Document:

Exhibit 10.1

Susquehanna Bancshares, Inc. 

Short-Term Incentive Plan  

 

Introduction

Susquehanna
Bancshares, Inc. (the “Company”) has adopted this Short-Term Incentive Plan
(the “Plan”) to provide a vehicle to reward eligible employees for their
contributions to the Company’s financial success. 

Effective
Date 

The Plan
was originally effective as of January 1, 2011 and was amended and restated
effective as of January 1, 2012.  The Plan is now amended and restated
effective as of January 1, 2013.  Each January 1 to December 31 period will be
the “Plan Year.” The Plan will be reviewed annually by the Compensation
Committee of the Board of Directors of the Company (the “Compensation
Committee”) to ensure proper alignment with the Company’s business objectives.
The Compensation Committee retains the rights, as described below, to amend or
modify the Plan at any time.

Purpose 

The Plan’s
objectives are to: 

·        
Align executives, management and
employees with the Company’s strategic plan and critical performance goals. 

·        
Encourage teamwork and
collaboration across all areas of the Company - our collective contributions
will drive improved business results. 

·        
Motivate and reward the
achievement of core performance objectives. 

·        
Provide payouts commensurate with
Company, affiliate, region, function, unit and/or employee performance – as
defined by each participating role. 

·        
Provide competitive total
compensation opportunities.

·        
Enable the Company to attract,
motivate and retain talented employees. 

·        
Ensure our incentives are
appropriately risk-balanced (i.e., do not unintentionally motivate
inappropriate risk taking). 

·        
Provide a program that is simple
and easy to understand and administer. 

The Plan is
intended to meet the requirements for “qualified performance-based
compensation” under section 162(m) of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder (the “Code”) with respect
to any “covered employee” of the Company, as such term is defined under section
162(m) of the Code. The Compensation Committee may, but is not required to,
structure awards under the Plan to meet the requirements for “qualified
performance-based compensation” under section 162(m) of the Code.

Plan
Administration 

The Plan
has been approved by the Compensation Committee, and the Compensation Committee
will administer the Plan. The Compensation Committee has the sole authority to
interpret the Plan and to make or nullify any rules and procedures, as
necessary, for proper administration of 

the Plan.
The Compensation Committee will make all final determinations regarding cash
compensation paid to executive officers of the Company. Except as required by
applicable law, determinations for other employees 

 

 

 

  

will
be made by senior management subject to review and approval by the Compensation
Committee. Any determination by the Compensation Committee will be final and
binding.  

Participation
and Eligibility 

Selected
employees are eligible to participate in the Plan. Employees will be nominated
by senior management to be eligible to participate in the Plan.  The
Compensation Committee will approve all executive officers for participation in
the Plan and will approve all other employees as recommended by management for
participation in the Plan. 

Unless the
Compensation Committee determines otherwise, other criteria for participation
in the Plan will include: 

·        
An employee must be employed by
September 30 of the Plan Year to be eligible to participate in the Plan for the
Plan Year. An employee hired after September 30 of the Plan Year must wait
until the next applicable Plan Year to be eligible to participate in the Plan.

·        
An employee must have one or more
approved goals in the “MyPerformance” system as of April 30 of a Plan Year (or
such other date as is set by the Compensation Committee for the Plan Year) or
within 30 days after commencement of employment, if later, unless otherwise
determined by the Compensation Committee.

·        
An employee must not be on a
Performance Improvement Plan, receive a performance rating of “Meets
Expectations” (or such equivalent) or better for the Plan Year, and remain in
good standing throughout the Plan Year. If an employee is placed on probation
during the Plan Year, any Award earned will be reduced on a pro-rata basis to
reflect the time on probation. 

·        
An employee must be current with
all regulatory and compliance requirements.

·        
An employee generally must be an
active employee as of the Award payout date to receive an Award.

For
purposes of the Plan “employee” shall mean an employee of the Company or a
subsidiary of the Company (including an officer or director who is also an
employee), but excluding any individual (a) employed in a casual or temporary
capacity (i.e., those hired for a specific job of limited duration), (b) whose
terms of employment are governed by a collective bargaining agreement that does
not provide for participation in the Plan, (c) any individual characterized as
a “leased employee” within the meaning of section 414(n) of the Code, (d)
classified by the Company as a “contractor” or “consultant,” no matter how
characterized by the Internal Revenue Service, other governmental agency or a
court, (e) employed as a mortgage loan originator as defined by TILA and
Regulation Z, or (f) who participates in a different incentive plan sponsored
by a subsidiary of the Company. Any change of characterization of an individual
by any court or government agency shall have no effect upon the classification
of an individual as an employee for purposes of the Plan, unless the
Compensation Committee determines otherwise. Whether an employee is exempt or
non-exempt shall be determined by the Company’s Human Resource Department based
on the employee’s status as of the end of the Plan Year for which an Award is
earned. Unless otherwise specified herein, all references to employee in the
Plan shall include both exempt and non-exempt employees. 

Performance Period 

The performance period for the Plan is the Plan Year. 

Incentive
Targets 

Each
eligible employee will have a specified target annual cash incentive award (the
“Target Award”) or will be eligible to receive a percentage of a pool created
based on level of attainment of the applicable performance goals, in each case,
based on his or her role at the Company. Except as required by applicable law,
the Target Award for executive officers is determined by the Compensation
Committee and by senior management for all other eligible employees, in each
case, in their sole discretion.  Target Awards are based on competitive 

 

 

 

  

practices and reflect the amount of the Award to be paid
for meeting predefined performance goals at the 100% level. Target Awards will
be defined as a percentage of base earnings. Base earnings includes straight
time pay, and does not include overtime, commissions, bonuses, incentives,
special premiums and allowances, or other non-salary items, actually earned by
an eligible employee for a Plan Year, determined as of the last day of the Plan
Year. This allows for an automatic conversion for part-time employees,
employees who receive salary increases during the year, and employees who are
employed after the start of the year. 

Actual
awards (“Awards”) can range from 0% to 200% of the Target Award established for
an eligible employee for the Plan Year or be subject to such other cap or
limitation as the Compensation Committee may set for a Plan Year, depending on
performance and may be based on achievement of threshold (i.e. baseline),
target and stretch (i.e. superior) performance which will be determined by the
Compensation Committee; provided that for Awards intended to qualify as
“qualified performance-based compensation” for purposes of section 162(m) of
the Code the maximum amount payable to any covered employee under the Plan is
200% of base earnings. Performance below threshold will result in no payout. 

If an
employee changes his or her role or is promoted during the Plan Year, and that
promotion results in a higher Target Award opportunity, he or she will be
eligible for the new role’s Target Award opportunity on a pro-rata basis. 

In the
event of an approved leave of absence, the Target Award opportunity level for
the year will be adjusted to reflect the time in active status.

Performance
Goals 

For each
Plan Year, each eligible employee will have predefined performance goals that
will be used, in part, to determine his or her Award. 

There may
be up to four categories of performance goals for each eligible employee: 

·        
Corporate; 

·        
Division; 

·        
Unit; and/or

·        
Individual (defined for each
role).

All
employees will have a portion of their incentive opportunity tied to Corporate
performance. 

