FIRST FEDERAL BANK
EMPLOYMENT AGREEMENT

This AGREEMENT (“Agreement”) originally entered into as of March 31, 1998, is
amended and restated effective as of January 1, 2002, by and between First
Federal Bank (the “Bank”), a federally-chartered financial institution, with its
principal offices at 12 Broad Street, Hazleton, Pennsylvania, 18201, Northeast
Pennsylvania Financial Corp. (the “Company”), a corporation organized under the
laws of the state of Delaware and the holding company of the Bank, and Thomas L.
Kennedy (“Executive”).

WHEREAS, the Bank desires to continue to assure itself of the services of
Executive as Chairman of the Board for the period provided for in this
Agreement; and

WHEREAS, the Bank has previously entered into an employment agreement with
Executive dated March 31, 1998; and

WHEREAS, Executive and the Board of Directors of the Bank desire to enter into
an updated and revised agreement setting forth the terms and conditions of the
continuing employment of Executive and the related rights and obligations of
each of the parties.

NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed as follows:

1. Position and Responsibilities.

(a) During the period of Executive’s employment under this Agreement, Executive
agrees to serve as Chairman of the Board of the Bank. Executive shall have
responsibility for the general management and control of the business and
affairs of the Bank and its subsidiaries, and shall perform all duties and shall
have all powers which are commonly incident to the offices of Chairman of the
Board or which, consistent with those offices, are delegated to him by the Board
or Directors.

(b) During the period of Executive’s employment under this Agreement, except for
periods of absence occasioned by illness, vacation, and reasonable leaves of
absence, Executive shall devote substantially all of his business time,
attention, skill and efforts to the faithful performance of his duties under
this Agreement, including activities and services related to the organization,
operation and management of the Bank and its subsidiaries, as well as
participation in community, professional and civic organizations; provided,
however, that, with the approval of the Board of Directors, as evidenced by a
resolution of the Board of Directors, from time to time, Executive may serve, or
continue to serve, on the boards of directors of, and hold any other offices or
positions in, companies or organizations, which, in the judgment of the Board of
Directors, will not present any conflict of interest with the Bank or its
subsidiaries, or materially affect the performance of Executive’s duties
pursuant to this Agreement.

(c) The Bank will furnish Executive with the working facilities and staff
customary for executive officers with the title and duties set forth in this
Agreement and as are necessary for him to perform his duties. The location of
such facilities and staff shall be at the principal administrative offices of
the Bank.

2. Term of Employment.

(a) The term of this Agreement shall be (i) the initial term, consisting of the
period commencing on the date of this Agreement (the “Effective Date”) and
ending on the third anniversary of the Effective Date, plus (ii) any and all
extensions of the initial term made pursuant to this Section 2.

(b) Commencing on the first anniversary of the Effective Date and on each
anniversary thereafter, the disinterested members of the Board of Directors may
renew the term of this Agreement for an additional one (1) year period beyond
the then effective expiration, provided that Executive shall not have given at
least sixty (60) days written notice of his desire that the term not be renewed.

(c) Notwithstanding anything contained in this Agreement to the contrary, either
Executive or the Bank may terminate Executive’s employment with the Bank at any
time during the term of this Agreement, subject to the terms and conditions of
this Agreement.

3. Compensation and Benefits.

(a) Base Salary. The Bank agrees to pay Executive during the term of this
Agreement a base salary at the rate of $142,268 per annum, payable in accordance
with the Bank’s customary payroll practices. The Board of Directors of the Bank
shall review annually the rate of Executive’s base salary based upon factors
they deem relevant, and may maintain or increase his base salary, provided that
no such action shall reduce the rate of base salary below the rate in effect on
the Effective Date. In the absence of action by the Board of Directors of the
Bank, Executive shall continue to receive a base salary at the per annum rate
specified on the Effective Date or, if another rate has been established under
the provisions of this Section 3, the rate last properly established by action
of the Board of Directors. Executive’s base salary shall include any amounts of
compensation deferred by Executive under any tax-qualified retirement or welfare
benefit plan or any other deferred compensation arrangement maintained by the
Company or the Bank.

