

Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Florida without giving effect to the conflict of laws principles thereof. Any action brought by any party to this Agreement shall be brought and maintained in a court of competent jurisdiction in State of Florida. 

14.

Non-Waiver.  Failure of the Employer to enforce any of the provisions of this Agreement or any rights with respect thereto shall in no way be considered to be a waiver of such provisions or rights, or in any way affect the validity of this Agreement. 

15.

Enforcement.  The Executive agrees that in the event of any breach or threatened breach by the Executive of any covenant contained in Section 7, 8, 10(a), 10(b), or 10(c) hereof, the resulting injuries to the Employer would be difficult or impossible to estimate accurately, even though irreparable injury or damages would certainly result. Accordingly, an award of legal damages, if without other relief, would be inadequate to protect the Employer. The Executive, therefore, agrees that in the event of any such breach, the Employer shall be entitled to obtain from a court of competent jurisdiction an injunction to restrain the breach or anticipated breach of any such covenant, and to obtain any other available legal, equitable, statutory, or contractual relief. Should the Employer have cause to seek such relief, no bond shall be required from the Employer, and the Executive shall pay all attorney’s fees and court costs which the Employer may incur to the extent the Employer prevails in its enforcement action. 

16.

Saving Clause.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision or clause of this Agreement, or portion thereof, shall be held by any court or other tribunal of competent jurisdiction to be illegal, void, or unenforceable in such jurisdiction, the remainder of such provision shall not be thereby affected and shall be given full effect, without regard to the invalid portion. It is the intention of the parties that, if any court construes any provision or clause of this Agreement, or any portion thereof, to be illegal, void, or unenforceable because of the duration of such provision or the area or matter covered thereby, such court shall reduce the duration, area, or matter of such provision, and, in its reduced form, such provision shall then be enforceable and shall be enforced. 

17.

Certain Definitions.    

a.

“Cause” shall consist of any of the following:

(i)

the commission by the Executive of a willful act (including, without limitation, a dishonest or fraudulent act) or a grossly negligent act, or the willful or grossly negligent omission to act by the Executive, which is intended to cause, causes, or is reasonably likely to cause material harm to the Employer (including harm to its business reputation); 

(ii)

the indictment of the Executive for the commission or perpetration by the Executive of any felony or any crime involving dishonesty, moral turpitude or fraud; 

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(iii)

the material breach by the Executive of this Agreement that, if susceptible of cure, remains uncured for thirty (30) days following written notice to the Executive of such breach; 

(iv)

the exhibition by the Executive of a standard of behavior within the scope of his employment that is materially disruptive to the orderly conduct of the Employer’s business operations (including, without limitation, substance abuse or sexual misconduct) to a level which, in the Board’s good faith and reasonable judgment, is materially detrimental to the Employer’s best interest, that, if susceptible of cure, remains uncured for thirty (30) days following written notice to the Executive of such specific inappropriate behavior; 

(v)

gross dereliction  of duties by the Executive; or 

(vi)

repeated failures to follow promptly the lawful, reasonable instructions of the Board of Directors of the Company or the Bank. 

b.

“Change in Control” shall mean the occurrence during the Term of any of the following events (except for the consummation of the transactions contemplated by the Merger Agreement which shall not be deemed to be a “Change in Control”), unless such event is a result of a Non-Control Transaction: 

(i)

The individuals who, as of the Merger Effective Date, are members of the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least 50% of the Board of Directors of the Company; provided, however, that if the election, or nomination for election by the Company’s shareholders, of any new director was approved in advance by a vote of at least 50% of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; provided, further, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened election contest, or other actual or threatened solicitation of proxies, proxy contest, or consents by or on behalf of any person other than the Board of Directors of the Company, including by reason of any agreement intended to avoid or settle any election contest or proxy contest. 

(ii)

An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term “person” is used for purposes of Section 13(d) or 14(d) of the Exchange Act) immediately after which such Person has “Beneficial Ownership” (within the 

-12-

meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power of the Company’s then outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities which are acquired in a Non-Control Acquisition shall not constitute an acquisition which would cause a Change in Control. 

(iii)

Consummation of: (i) a merger, consolidation, or reorganization involving the Company; (ii) a complete liquidation or dissolution of the Company; or (iii) the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary). 

(iv)

A notice of an application is filed with the Office of Comptroller of the Currency (the “OCC”) or the Federal Reserve Board or any other bank or thrift regulatory approval (or notice of no disapproval) is granted by the Federal Reserve, the OCC, the Federal Deposit Insurance Corporation, or any other regulatory authority for permission to acquire control of the Company or any of its banking subsidiaries; provided that if the application is filed in connection with a transaction which has been approved by the Board, then the Change in Control shall not be deemed to occur until consummation of the transaction. 

c.