To the
extent Awards are intended to qualify as “qualified performance based
compensation” for purposes of section 162(m) of the Code, performance goals
will be set by the Compensation Committee no later than the earlier of (i) 90
days after the beginning of the Plan Year or (ii) the date on which 25% of the
Plan Year has been completed, or such other date as may be required or
permitted under applicable regulations under section 162(m) of the Code and may
be based on earnings or earnings growth (including but not limited to earnings
per share or net income); economic profit, shareholder value added or economic
value added; return on equity, assets or investment; revenues; expenses; stock
price or total shareholder return; regulatory compliance; satisfactory internal
or external audits; improvement of financial or credit ratings; achievement of
asset quality objectives; achievement of balance sheet or income statement
objectives, including, without limitation, capital and expense management;
efficiency ratio; non-interest income to total revenue ratio; net interest
margin; credit quality measures (including non-performing asset ratio, net
charge-off ratio, and reserve coverage of non-performing loans); net operating
profit; loan growth; deposit growth; non-interest income growth; market share;
productivity ratios; or achievement of risk management objectives. Such
performance goals may also be particular to an eligible employee or the
division, department, branch, line of business, subsidiary or other unit in
which the employee works, or may be based on attaining a specified absolute
level of the performance goal, or a percentage increase or decrease in the
performance goal compared to a pre-established target, previous 

 

 

 

  

years’ results, or a designated market index or comparison
group, all as determined by the Compensation Committee. 

Performance
targets and ranges for each corporate performance goal will be recommended by
management and approved by the Compensation Committee. Target Awards may
provide for differing amounts to be paid based on differing thresholds of
performance. The Company will notify each eligible employee of the employee’s
Target Award and the applicable performance goals for the Plan Year. The
specific allocation of goals, including how the performance goals are weighted,
will be determined at the discretion of the Compensation Committee and may be
based on the eligible employee’s role, key area of contribution or such other
factor as determined by the Compensation Committee. 

For Awards
intended to meet the requirements for “qualified performance-based
compensation” under section 162(m) of Code, the Compensation Committee will
specify in the minutes (i) each employee’s Target Award, (ii) the performance
goals for each eligible employee, and (iii) how the financial calculations for
the performance goals will be made, including what, if any, adjustments will be
made in accordance with the Plan. The maximum dollar amount that may be paid to
an eligible employee for a Plan Year is 200% of base earnings. For decisions
with respect to Awards not intended to be “qualified performance-based
compensation,” the Compensation Committee will have flexibility in establishing
the Target Award opportunity, performance goals and Award level for each
eligible employee under the Plan. 

Award
Levels 

At the end
of the Plan Year (December 31st), or as soon as practical thereafter,
performance is assessed against the specific goals established at the start of
the Plan Year. An eligible employee will earn an Award for the Plan Year based
on the level of achievement of the performance goals established by the
Compensation Committee for the Plan Year; provided that for Awards intended to
qualify as “qualified performance based compensation,” the Compensation
Committee may reduce (but not increase) an Award below the level determined
based on the Performance Goals.  Unless the Compensation Committee determines
otherwise, Awards will be interpolated based on performance between the
applicable performance levels. 

Payout for
each goal is determined independently in arriving at the overall incentive
payout. As a result, an eligible employee may not achieve baseline (threshold)
performance on one goal but may still receive an Award based upon the level of
attainment of other performance goals (assuming the eligible employee maintains
a minimum performance rating of “satisfactory” (or such equivalent) or better).

Awards
under the Plan are based on the performance results for the Plan Year.
Achieving higher levels of performance above target up to stretch will increase
the Plan payouts to the eligible employee. Similarly, achieving less than
target performance will reduce the Plan payouts.

Adjustment
to Target Awards and Performance goals 

Except with
respect to Awards to named executive officers that are structured to satisfy
the requirements for “qualified performance based compensation” under section
162(m) of the Code, the Compensation Committee may at any time prior to the
final determination of Awards change the Target Award opportunity of any
eligible employee or assign a different Target Award opportunity to an eligible
employee to reflect any change in the employee’s responsibility level or
position during the course of the performance period. 

In
addition, the Compensation Committee may, but only to the extent consistent
with the requirements of section 162(m) of the Code for Awards intended to meet
the requirements for “qualified performance-based compensation,” at any time
prior to the financial determination of Awards, change the performance goals to
reflect a change in corporate capitalization, such as a stock split or stock
dividend, or a corporate transaction, such as a merger, consolidation,
separation, reorganization or partial or complete liquidation, or to equitably
reflect the occurrence of any extraordinary event, any change in applicable
accounting rules or principles, any change in the Company’s method of
accounting, any change in applicable law, any change due to any merger, 

 

 

 

  

consolidation, acquisition, reorganization, stock split,
stock dividend, combination of shares or other changes in the Company’s
corporate structure or shares, or any other change of a similar nature. 

Application
of Section 162(m) of the Internal Revenue Code 

Awards
structured to satisfy the requirements for “qualified performance based
compensation” under section 162(m) of the Code will be based on performance
goals, including the requirement that the achievement of the performance goals
be substantially uncertain at the time they are established and that the
performance goals be established in such a way that a third party with
knowledge of the relevant facts could determine whether and to what extent the
performance goals have been met. An Award that is designated as “qualified
performance based compensation” under section 162(m) of the Code may not be
awarded as an alternative to any other award that is not designated as
“qualified performance based compensation,” but instead must be separate and
apart from all other awards made. The Compensation Committee is authorized to
reduce an Award for the Plan Year based upon its assessment of personal
performance or other factors, but not to increase the Award beyond the amount
determined based on achievement of the performance goals for that employee. Any
reduction of an eligible employee’s Award will not result in an increase in any
other eligible employee’s Award. 

Incentive
Award Payments 

For Awards
structured to satisfy the requirements for “qualified performance based
compensation” under section 162(m) of the Code and for Awards to named
executive officers, the Compensation Committee will certify the performance
goals for the Plan Year and the Awards that will be paid by the Company to each
employee following the final determination of the Company’s financial results
for the Plan Year. Except as required by applicable law or as otherwise
determined by the Compensation Committee, all other Awards will be approved by
the Compensation Committee based on the achievement of the performance goals by
the employee. 

Except as
provided below, and subject to the requirements of applicable law, employees
who terminate during the Plan Year will not be eligible to receive an Award for
that Plan Year. Further, to encourage employees to remain in the employment of
the Company, except as set forth herein, an employee must be an active employee
of the Company on the date the applicable portion of the Award is paid in
accordance with the payment schedule set forth below. 

Unless the
Compensation Committee determines otherwise, Awards will be paid out to selected
exempt employees in three installments following the end of the Plan Year;
provided that the employee remains employed through the applicable payment
date, as follows: 50% of the Award will be paid out within two and one half
months following the end of the Plan Year (i.e. no later than March 15) (such
actual date the “Payment Date”), 25% of the Award will be paid out on the first
anniversary of the Payment Date and the remaining 25% of the Award will be paid
out on the second anniversary of the Payment Date.  Payment of the installments
may be subject to attainment of additional performance criteria as determined
by the Compensation Committee.  All Awards to non-exempt employees will be paid
as a single lump sum cash payment on the Payment Date.  Awards may be paid in
cash or equity, or a combination of the two, as determined by the Compensation
Committee.  If Awards are paid in equity, such Awards shall be made under the
Amended and Restated Susquehanna Bancshares, Inc. 2005 Equity Compensation Plan.

If an
employee ceases to be employed by the Company prior to the end of the Plan Year
for which an Award may be earned due to death, disability (within the meaning
of section 22(e)(3) of the Code) or on account of an early or normal retirement
(as defined by Susquehanna Bancshares, Inc. Cash Balance Pension Plan), his or
her Award under the Plan will be pro-rated based on actual performance for the
applicable Plan Year. Such pro-rated amount will be calculated by multiplying
the amount of the Award that the employee would have received had he remained
employed through the end of the Plan Year by a fraction, the numerator of which
is the number of completed calendar months during which the employee was
employed by the Company during the Plan Year 

 

 

 

  

and the denominator
of which is 12. Any Award owed to the employee will be paid to the employee, or
the employee’s estate, as applicable, in a lump sum on the Payment Date at the
time Awards earned for the applicable Plan Year are paid under the Plan to
other employees, but in any event not later than March 15 of the Plan Year
following the Plan Year for which the Award was earned. 