(b) Board Fees. Executive shall be entitled to receive fees for serving as a
director of the Bank or as a member of any committee of the Board of Directors
in amounts equal to the other members of the Board of Directors of the Bank.
Board fees paid to Executive shall be in addition to and not in lieu of any
other remuneration provided for under this Agreement.

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(c) Incentive Compensation. Executive shall be entitled to participate in
discretionary bonuses or other incentive compensation programs that the Board of
Directors may award from time to time to senior management employees pursuant to
bonus plans, or otherwise.

(d)Club Dues. In addition to any other compensation provided for under this
Agreement, the Company or the Bank shall pay Executive an amount sufficient, on
an after-tax basis, to maintain his membership at the following club:

 * Valley Country Club

(e) Automobile and Cellular Phone. The Company or the Bank shall provide
Executive with, and Executive shall have the primary use of, an automobile owned
or leased by the Company or the Bank and the Company or the Bank shall pay (or
reimburse Executive) for all expenses of insurance, registration, operation and
maintenance of the automobile. Executive shall comply with reasonable reporting
and expense limitations on the use of such automobile, as the Company or the
Bank may establish from time to time, and the Company or the Bank shall annually
include on Executive’s Form W-2 any amount attributable to Executive’s personal
use of such automobile. The Company or the Bank shall also provide Executive
with a cellular phone and shall pay (or reimburse Executive) for all reasonable
expenses related to the business use of such phone.

(f) Vacation and Holidays. Executive shall take vacation at a time mutually
agreed upon by the Bank and Executive. Executive shall receive his base salary
and other benefits during periods of vacation. Executive shall also be entitled
to paid legal holidays in accordance with the policies of the Bank.

(g) Annual Physical. The Company or the Bank shall provide Executive with or
reimburse Executive for all cost of an annual physical at the Greenbrier Clinic
in White Sulpher Springs, West Virginia, including the cost of travel and
overnight accommodations for Executive and Executive’s spouse.

(h) Other Employee Benefits. In addition to any other compensation or benefits
provided for under this Agreement, Executive shall be entitled to continue to
participate in any employee benefit plans, arrangements and perquisites of the
Bank in which he participated or was eligible to participate as of the Effective
Date. Executive shall also be entitled to participate in any employee benefits
or perquisites the Bank offers to full-time employees or executive management in
the future. The Bank will not, without Executive’s prior written consent, make
any changes in such plans, arrangements or perquisites which would adversely
affect Executive’s rights or benefits thereunder without separately providing
for an arrangement that ensures Executive receives or will receive the economic
value that Executive would otherwise lose as a result of such adverse effect.
Without limiting the generality of the foregoing provisions of this paragraph,
Executive shall be entitled to participate in or receive benefits under all
plans relating to stock options, restricted stock awards, stock purchases,
pension, profit sharing, employee

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stock ownership, supplemental retirement, group life insurance, medical and
other health and welfare coverage that are made available by the Bank at the
Effective Time or at any time in the future during the term of this Agreement,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements.

4. Payments to Executive Upon an Event of Termination.

(a) Upon the occurrence of an Event of Termination (as herein defined) during
Executive’s term of employment under this Agreement, the provisions of this
Section 4 shall apply. Unless Executive otherwise agrees, as used in this
Agreement, an “Event of Termination” shall mean and include any one or more of
the following: (i) the termination by the Bank of Executive’s full-time
employment for any reason other than a termination governed by Section 7 of this
Agreement; or (ii) Executive’s resignation from the Bank, upon, any (A) notice
to Executive of non-renewal of the term of this Agreement (B) failure to
reappoint Executive as Chairman of the Board, (C) material change in Executive’s
function, duties or responsibilities with the Bank or its subsidiaries, which
change would cause Executive’s position(s) to become of lesser responsibility,
importance or scope from the position and attributes thereof described in
Section 1 of this Agreement, (D) relocation of Executive’s principal place of
employment by more than twenty-five (25) miles from its location at the
Effective Date of this Agreement, (E) material reduction in the benefits and
perquisites to Executive from those being provided as of the Effective Date of
this Agreement (except as provided for in Section 3(g) of this Agreement), (F)
liquidation or dissolution of the Company or the Bank, or (G) breach of this
Agreement by the Bank or the Company. Upon the occurrence of any event described
in clauses (A), (B), (C), (D), (E), (F) or (G), above, Executive shall have the
right to terminate his employment under this Agreement by resignation upon not
less than sixty (60) days prior written notice given within six (6) full
calendar months after the event giving rise to Executive’s right to elect to
terminate his employment.