“Good Reason” shall mean the occurrence of any of the events or conditions described in subsections (i) through (viii) hereof: 

(i)

a change in the Executive’s status, title, position or responsibilities (including reporting responsibilities) which, in the Executive’s reasonable judgment, represents an adverse change from his status, title, position or responsibilities as in effect as of the Effective Date or at any time thereafter; the assignment to the Executive of any duties or responsibilities which, in the Executive’s reasonable judgment, are inconsistent with his status, title, position or responsibilities as in effect as of the Effective Date or at any time thereafter; any removal of the Executive from or failure to reappoint or reelect him to any of such offices or positions, except in connection with the termination of his employment for disability or Cause, as a result of his death, or by the Executive other than for Good Reason, or any other change in condition or circumstances that in the Executive’s reasonable judgment makes it materially more difficult for the Executive to carry out the duties and responsibilities of his office than existed as of the Effective Date or at any time thereafter; 

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(ii)

a reduction in the Executive’s base salary or any failure to pay the Executive any compensation or benefits to which he is entitled within 10 days of the date due; 

(iii)

the Employer’s requiring the Executive to be based at any place outside a 30-mile radius from the executive offices occupied by the Executive as of the Effective Date, except for reasonably required travel on the Employer’s business which is not materially greater than such travel requirements prior to the Effective Date; 

(iv)

the failure by the Employer to (A) continue in effect (without reduction in benefit level and/or reward opportunities) any material compensation or employee benefit plan in which the Executive was participating at any time within ninety (90) days preceding the effective date of a Change in Control or at any time thereafter, unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to the Executive, or (B) provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other employee benefit plan, program and practice in which the Executive was participating at any time within ninety (90) days preceding the effective date of a Change in Control or at any time thereafter; 

(v)

the insolvency or the filing (by any party, including the Company or the Employer) of a petition for bankruptcy of the Company or the Employer, which petition is not dismissed within 60 days; 

(vi)

any material breach by the Employer of any material provision of this Agreement; 

(vii)

any purported termination of the Executive’s employment for Cause by the Employer which does not comply with the terms of this Agreement; or 

(viii)

the failure of the Employer to obtain an agreement, satisfactory to the Executive, from any successor or assign to assume and agree to perform this Agreement, as contemplated in Section 11 hereof. 

provided, however, that for a Resignation by the Executive to be for Good Reason, the Executive must notify the Employer in writing of the event giving rise to Good Reason within thirty (30) days following the occurrence of the event (or, if later, the Executive’s knowledge of the occurrence of the event), the event must remain uncured after the expiration of thirty (30) days following the delivery of written notice of such event to the Employer by the Executive, and the Executive must resign effective no later than sixty (60) days following the Employer’s failure to cure the event and must give at least thirty (30) days advance written notice prior to his effective date of resignation.

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To the extent applicable, any event or condition described in clause (i) through (viii) above which occurs within ninety (90) days prior to a Change in Control but which the Executive reasonably demonstrates (A) was at the request of a third party, or (B) otherwise arose in connection with, or in anticipation of, a Change in Control which actually occurs, shall constitute Good Reason for purposes of this Agreement, notwithstanding that it occurred prior to the Change in Control. The Executive’s right to terminate his employment for Good Reason shall not be affected by his incapacity due to physical or mental illness. 

d.

“Non-Control Transaction” shall mean a transaction described below: 

(i)

the shareholders of the Company, immediately before such merger, consolidation or reorganization, own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least 50% of the combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization; and 

(ii)

immediately following such merger, consolidation or reorganization, the number of directors on the board of directors of the Surviving Corporation who were members of the Incumbent Board shall at least equal the number of directors who were affiliated with or appointed by the other party to the merger, consolidation or reorganization. 

18.

Entire Agreement.  Subject to Section 1 above, this Agreement constitutes the entire agreement between the parties hereto as of the Effective Date and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. 

19.

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

20.

Code Section 409A.  The parties intend for this Agreement to be interpreted in accordance with Code Section 409A and for any payment under this Agreement, to the extent subject to Code Section 409A, to be paid in compliance with Code Section 409A and the Treasury Regulations and other generally applicable guidance thereunder, such that there shall be no adverse tax consequences, interest, or penalties to the Executive as a result of such payments.  The parties agree to work together in good faith to modify this Agreement or the form or timing of any payment to the extent necessary to comply with Code Section 409A and avoid application of any taxes, penalties, or interest thereunder, and take such other actions as may be permissible to correct any failures under the Agreement to comply in operation with the requirements of Code Section 409A.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the Employer has caused this Agreement to be executed and its seal to be affixed hereunto by its officers thereunto duly authorized, and the Executive has signed and sealed this Agreement, effective as of the date first above written. 

			
	 

	EMPLOYER

	 
	 

	 

	COASTAL BANKING COMPANY, INC.

	 
	 

	                                                       

	By:

	/s/ Edward E. Wilson

	 

	Name:

	Edward E. Wilson 

	 
	Title:

	Chairman of Compensation

Committee

	 
	 
	 

	 

	CBC NATIONAL BANK

	 
	 
	 

	 

	By:

	/s/ Edward E. Wilson

	 

	Name:

	Edward E. Wilson

	 
	Title:

	Director

	 
	 
	 

	 
	 
	 

	 

	EXECUTIVE

	 

	 
	 

	 
	 
	/s/ Michael G. Sanchez

	 
	Name:

	Michael G. Sanchez

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