If an
exempt employee ceases to be employed by the Company due to death, disability
or on account of an early or normal retirement, at any time following the
Payment Date but prior to one or both of the subsequent payment dates on the
first or second anniversary of the Payment Date, the remaining amount of the
Award not yet paid will be paid in full within 30 days following the date of the
exempt employee’s death, termination due to disability or early or normal
retirement, as applicable. 

If
a change of control (as defined the Company’s [Key Employee Severance Pay
Plan/2013 Omnibus Equity Compensation Plan]) occurs prior to the end of a performance
period and the eligible employee is employed on the date of the change of
control, then the performance period will end on the date of the change of
control and Awards under the Plan will be paid based on the greater of
(i) the Company’s actual performance level achieved with respect to the
performance goals as of the date of the change of control or (ii) 100% of the
Target Award.

 

Awards will
be considered taxable income to employees in the year paid and will be subject
to withholding for required income and other applicable taxes. 

Discretionary Awards 

In addition to Awards that are designated “qualified
performance-based compensation” under section 162(m) of the Code, as described
above, the Compensation Committee may grant to employees such other incentive
awards as the Compensation Committee deems appropriate, which may be based on
Unit/Individual goals, Corporate/Company goals or such other criteria as the
Compensation Committee determines. Decisions with respect to such incentive
awards will be made separate and apart from the Awards intended to be
“qualified performance-based compensation.” 

Taxes 

The Company
is authorized to withhold from any payment under the Plan, amounts of
withholding and other taxes due in connection with a payment made under the
Plan, and to take such other action as the Compensation Committee may deem
advisable to enable the Company and employees to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to any payment 

Application
of Section 409A of the Internal Revenue Code 

The Plan is
intended to comply with the requirements of section 409A of the Code, and shall
in all respects be administered in accordance with section 409A of the Code or
an exception thereto. Notwithstanding anything in the Plan to the contrary,
payments may only be made upon an event and in a manner permitted by section
409A of the Code or an exception thereto. If a payment is not made by the
designated payment date under the Plan, the payment shall be made by December
31 of the calendar year in which the designated date occurs. For purposes of
section 409A of the Code, all payments to be made upon an employee ceasing to
be employed by, or providing service to, the Company may only be made upon the
employee’s “separation from service” (within the meaning of such term under
section 409A of the Code). 

Notwithstanding
anything in the Plan to the contrary, if an employee is a “key employee” under
section 409A of the Code and payment of any amount under the Plan is required
to be delayed for a period of six months after separation from service pursuant
to section 409A of the Code, payment of such amount will be delayed as required
by section 409A of the Code and will be paid within 10 days after the end of
the six-month period. If the employee dies during such six-month period, the
amounts withheld on account of section 409A of the Code 

 

 

 

  

will
be paid to the personal representative of the employee’s estate within 60 days
after the date of the employee’s death. 

Limitations
on Rights Conferred under Plan 

Nothing
contained in the Plan or in any documents related to the Plan will confer upon
any employee any right to continue as an employee or in the employ of the
Company or constitute any contract or agreement of employment, or interfere in
any way with the right of the Company to reduce such person’s compensation, to
change the position held by such person or to terminate the employment of such
employee, with or without cause, but nothing contained in this Plan or any
document related thereto will affect any other contractual right of any
employee. No benefit payable under, or interest in, this Plan will be
transferable by an employee except by will or the laws of descent and
distribution or otherwise be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge. 

Plan
Changes or Discontinuance 

The
Compensation Committee may add to, amend, modify or discontinue any of the
terms or conditions of the Plan at any time; provided, however, that the
Compensation Committee will not amend the Plan without shareholder approval if
such approval is required by section 162(m) of the Code. The Plan must be
re-approved by the Company’s shareholders no later than the first shareholders’
meeting that occurs in the fifth year following the year in which the
shareholders previously approved the Plan, if additional Awards are to be paid
under the Plan and if required by section 162(m) of the Code or the regulations
thereunder. 

Ethics,
Interpretation and Clawback 

If there is
any ambiguity as to the meaning of any terms or provisions of this Plan or any
questions as to the correct interpretation of any information contained
therein, the Company’s interpretation expressed by the Compensation Committee
will be final and binding. 

The
altering, inflating, and/or inappropriate manipulation of performance/financial
results or any other infraction of recognized ethical business standards, will
subject the employee to disciplinary action up to and including termination of
employment. In addition, any incentive compensation as provided by this Plan to
which the employee would otherwise be entitled will be revoked. 

All Awards
under the Plan will be subject to any compensation, clawback and recoupment
policies that may be applicable to the employees of the Company, as in effect
from time to time and as approved by the Board of Directors or a duly
authorized committee thereof, whether or not approved before or after the
effective date of the Plan. 

Severability

Each
provision in this Plan is severable, and if any provision is held to be
invalid, illegal, or unenforceable, the validity, legality and enforceability
of the remaining provisions will not, in any way, be affected or impaired
thereby. 

Successors
and Assigns 

The
provisions of the Plan will be binding upon the Company and its successors and
upon the employees and their legal representatives. 

Governing
Law 

The
validity, construction, and effect of the Plan, any rules and regulations
relating to the Plan, and any payment made under the Plan will be determined in
accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts of laws, and applicable federal law.Exhibit 10.2

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of
this 7th day of May, 2012, and is effective as of June 6, 2012 (the “Effective
Date”), by and between SUSQUEHANNA BANCSHARES, INC., a Pennsylvania
corporation (the “Company”), and Michael W. Harrington, an adult
individual whose principal residence is at 8346 Black Walnut Drive, East
Amherst, NY 14051 (the “Employee”).

Background

            WHEREAS, the
Company desires to employ the Employee as the Executive Vice President and
Treasurer of the Company, the Employee desires to be employed by the Company in
such capacity; 

 

            WHEREAS,
the Company and the Employee desire to enter into this Agreement to evidence
the terms and conditions of the Employee’s employment with the Company as its
Executive Vice President and Treasurer.

 

            NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
promises contained herein, and intending to be bound hereby, the parties agree
as follows:

 

1.                 
Position.  The Company hereby agrees to employ the Employee
and the Employee hereby agrees to commence employment with the Company, as
Executive Vice President and Treasurer.

2.                 
Duties. 

2.1             
The Employee agrees to assume such
duties and responsibilities as may be consistent with the position of the
Executive Vice President and Treasurer and as may be assigned to the Employee
by the Chief Financial Officer of the Company from time to time. No change in
the duties of the Employee shall in any way diminish the compensation payable
to him pursuant to the provisions of Paragraph 4 hereof.

2.2             
The Employee agrees to devote his
full time, skill, attention and energies and his best efforts to the
performance of his duties under this Agreement, consistent with practices and
policies established from time to time by the Company. The Employee agrees, in
addition to the covenants concerning Non-Competition contained in Paragraph 11,
that he shall not engage in any other business activity (including, without
limitation, participation by the Employee on any unaffiliated profit or
non-profit board of directors) except: (a) upon the prior written notice to and
consent of the Board, or (b) solely as an investor in real or personal
property, the management of which shall not 

detract from the performance of his duties hereunder;
provided, however, that the engagement by the Employee in any such business
activity shall at all times be in conformity with the Company’s Code of Ethics,
as the same may be amended or supplemented from time to time. Notwithstanding
anything herein to the contrary, the Employee shall terminate any such activity
upon reasonable request by the Company.

3.                 
Period of Employment. 

 

 

 

  

3.1             
Unless terminated earlier pursuant
to the applicable termination provisions of this Agreement, the period of
employment shall commence on the Effective Date and end on the third December
31 next following the Effective Date (as the same may be extended pursuant to
this Paragraph, the “Period of Employment”). If written election not to renew
by either party is not received by the other party by (a) November 1 of the
year of the Effective Date, or (b) November 1 any subsequent year, if this
Agreement has previously been extended pursuant to this Paragraph 3, then the
Period of Employment shall be automatically extended by one year.