(b) Upon Executive’s termination from employment in accordance with paragraph
(a) of this Section 4, on the Date of Termination, as defined in Section 8 of
this Agreement, the Bank shall be obligated to pay Executive, or, in the event
of his death following the Date of Termination, his beneficiary or
beneficiaries, or his estate, as the case may be, an amount equal to the sum of:
(i) the base salary and incentive compensation that would have been paid to
Executive for the remaining term of this Agreement had the Event of Termination
not occurred (based on Executive’s then current base salary and most recently
paid or accrued bonus at the time of the Event of Termination) plus (ii) the
value, as calculated by a recognized firm customarily performing such valuation,
of any stock options which, as of the Date of Termination, have been granted to
Executive but are not exercisable by Executive and the value of any restricted
stock awards which have been granted to Executive, but in which Executive does
not have a non-forfeitable or fully-vested interest as of the Date of
Termination plus (iii) the value of all employee benefits that would have been
provided to Executive for the remaining term of this Agreement had the Event of
Termination not occurred, based on the most recent level of contribution,
accrual or other participation by or on behalf of Executive. At the election of

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Executive, which election is to be made prior to the Date of Termination, such
payments shall be made in a lump sum. In the event that no election is made,
payment to Executive will be made on a monthly basis in approximately equal
installments during the remaining unexpired term of this Agreement. Such
payments shall not be reduced in the event Executive obtains other employment
following termination of employment.

(c) In addition to the payments provided for in paragraph (b) of this Section 4,
upon Executive’s termination of employment in accordance with the provisions of
paragraph (a) of this Section 4, to the extent that the Company or the Bank
continues to offer any life, medical, health, disability or dental insurance
plan or arrangement in which Executive or his dependents participates as of the
date of the Event of Termination (each being a “Welfare Plan”), Executive and
his covered dependents shall continue participating in such Welfare Plans,
subject to the same premium contributions on the part of Executive as were
required immediately prior to the Event of Termination until the earlier of (i)
his death; (ii) his employment by another employer other than one of which he is
the majority owner; or (iii) the end of the remaining term of this Agreement. If
the Company or the Bank does not offer the Welfare Plans at any time after the
Event of Termination, then the Company shall provide Executive with a payment
equal to the premiums for such benefits for the period which runs until the
earlier of (i) his death; (ii) his employment by another employer other than one
of which he is the majority owner; or (iii) the end of the remaining term of
this Agreement.

5. Change in Control.

(a) For purposes of this Agreement, a “Change in Control” shall mean an event
that; (i) would be required to be reported in response to Item 1(a) of the
current report on Form 8-K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); (ii)
results in a Change in Control of the Bank or the Company within the meaning of
the Home Owners’ Loan Act of 1933, as amended, the Federal Deposit Insurance
Act, or the Rules and Regulations promulgated by the Office of Thrift
Supervision (or its predecessor agency), as in effect on the date hereof
(provided, that in applying the definition of change in control as set forth
under the rules and regulations of the OTS, the Board of Directors shall
substitute its judgment for that of the OTS); or (iii) without limitation such a
Change in Control shall be deemed to have occurred at such time as (A) any
“person” (as the term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of voting securities of the Bank or the
Company representing 20% or more of the Bank’s or the Company’s outstanding
voting securities or right to acquire such securities except for any voting
securities of the Bank purchased by the Company and any voting securities
purchased by any employee benefit or stock-based compensation plan of the
Company or its subsidiaries; or (B) individuals who constitute the Board of
Directors on the date hereof (the “Incumbent Board”) cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters (¾) of the directors comprising the Incumbent Board, or
whose nomination for election by