3.2             
Notwithstanding anything to the
contrary set forth herein, the Employment Period shall not extend beyond:

3.2.1       
Normal Retirement Date, or

3.2.2       
if a Change in Control occurs
prior to the Normal Retirement Date, the later of (a) the Normal Retirement
Date, or (b) the first anniversary of the Change in Control.

4.                 
Compensation.  For all services rendered by the Employee under
this Agreement, the Company shall pay to the Employee compensation as provided
below:

4.1             
Base Salary.  The Company shall pay the Employee a minimum annual
base salary at the rate of $350,000 per year in accordance with the Company’s
normal payroll practices. In connection with the annual review required by
Subparagraph 4.3 hereof, the Employee’s base salary shall be reviewed and in
light of such review may be increased (but not decreased), taking into account
any change in the Employee’s responsibilities, performance of the Employee and
other pertinent factors. Payment of any increase in the Employee’s base salary
(if any) shall commence no later than July 1 of the year in which the increase
is granted. 

4.2             
Bonus.  The Company may, but shall not be required to, pay
to the Employee annual bonus compensation in such amount as may be determined
by the appropriate board of directors or its designee within guidelines
established by the Company. The
Employee’s bonus (if any) for a fiscal year shall be paid to him at the time
and in the form and manner provided under the terms of the applicable plan
pursuant to which the bonus is awarded.  Notwithstanding any provision of this
Agreement to the contrary, the Employee shall be eligible to earn a full year’s
bonus for calendar year 2012 without regard to the fact that he will not be
employed for the full calendar year 2012; provided that such bonus is otherwise
earned in accordance with the terms of the applicable bonus plan in effect for
2012.

4.3             
Annual Review.  The determination of compensation payable by the
Company hereunder shall be made by the Compensation Committee or its designee,
which shall perform an annual review of this Agreement, the Employee’s
performance with the Company, and compensation payable hereunder. The results
of such review, including recommendation as to base salary adjustment and bonus
(if any), shall be reported to the Company and shall be memorialized in the
minutes of the meetings of the Board or held in a confidential file by the
Company’s Human Resources Department.

5.                 
Benefits. 

5.1             
Life Insurance and Disability
Benefits. The Employee shall be
entitled to group term life insurance insuring the Employee’s life during the
term of employment, disability insurance coverage, and accidental death and
dismemberment benefits, including death benefit, in such amounts and in such
coverage as shall be consistent with the insurance coverage programs available
to other salaried employees of the Company, 

 

 

 

  

as the same
may change from time to time. The Employee shall designate the beneficiary of
such policy and benefits.

5.2             
Health Benefits.  The Employee shall be entitled to major medical and
health insurance coverage for the Employee and his immediate family on such
terms, in such amounts and in such coverage as shall be consistent with the
insurance coverage programs available to other salaried employees of the
Company generally, as the same may change from time to time.

5.3             
Other Benefits. To the extent such benefits are not specifically
described or duplicated hereinabove in this Paragraph 5, the Employee shall
also be entitled to participate in any and all thrift, profit sharing, pension
and similar benefit plans (not including severance, change in control or other
similar arrangements), now or hereafter maintained by the Company and offered
by the Company to its salaried, management employees generally, as the same may
change from time to time.  In addition, subject to approval by the Compensation
Committee, the Employee shall be eligible to participate in the Company’s
Supplemental Executive Retirement Plan, as in effect from time to time.

5.4             
Expenses.  Subject to such general employee expense account
policies as the Company may from time to time adopt, the Company shall pay or
reimburse the Employee upon presentation of vouchers or invoices for reasonable
expenses incurred by the Employee in the performance of his duties in carrying
out the terms and provisions of this Agreement, including, without limitation,
expenses for such items as entertainment, travel, meals, hotel and similar
items. In the event that any reimbursed expenses are disallowed by the Internal
Revenue Service as deductions to the Company, as the case may be, the Employee
shall retain such reimbursed expense amounts which the Employee shall treat and
report as additional compensation and which the Company shall treat as
deductible salary expense.

5.5             
Paid Time Off.  The Employee shall be entitled to 32 days of paid
time off to be taken at times reasonably convenient to the Company and
consistent with the Company’s paid time off policy.  Paid time off shall be
available to the Employee immediately upon the Employee’s commencement of employment
with the Company.

5.6             
Company Car.  The Company shall provide the Employee during his
employment under this Agreement with the full time use of a car in accordance
with the Company’s general policy on cars.

5.7             
Country Club.  During the Employee’s employment under this
Agreement, the Company shall reimburse the Employee for dues (including
reasonable initiation fees) associated with the Employee’s membership at one
club selected by the Employee and approved by the Company.

5.8             
Indemnification.  To the extent permitted by law, the Company shall
indemnify the Employee and hold him harmless from all liability and claims,
whether meritorious or not, including the cost of defense thereof (including
reasonable attorneys’ fees) which have arisen or accrued or which hereafter may
arise or accrue and are based upon any act or omission which the Employee has
taken or committed or hereafter may take or commit on behalf of or in
connection with the Company in his official capacity, so long as the following
conditions are met with respect to such claim or liability: (a) if such action
was taken in the exercise of reasonable business judgment and was taken in an
area within the scope of responsibility of the Employee, or (b) if not within
the scope of the Employee’s responsibility, (i) at the time of such act or
omission the Board had knowledge of the facts or circumstances pursuant to
which such act was taken or such omission occurred and (ii) no written
objection to such act or omission was duly made by the Board.

 

 

 

  

Actions taken by
the Employee which are covered by this Agreement specifically include (by way
of illustration), but are not limited to, (a) the payment of any salary, bonus
or other compensation to any officer, director, or employee, (b) the
reimbursement or payment of any expenses incurred by any such officer, director
or employee, (c) the making or retention of any investments (including, without
limitation, loans) by the Company, or (d) injury claims against the Company or
the Employee based on negligence or other alleged tortious actions and which
arise in connection with the conduct of the Company’s business.

The Employee shall indemnify the Company
and hold it harmless from all liability and claims, whether meritorious or not,
including the cost of the defense thereof (including reasonable attorneys’
fees) which have arisen or accrued or which hereafter may arise or accrue and
are based upon acts taken without the consent or approval of the Board of
Directors of the Company and which represent the Employee’s deliberate
malfeasance or gross negligence.

6.                 
Termination.  The Company may terminate the Employee’s employment
without Cause (as defined below), subject to the requirements of applicable
law, on account of the Employee’s Disability (as defined below), in either case,
at any time, with 90 days’ advance written notice (or pay in lieu thereof). The
Company may terminate the Employee’s employment for Cause at any time without
notice. The Employee may terminate his employment at any time for any reason,
with 90 days’ advance written notice (or such shorter notice as the Company
shall then accept). Upon termination, the Employee shall be entitled only to
such compensation and benefits as described in this Paragraph 6 and, if
applicable, the Employee shall immediately resign his position as a member of
the Board and any committee thereof, from his position as the Executive Vice
President and Treasurer of the Company, and his position as a member of the
board of directors of any Affiliate and any committee thereof.

6.1             
Termination without Cause or
Resignation due to an Adverse Change.
If the Employee’s employment ceases due to a termination by the Company without
Cause or a resignation by the Employee due to an Adverse Change (as defined
below), the Employee shall be entitled to:

6.1.1       
payment of all accrued and unpaid
base salary through the date of such termination; 

6.1.2       
payment for all accrued but unused
vacation days;

6.1.3       
payment of any bonus payable with
respect to a period ending prior to such termination; 

6.1.4       
bi-weekly compensation continuation
payments for a period equal to the Non-Competition Period, with each payment
equal to 1/26 of the Average Annual Compensation (provided, however, that it is
understood that Employee shall not participate in any benefit plans covering
employees, except as specifically stated in this Paragraph 6), which amount
shall be paid in regular payroll installments over the Non-Competition Period
following the Employee's termination date;

6.1.5       
if the Employee participates in
any defined benefit plan maintained by the Company or one of its Affiliates
immediately before the Employee’s termination date (whether such plan is tax
qualified or nonqualified), the Employee shall accrue an additional, fully
vested benefit under the Company’s nonqualified pension plan (which shall be
paid at the time and in the form determined under the nonqualified pension plan
and shall be determined in all respects pursuant to the terms of the applicable
defined benefit pension plan(s)) equal to the difference between (a) the
benefit that the Employee would have accrued under all defined benefit pension
plans of the Company or its Affiliates in which the Employee participated
immediately before the Employee’s termination date, taking into account the
compensation paid to the Employee under Subparagraph 6.1.4 as compensation for
purposes of the applicable plan and increasing the Employee’s years of benefit 

 

 

 

  

service under the applicable plan by the number of years
in the Non-Competition Period, and (b) the actual benefit due to the Employee
under all defined benefit pension plans of the Company and its Affiliated in
which the Employee participated immediately before the Employee’s termination
date; and

6.1.6       
the employee benefits
listed below for the remainder of the Non-Competition Period, in the form and
manner set forth below:

(a) 
      provided that the Employee is
eligible for and timely elects COBRA continuation coverage, during the 18-month
period following the Employee’s termination date, the Company will reimburse
the Employee for the monthly COBRA cost of continued coverage for the Employee,
and, where applicable, his spouse and dependents, paid by the Employee under
the Company’s group health plan pursuant to section 4980B of the Code, less the
amount that the Employee would be required to contribute for such health
coverage if the Employee were an active employee of the Company (the “Monthly
COBRA Costs”).  Following the foregoing 18-month period, if the Employee
secures an individual policy for health coverage for himself and, where
applicable, his spouse and dependents, the Company will reimburse the Employee
for the monthly cost of such coverage for the period commencing on the first
day following the 18-month period and ending on the last day of the
Non-Competition Period; provided that the amount of the Company’s reimbursement
for any month during this period will not exceed the Monthly COBRA Costs;  

(b) 
      a payment each month for a number of months equal to the number of months
in the Non-Competition Period, equal to the monthly premium cost (less any
employee portion of such premium costs) the Company would have paid for
coverage for the Employee under the applicable life insurance and accidental
death and dismemberment policy(ies) which insured the Employee during the term
of his employment had the Employee remained employed by the Company during the
Non-Competition Period; and

(c)        a
payment each month for a number of months equal to the number of months in the
Non-Competition Period, equal to the monthly premium cost (less any employee
portion of such premium costs) the Company would have paid for coverage under
the applicable disability insurance policy(ies) of the Company which insured
the Employee during the term of his employment had the Employee remained
employed by the Company during the Non-Competition Period.

            Except
as otherwise provided  in Subparagraph 6.1, all
compensation and benefits shall cease at the time of such termination and the
Company shall have no further liability or obligation by reason of such
termination.  The separation payments and benefits described in this
Subparagraph 6.1 shall be paid (or in the case of the payments described in
Subparagraphs 6.1.4 and 6.1.6 shall begin to be paid) within 60 days after the
Employee’s termination date, subject to the Employee’s execution and delivery
of an effective release as described below in Subparagraph 6.4.  

            Notwithstanding anything herein to the contrary, if,
at the time of the Employee’s termination of employment with the Company, the
Company has securities which are publicly traded on an established securities
market and the Employee is a “specified employee” (as such term is defined in
section 409A of the Code) and it is necessary to postpone the commencement of
any payments or benefits otherwise payable under this Agreement as a result of
such termination of employment to prevent any accelerated or additional tax
under section 409A of the Code, then the Company shall postpone the
commencement of the payment of any such payments or benefits hereunder (without
any reduction in such payments or benefits ultimately paid or provided to the
Employee) that are not otherwise paid within the  “short-term deferral
exception” under Treas. Reg. §1.409A-1(b)(4) and/or the “separation pay
exception” under Treas. Reg. §1.409A-1(b)(9)(iii), until the first 

 

 

 

  

payroll date that occurs after the date that is six months
following the Employee’s “separation of service” with the Company.  If any
payments are postponed due to such requirements, such postponed amounts shall
be paid in a lump sum to the Employee on the first payroll date that occurs
after the date that is six months following the Employee’s “separation of
service” with the Company.  If the Employee dies during the postponement period
prior to the payment of postponed amount, the amounts withheld on account of
section 409A of the Code shall be paid to the personal representative of the
Employee’ s estate within 60 days after the date of the Employee’s death.  A
“specified employee” shall mean an employee who, at any time during the 12-month
period ending on the identification date, is a “specified employee” under
section 409A of the Code, as determined by the Compensation Committee or its
designee.  The determination of specified employees, including the number and
identity of persons considered specified employees and the identification date,
shall be made by the Compensation Committee or its designee in accordance with
the provisions of sections 416(i) and 409A of the Code and the regulations
issued thereunder.

6.2             
Other Terminations.  If the Employee’s employment ceases for any reason
other than as described in Subparagraph 6.1, above (including, but not limited,
to (a) termination by the Company for Cause, (b) as a result of the Employee’s
death or termination by the Company on account of the Employee’s Disability (as
defined below), (c) resignation by the Employee in the absence of an Adverse
Change or (d) attainment of the Employee’s Normal Retirement Date described in
Subparagraph 3.2), then the Employee shall receive payment for his accrued and
unpaid base salary through the date of such cessation. All compensation and
benefits shall cease at the time of such termination and, except as otherwise
provided herein or in the applicable employee benefit plans of the Company, the
Company shall have no further liability or obligation by reason of such
termination.

6.3             
Claims.  Any claims
for benefits under Paragraph 6 of the Agreement shall be governed by the claims
procedures in the Susquehanna Bancshares, Inc. Key Employee Severance Pay Plan,
as amended from time to time. However, the severance benefit provisions of this
Agreement shall govern in lieu of the severance provisions of such Plan. Except
as specifically provided in this Agreement, the benefits provided under this
Agreement in the case of a termination shall be in lieu of those provided by
the Company and its Affiliates under any other severance plans.

6.4             
Release.  Notwithstanding any other provision of this
Agreement, any severance or termination payments or benefits herein described
are conditioned on the Employee’s execution and delivery to the Company of an
effective general release and non-disparagement agreement in a form prescribed
by the Company and in a manner consistent with the requirements of the Older
Workers Benefit Protection Act and any applicable state law.  In no event shall
the timing of Employee’s execution of the general release, directly or
indirectly, result in the Employee designating the calendar year of payment,
and if a payment that is subject to execution of the general release could be
made in more than one taxable year, payment shall be made in the later taxable
year.

6.5             
Other Rights.  Nothing in this Agreement is intended to limit the
Employee’s right to (a) payment or reimbursement for welfare benefit claims
incurred prior to the cessation of his employment under any group insurance
plan, policy or arrangement of the Company in accordance with the terms of such
plan, policy or arrangement, (b) elect COBRA Benefits in accordance with
applicable law, or (c) receive a distribution of vested accrued benefits from
any employee pension benefit plan in accordance with the terms of that plan.