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the Company’s stockholders was approved by a Nominating Committee solely
composed of members which are Incumbent Board members, shall be, for purposes of
this clause (B), considered as though he or she were a member of the Incumbent
Board; or (C) a plan of reorganization, merger, consolidation, sale of all or
substantially all the assets of the Bank or the Company or similar transaction
occurs or is effectuated in which the Bank or Company is not the resulting
entity; provided, however, that such an event listed above will be deemed to
have occurred or to have been effectuated upon the receipt of all required
federal regulatory approvals not including the lapse of any statutory waiting
periods; or (D) a proxy statement has been distributed soliciting proxies from
stockholders of the Company, by someone other than the current management of the
Company, seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company or Bank with one or more corporations as a result
of which the outstanding shares of the class of securities then subject to such
plan or transaction are exchanged for or converted into cash or property or
securities not issued by the Bank or the Company shall be distributed; or (E) a
tender offer is made for 20% or more of the voting securities of the Bank or
Company then outstanding.

(b) If any of the events described in paragraph (a) of this Section 5,
constituting a Change in Control, have occurred or the Board of Directors
determines that a Change in Control has occurred, Executive shall be entitled to
the benefits provided for in paragraphs (c), (d), (e), (f) and (g) of this
Section 5 upon his termination of employment at any time during the term of this
Agreement on or after the date the Change in Control occurs due to (i)
Executive’s dismissal, (ii) Executive’s resignation following any demotion, loss
of title, office or significant authority or responsibility, reduction in annual
compensation or benefits or relocation of his principal place of employment by
more than twenty-five (25) miles from its location immediately prior to the
Change in Control, or (iii) Executive’s resignation for any reason within the
sixty (60) day period following the date that is one year from the date the
Change in Control occurred, unless Executive’s termination is for Just Cause as
defined in Section 7 of this Agreement; provided, however, that such benefits
shall be reduced by any payment made under Section 4 of this Agreement.

(c) Upon the occurrence of a Change in Control followed by Executive’s
termination of employment, as provided for in paragraph (b) of this Section 5,
the Bank shall pay Executive, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be, as severance
pay or liquidated damages, or both, a sum equal to the greater of: 1) the
payments and benefits due for the remaining term of the Agreement or 2) three
(3) times Executive’s average annual compensation for the five (5) preceding
taxable years.

In determining Executive’s annual compensation for purposes of this Section 5,
compensation shall include base salary and any other taxable income, including
but not limited to amounts related to the granting, vesting or exercise of
restricted stock or stock option awards (including the value realized on the
exercise of incentive stock options whether taxable or not at the time of
exercise), commissions, bonuses (whether paid or accrued for the applicable
period), as well as, severance payments, retirement benefits, director or
committee fees and fringe benefits paid or to

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be paid to Executive or paid for Executive’s benefit during any such year,
profit sharing, employee stock ownership plan and other retirement contributions
or benefits, including any tax-qualified or non-tax qualified plan or
arrangement (whether or not taxable) made or accrued on behalf of Executive of
such year and the value (based on the Black-Scholes valuation method) of stock
options (based on the values determined for purposes of the Company’s FAS 123
determination in the Company’s financial statements for the year that includes
and immediately follows the date of vesting).

At the election of Executive, which election is to be made prior to or within
thirty (30) days of the Date of Termination on or following a Change in Control,
such payment may be made in a lump sum (without discount for early payment) on
or immediately following the Date of Termination (which may be the date a Change
in Control occurs) or paid in equal monthly installments during the sixty (60)
months following Executive’s termination. In the event that no election is made,
payment to 1 Executive will be made on a monthly basis during the sixty (60)
months following Executive’s termination.

(d) Upon the occurrence of a Change in Control, Executive will be entitled to
receive benefits due him under or contributed by the Bank or the Company on his
behalf pursuant to any retirement, incentive, profit sharing or other
retirement, bonus, performance, disability or other employee benefit plan
maintained by the Company or the Bank on Executive’s behalf to the extent such
benefits are not otherwise paid to Executive under a separate provision of this
Agreement. In addition, for purposes of determining his vested accrued benefit,
Executive shall be credited either under any defined benefit pension plan
maintained by the Bank or, if not permitted under such plan, under a separate
arrangement, with the additional “years of service” that he would have earned
for vesting and benefit accrual purposes for the remaining term of the Agreement
had his employment not terminated.