7.                 
Change in Control. 

7.1             
Effect of a Change in Control. 

 

 

 

  

7.1.1       
Effect on LTI/STI Rights.  With respect to any long-term, short-term or any
similar incentive program cycle in effect at the time of a Change in Control:

(a)               
Employee shall become fully and
immediately vested in his incentive awards upon the occurrence of the Change in
Control; and

(b)              
subject to the requirements of
section 409A of the Code, such incentive awards shall be paid at target levels
and shall be paid to the Employee in a single lump sum payment between January
1 and March 15 of the calendar year following the end of the incentive program
cycle for which the incentive award was earned, without regard to whether
Employee remains employed by the Company and without regard to the performance
of Employee during those incentive program cycles.

7.1.2       
Effect on Pension Rights.  In the event
of a termination of employment providing for payment of benefits under
Subparagraph 6.1, the Employee shall accrue an additional, fully vested benefit
under the Company’s nonqualified pension plan (which shall be paid at the time
and in the form determined under the nonqualified pension plan and shall be determined
in all respects pursuant to the terms of the applicable defined benefit pension
plan(s)) equal to the difference between:

(a)               
the benefit that the Employee would have accrued under all
defined benefit pension plans of the Company or its Affiliates in which the
Employee participated immediately prior to the Change in Control (whether tax
qualified or nonqualified), assuming:

(i)                
the Employee remained continuously
employed by the Company until the third anniversary of the Change in Control,

(ii)              
the Employee’s compensation for
purposes of calculating benefits under such defined benefit pension plan
increased at a rate of four percent per year for the period of imputed service
described above in Subparagraph 7.1.2(a)(i), and

(iii)            
the terms of all such defined
benefit pension plans remained identical to those in effect immediately prior
to the Change in Control; and

(b)              
the actual benefit due to the Employee under all defined benefit pension plans of the
Company and its Affiliates in which the Employee participated immediately prior
to the Change in Control.

7.1.3       
Effect on Restrictive Covenants.  Upon the occurrence of a Change in Control, the one
year period referenced in Paragraph 11.1 shall be revised automatically to
equal the greater of one year or the period extending from the date of the
termination of active employment to the third anniversary of the Change in
Control. 

7.1.4       
Transition Services.  For two years following cessation of employment
after any Change in Control, the Employee agrees to remain available to provide
the Company with transition assistance on matters with which the Employee was
involved during his employment. The Employee shall render such assistance in a
timely manner on reasonable notice from the Company. The Employee shall not be
entitled to any separate compensation for the services described in this
Paragraph (other than reimbursement for reasonable out-of-pocket expenses
actually incurred). The Company agrees to provide reasonable advance notice of
the need for the Employee’s assistance and shall exercise reasonable efforts to
schedule and limit such matters so as to avoid interfering with the Employee’s
personal and other professional obligations.

 

 

 

  

7.2             
Parachute Payments. 

7.2.1       
Anything in this Agreement to the
contrary notwithstanding, in the event that a Change in Control occurs and it
shall be determined that any payment or distribution by the Company or its
Affiliates to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (“Total Payments”) would otherwise exceed the amount (the “Safe
Harbor Amount”) that may be received by the Employee without the imposition of
an excise tax under section 4999 of Code, then the Total Payments shall be
reduced to the extent, and only to the extent, necessary to assure that their
aggregate present value, as determined in accordance the applicable provisions
of section 280G of the Code, does not exceed the greater of the following
dollar amounts (the “Benefit Limit”): 

(a)        the
Safe Harbor Amount, or

(b)        the
greatest after-tax amount payable to the Employee after taking into account any
excise tax imposed under section 4999 of the Code on the Total Payments.

7.2.2       
All determinations to be made
under this Paragraph 7.2 shall be made by an independent public accounting firm
chosen by the Company (the “Accounting Firm”).  In determining whether such
Benefit Limit is exceeded, the Accounting Firm shall make a reasonable
determination of the value to be assigned to the restrictive covenants in
effect for the Employee pursuant to Paragraphs 8, 10 and 11 of this Agreement,
and the amount of the Employee’s potential parachute payment under section 280G
of the Code shall reduced by the value of those restrictive covenants to the
extent consistent with section 280G of the Code.

7.2.3       
In the event the Internal Revenue
Service notifies the Employee of an inquiry with respect to the applicability
of section 280G of the Code or section 4999 of the Code to any payment by the
Company or its Affiliates, or assessment of tax under section 4999 of the Code
with respect to any payment by the Company or its Affiliates, the Employee
shall provide notice to the Company of such inquiry or assessment within 10
days, and shall take no action with respect to such inquiry or assessment until
the Company has responded thereto (provided such response is timely with
respect to the inquiry or assessment). The Company shall have the right to
appoint an attorney or accountant to represent the Employee with respect to
such inquiry or assessment, and the Employee shall fully cooperate with such
representative as a condition of the Agreement with respect to such inquiry or
assessment.

7.2.4       
All of the fees and expenses of
the Accounting Firm in performing the determinations referred to in Paragraph
7.2 shall be borne solely by the Company.

7.2.5       
To the extent a reduction to the
Total Payments is required to be made in accordance with this Paragraph 7.2,
such reduction and/or cancellation of acceleration of equity awards shall occur
in the order that provides the maximum economic benefit to the Employee.  In
the event that acceleration of equity awards is to be reduced, such
acceleration of vesting also shall be canceled in the order that provides the
maximum economic benefit to the Employee. Notwithstanding the foregoing, any
reduction shall be made in a manner consistent with the requirements of section
409A of the Code and where two economically equivalent amounts are subject to
reduction but payable at different times, such amounts shall be reduced on a
pro rata basis, but not below zero. 

7.3             
Enforcement.  Following any Change in Control, the Company shall
pay all legal fees and costs incurred by the Employee to enforce his rights
under this Agreement if (a) he is required to initiate a proceeding to enforce
such rights and (b) he is awarded any relief in that proceeding.

 

 

 

  

8.                 
Confidential Information.  During the term of employment, and at any time
thereafter, the Employee shall not, without the consent of a senior officer of
the Company, disclose to any person, firm or corporation (except, during the
term of his employment, to the extent necessary to perform his duties
hereunder) any customer lists, trade secrets, reports, correspondence, mailing
lists, manuals, price lists, employee lists, prospective employee lists, letters,
records or any other confidential information relating to the business of the
Company or any Affiliate of the Company and shall not, without the consent of a
senior officer of the Company, deliver any oral address or speech or publish,
or knowingly permit to be published, any written matter in any way relating to
confidential information regarding the business of the Company or any
Affiliate.

9.                 
Property Rights.  The Employee agrees that all literary work,
copyrightable material or other proprietary information or materials developed
by the Employee during the term of this Agreement and relating to, or capable
of being used or adopted for use in, the business of the Company shall inure to
and be the property of the Company and must be promptly disclosed to the
Company. Both during employment by the Company and thereafter, the Employee
shall, at the expense of the Company, execute such documents and do such things
as the Company reasonably may request to enable the Company or their nominee
(i) to apply for copyright or equivalent protection in the United States,
Canada and elsewhere for any literary work hereinabove referred in this
Paragraph, or (ii) to be vested with any such copyright protection in the
United States, Canada and elsewhere.

10.             
Non-Disparagement.  Upon termination of employment hereunder, the
Employee shall not malign, criticize or otherwise disparage the Company, the
Affiliates or their respective officers, employees or directors.

11.             
Non-Competition. 

11.1         
During the Period of Employment
hereunder and then for one year following the Employee’s termination of
employment for any reason

11.1.1    the Employee shall not directly for himself or any
third party, become engaged in any business or activity which is directly in
competition with any services or financial products sold by, or any business or
activity engaged in by, the Company or any of its Affiliates, including,
without limitation, any business or activity engaged in by any federally or
state chartered bank, savings bank, savings and loan association, trust company
and/or credit union, and/or any services or financial products sold by such
entities, including, without limitation, the taking and accepting of deposits,
the provision of trust services, the making of loans and/or the extension of
credit, brokering loans and/or leases and the provision of insurance and
investment services, within a 25 mile radius of any office or facility of the
Company or any of its Affiliates. This provision shall not restrict the
Employee from owning or investing in publicly traded securities of financial
institutions, so long as his aggregate holdings in any financial institution do
not exceed 10% of the outstanding capital stock of such institution.

11.1.2    the Employee shall not solicit any person who was a
customer of the Company or any of its Affiliates during the period of the
Employee’s employment hereunder, or solicit potential customers who are or were
identified through leads developed during the course of employment with the
Company, or otherwise divert or attempt to divert any existing business of the
Company or any of its Affiliates within any area of 100 miles of any office or
facility of the Company or any of its Affiliates.

11.1.3    the Employee shall not, directly for himself or any
third party, solicit, induce, recruit or cause another person in the employment
of the Company or any of its Affiliates to terminate his employment for the
purposes of joining, associating, or becoming employed with any business or
activity which is in 

 

 

 

  

competition with any services or
financial products sold, or any business or activity engaged in, by the Company
or any of its Affiliates.

11.2         
The Employee understands that in
the event of a violation of any provision of this Agreement, the Company shall
have the right to seek injunctive relief, in addition to any other existing
rights provided in this Agreement or by operation of law, without the
requirement of posting bond. The Employee understands that the Company may
suspend future payments of the compensation continuation payments and benefits
provided in Subparagraph 6.1, may forfeit the additional pension benefit
provided under Subparagraph 7.1.2, and may seek, as a remedy, a return of any
prior compensation continuation payments made under Subparagraph 6.1.4. The
remedies provided in this Paragraph shall be in addition to any legal or
equitable remedies existing at law or provided for in any other agreement
between the Employee and the Company or any of its Affiliates, and shall not be
construed as a limitation upon, or as an alternative or in lieu of, any such
remedies. If any provisions of this Paragraph shall be determined by a court of
competent jurisdiction to be unenforceable in part by reason of it being too
great a period of time or covering too great a geographical area, it shall be
in full force and effect as to that period of time or geographical area
determined to be reasonable by the court.

11.3         
In the event of a Change in
Control, the Employee acknowledges that the provisions of Paragraph 11 hereof
shall extend to any offices or facilities of any business that becomes an
affiliate of or successor to the Company or any of its Affiliates on account of
such Change in Control and that the period specified in Subparagraph 11.1 shall
be three years instead of one year.

12.             
Preemptive Considerations.  Notwithstanding anything to the contrary set forth
herein:

12.1         
If the Employee is suspended
and/or temporarily prohibited from participating in the conduct of the
Company’s or any of its Affiliates’ affairs by a notice served under Section
8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818(e)(3)
and (g)(1)) or any amendments or supplements thereto, the Company’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
Company may in its discretion (i) pay the Employee all or part of the
compensation withheld while this Agreement’s obligations were suspended, and
(ii) reinstate (in whole or in part) any of its obligations which were suspended.

12.2         
If the Employee is removed and/or
permanently prohibited from participating in the conduct of the Company’s or
its Affiliates’ 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)) or any
amendments or supplements thereto, or equivalent provisions relating to a
regulator with supervisory authority over the Company or its Affiliates, all
obligations of the Company and its Affiliates under the contract shall
terminate as of the effective date of the order, but vested rights of the
parties shall not be affected.

12.3         
If the Company or any Affiliate is
in default (as defined in Section 3(x)(1) of the Federal Deposit Insurance Act
or equivalent provisions relating to a regulator with supervisory authority
over the Company or its Affiliates), all obligations under this Agreement shall
terminate as of the date of default, but this Subparagraph 12.3 shall not
affect any vested rights of the parties.

13.             
Records.  Upon the termination of employment hereunder, the
Employee shall deliver to the Company all correspondence, reports, customer
lists, office keys, manuals, advertising brochures, sample contracts, price
lists, employee lists, prospective employee lists, mailing lists, letters,
records and any and all other documents pertaining to or containing information
relative to the business of the Company, and the 

 

 

 

  

Employee
shall not remove any of such records either during the course of employment or
upon the termination thereof.

The Employee understands that in the event of a
violation of the provisions of this Paragraph 13, the Company shall have the
right to seek injunctive relief, in addition to any other existing rights
provided herein or by operation of law, without the requirement of posting bond.
The remedies provided in this Paragraph 13 shall be in addition to any legal or
equitable remedies existing between the Employee and the Company, and shall not
be construed as a limitation upon, or as alternative or in lieu of, such
remedies.

14.             
Survival.  Notwithstanding anything to the contrary in this
Agreement, the parties agree that the Employee’s obligations under Paragraphs
8, 9, 11, and 13 of this Agreement shall continue despite the expiration of the
term of this Agreement or its termination.

15.             
Definitions. For purposes of
this Agreement: 

15.1         
The term “Adverse Change” shall
include and be limited to (A) a significant change in the nature or scope of
the Employee’s duties as set forth in the first 
sentence of Paragraph 2 hereof such that the Employee has been reduced to a
position of materially lesser authority, status or responsibility (provided,
however, for purposes of this Subparagraph, in circumstances not involving a
Change in Control, so long as the Employee remains a senior officer (which
shall mean and include any officer position with the Company above the position
of vice president), an Adverse Change shall not be deemed to have occurred), or
the time required to be spent by the Employee 60 miles or more beyond the
Company’s geographic market area shall be increased without the Employee’s
consent by more than 20%, as compared to the average of the two (2) preceding
years, (B) a material reduction in the Employee’s base compensation, (C) any
other material and willful breach by the Company of any other provision of this
Agreement, or (D) delivery by the Company of notice of its intention not to
renew this Agreement; provided that Employee is
willing and able to execute a new contract providing terms and conditions
substantially similar to those in this Agreement and to continue providing
services to the Company. 

However, none of the foregoing events or
conditions shall constitute an Adverse Change unless: (x) the Employee provides
the Company with written objection to the event or condition within 60 days
following the occurrence thereof, (y) the Company does not reverse or otherwise
cure the event or condition within 30 days of receiving that written objection,
and (z) the Employee resigns his employment within 60 days following the
expiration of the 30-day cure period.  If the Employee’s termination occurs
after such time, the termination shall be treated as a termination other than
for Adverse Change and the Employee shall not be entitled to severance benefits
under this Agreement.

15.2         
The term “Affiliate” shall mean
with respect to the Company, persons or entities controlling, controlled by or
under common control with the Company.

15.3         
The term “Average Annual
Compensation” shall mean, as of any date, the arithmetic average of the base
salary and annual bonuses received by the Employee with respect to the three
most recently completed calendar years; provided, however, if the Employee has
compensation for less than three completed calendar years but at least two
completed calendar years, Average Annual Compensation shall mean the arithmetic
average of the base salary and annual bonuses received by the Employee with
respect to the two most recently completed calendar years, and if the Employee
has less than two completed calendar years of compensation, Average Annual
Compensation shall mean base salary and annual bonus received by the Employee
with respect to the most recently completed calendar year.

 

 

 

  

15.4         
The term “Board” shall mean the
Board of Directors of the Company.

15.5         
The term “Cause” shall mean any of
the following: (a) the Employee’s personal dishonesty; (b) the Employee’s
incompetence; (c) the Employee’s willful misconduct; (d) the Employee’s breach
of fiduciary duty involving personal profit; (e) the Employee’s intentional
failure to perform stated duties; (f) the Employee’s willful violation of any
law, rule or regulation (other than traffic violations or similar offenses);
(g) the issuance of a final cease-and-desist order by a state or federal agency
having jurisdiction over the Company or any entity which controls the Company
to the extent such cease-and-desist order requires the termination of the
Employee; or (h) a material breach by the Employee of any provision of this
Agreement.

15.6         
The term “Change in Control” shall
mean the first to occur, after the date hereof, of any of the following:

(a)               
if any Person is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange
Act), directly or indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any securities acquired
directly from the Company or its subsidiaries) representing 25% or more of
either the then outstanding shares of stock of the Company or the combined
voting power of the Company’s then outstanding securities;

(b)              
if during any period of 24
consecutive months during the existence of this Agreement commencing on or
after the date hereof, the individuals who, at the beginning of such period,
constitute the Board (the “Incumbent Directors”) cease for any reason other than
death to constitute at least a majority thereof; provided that a director who
was not a director at the beginning of such 24-month period shall be deemed to
have satisfied such 24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with the approval of,
at least two-thirds of the directors who then qualified as Incumbent Directors
either actually (because they were directors at the beginning of such 24-month
period) or by prior operation of this clause (b);

(c)               
the consummation of a merger or
consolidation of the Company with any other corporation other than (A) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least 60% of the
combined voting power of the voting securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is
or becomes the beneficial owner, as defined in clause (a), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its subsidiaries) representing 40% or more of either the then
outstanding shares of stock of the Company or the combined voting power of the
Company’s then outstanding securities; or

(d)              
the shareholders of the Company
approve a plan of complete liquidation or dissolution of the Company, or there
is consummated an agreement for the sale or disposition by the Company of all
or substantially all of the Company’s assets, other than a sale or disposition
by the Company of all or substantially all of the Company’s assets to an
entity, at least 60% of the combined voting power of the voting securities of
which are owned by Persons in substantially the same proportion as their
ownership of the Company immediately prior to such sale.

 

 

 

  

Upon the occurrence of a
Change in Control, no subsequent event or condition shall constitute a Change
in Control for purposes of this Agreement, with the result that there can be no
more than one Change in Control hereunder.

15.7         
The term “Code” shall mean the
Internal Revenue Code of 1986, as amended and the regulations promulgated
thereunder.

15.8         
The term “Company” shall mean the
Company as hereinbefore defined or any entity succeeding to substantially all
of the assets and business of the Company.

15.9         
The term “Compensation Committee”
shall mean the Compensation Committee of the Board.

15.10     
The terms “COBRA” and “COBRA
Benefits” shall refer to continued group health insurance benefits under
sections 601-607 of the Employee Retirement Income Security Act of 1974, as
amended, (29 U.S.C. part 6) Act and the regulations promulgated thereunder.

15.11     
The term “Disability” means a
condition entitling the Employee to benefits under the Company’s long term
disability plan, policy or arrangement; provided, however, that
if no such plan, policy or arrangement is then maintained by the Company and
applicable to the Employee, “Disability” will mean the Employee’s inability to
perform his duties under this Agreement due to a mental or physical condition
that can be expected to result in death or that can be expected to last (or has
already lasted) for a continuous period of 180 days or more. Termination as a
result of a Disability will not be construed as a termination “without Cause.”

15.12     
The term “Non-Competition Period”
shall mean, with respect to a specified cessation of employment, the one year
period following the Employee’s termination date; provided that on and after
the occurrence of a Change in Control, the Non-Competition Period shall mean,
with respect to a specified cessation of employment, the three year period
following the Employee’s termination date.

15.13     
The term “Normal Retirement Date”
shall mean the last business day in the calendar year in which the Employee
attains the age of 65.

15.14     
The term “Period of Employment”
shall have the meaning described in Paragraph 3.

15.15     
The term “Person” shall have the
meaning ascribed thereto by Section 3(a)(9) of the Securities Exchange Act of
1934, as amended (“Exchange Act”), as modified and used in Sections 13(d) and
14(d) thereof (except that such term shall not include (i) the Company or any
of its subsidiaries, (ii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, (iv) a corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportion as their ownership of stock
of the Company, or (v) such Employee or any “group” (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) which includes the Employee).

16.             
Miscellaneous. 

16.1         
Assignment.  This Agreement (including, without limitation,
Paragraph 11 hereof relating to non-competition) shall be binding upon the
parties hereto, the heirs and legal representatives of the Employee and the
successors and assigns of the Company.

 

 

 

  

16.2         
Prohibited Assignment.  The Employee shall have no right to exchange,
convert, encumber or dispose of the rights to receive the benefits or payments
under this Agreement, which payments, benefits and rights thereto are expressly
declared to be non-assignable and non-transferable.

16.3         
Notices. Any notice required, permitted or intended to be
given under this Agreement shall be in writing and shall be deemed to have been
given only if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid to the appropriate address shown
below, or such revised address as is delivered to the other party by the same
means.

(a)               
Notices to the Company shall be
sent to:

Susquehanna
Bancshares, Inc. 

Attn.
Director of Human Resources 

26
North Cedar Street P.O. Box 1000

Lititz,
PA  17543-7000

 

(b)              
Notices to the Employee shall be
sent to the most recent address

                                    on file with the Company.

16.4         
Entire Agreement.  This Agreement constitutes the entire agreement
between the parties in connection with the subject matter hereof, supersedes
any and all prior agreements or understandings between the parties, including
the offer letter from the Company to the Employee dated May __, 2012 (other
than the provisions relating to the right to receive a restricted stock grant
and nonqualified stock option grant and relocation assistance), and may only be
changed by agreement in writing between the parties.

16.5         
Construction. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania, without
application of the principles of conflicts of laws.

16.6         
Paragraph Headings. The Paragraph headings herein have been inserted for
convenience of reference only and shall in no way modify or restrict any of the
terms or provisions hereof.

16.7         
Section 409A of the Code.  This Agreement shall be interpreted to
avoid any penalty sanctions under section 409A of the Code.  If any payment or
benefit cannot be provided or made at the time specified herein without
incurring sanctions under section 409A of the Code, then such benefit or
payment shall be provided in full at the earliest time thereafter when such
sanctions shall not be imposed.  The Employee shall be solely responsible for
any tax imposed under section 409A of the Code and in no event shall the Company
have any liability with respect to any tax, interest or other penalty imposed
under section 409A of the Code.  For purposes of section 409A of the Code, all
payments to be made upon a termination of employment under this Agreement may
only be made upon the Employee’s “separation from service” (within the meaning
of such term under section 409A of the Code).  In no event shall the Employee,
directly or indirectly, designate the calendar year of payment, except as
permitted under section 409A of the Code.  All reimbursements and in kind
benefits provided under this Agreement shall be made or provided in accordance
with the requirements of section 409A of the Code, including, where applicable,
the requirement that (i) any reimbursement shall be for expenses incurred
during the Employee’s lifetime (or during a shorter period of time specified in
this Agreement), (ii) the amount of expenses eligible for reimbursement, or in
kind benefits provided, during a calendar year may not affect the expenses
eligible for reimbursement, or in kind benefits to be provided, in any other
calendar year, (iii) the reimbursement of an eligible expense shall be made on
or before the last day of the calendar year following the year in which the
expense is incurred, and (iv) the right to reimbursement or in kind benefits is
not subject to liquidation or exchange for another benefit.

 

 

 

  

16.8         
Recoupment Policy. The Employee agrees that the Employee will be
subject to any compensation clawback or recoupment policies that may be
applicable to Employee as an executive of the Company, as in effect from time
to time and as approved by the Board or a duly authorized committee thereof,
whether or not approved before or after the effective date of this Agreement.

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

  

IN WITNESS WHEREOF,
and intending to be legally bound, the parties have executed this Agreement the
day and year first above written. 

	
   

  	
  SUSQUEHANNA BANCSHARES,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:                                                          

  	
  By: /s/Elizabeth E. Lytle                             

  
	
   

  	
  Elizabeth
  E. Lytle

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Michael W. Harrington

  
	
  Witness:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
                                                                       

  	
  /s/ Michael W. Harrington

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