(e) Upon the occurrence of a Change in Control and Executive’s termination of
employment in connection therewith, the Bank will cause to be continued life,
medical and disability coverage substantially identical to the coverage
maintained by the Company or the Bank for Executive and any of his dependents
covered under such plans immediately prior to the Change in Control. Such
coverage and payments shall cease upon the expiration of sixty (60) full
calendar months following the Date of Termination. In the event Executive’s
participation in any such plan or program is barred, the Company shall arrange
to provide Executive and his dependents with benefits substantially similar to
those of which Executive and his dependents would otherwise have been entitled
to receive under such plans and programs from which their continued
participation is barred or at the election of Executive, provide their economic
equivalent.

(f) The use or provision of any membership, license, automobile use or other
perquisites shall be continued during the remaining term of the Agreement on the
same financial terms and obligations as were in place immediately prior to the
Change in Control. To the extent that any item referred to in this paragraph
will, at the end of the term of this Agreement, no longer be available to
Executive, Executive will have the option to purchase all rights then held by
the Company or the Bank to such item for a price equal to the then fair market
value of the item.

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(g) In the event that Executive is receiving monthly payments pursuant to
Section 5(c) hereof, on an annual basis, thereafter, between the dates of
January 1 and January 31 of each year, Executive shall elect whether the balance
of the amount payable under the Agreement at that time shall be paid in a lump
sum or on a pro rata basis pursuant to such section. Such election shall be
irrevocable for the year for which such election is made by Executive.

6. Change in Control Related Provisions.

(a) Notwithstanding the provisions of Section 5, in no event shall the aggregate
payments or benefits to be made or afforded to Executive under said paragraphs
(the “Termination Benefits”) constitute an “excess parachute payment” under
Section 280G of the Code or any successor thereto, and in order to avoid such a
result, Termination Benefits will be reduced, if necessary, to an amount (the
“Non-Triggering Amount”), the value of which is one dollar ($1.00) less than an
amount equal to three (3) times Executive’s “base amount”, as determined in
accordance with said Section 280G. The allocation of the reduction required
hereby among the Termination Benefits provided by Section 5 shall be determined
by Executive.

7. Termination for Just Cause

The phrase termination for “Just Cause” shall mean termination because of
Executive’s personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, regulation (other than traffic
violations or similar offenses), final cease and desist order or material breach
of any provision of this Agreement. Notwithstanding the foregoing, Executive
shall not be deemed to have been terminated for Just Cause unless and until
there shall have been delivered to him a Notice of Termination which shall
include a copy of a resolution duly adopted by the affirmative vote of not less
than three-fourths (¾) of the members of the Board of Directors at a meeting of
the Board of Directors called and held for that purpose (after reasonable notice
to Executive and an opportunity for him, together with counsel, to be heard
before the Board of Directors), finding that in the good faith opinion of the
Board of Directors, Executive was guilty of conduct justifying termination for
Just Cause and specifying the particulars thereof in detail. Executive shall not
have the right to receive compensation or other benefits for any period after
termination for Just Cause. During the period beginning on the date of the
Notice of Termination for Just Cause pursuant to Section 8 hereof through the
Date of Termination, stock options granted to Executive under any stock option
plan shall not be exercisable nor shall any unvested awards granted to Executive
under any stock benefit plan of the Bank, the Company or any subsidiary or
affiliate thereof, vest. At the Date of Termination, such stock options and any
such unvested awards shall become null and void and shall not be exercisable by
or delivered to Executive at any time subsequent to such termination for Just
Cause.

8. Notice.

(a) Any purported termination by the Bank or by Executive shall be communicated
by Notice of Termination to the other party hereto. For purposes of this
Agreement, a “Notice of

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Termination” shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so indicated.

(b) “Date of Termination” shall mean the date specified in the Notice of
Termination (which, in the case of a termination for Just Cause, shall not be
less than thirty (30) days from the date such Notice of Termination is given).

(c) If, within thirty (30) days after any Notice of Termination is given, the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by Executive in which case the Date
of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award or by
a final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected), and
provided further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, base salary) and continue him
as a participant in all compensation, benefit and insurance plans in which he
was participating when the notice of dispute was given, until the dispute is
finally resolved in accordance with this Agreement. Amounts paid pursuant to
this provision shall be in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due under
this Agreement.

9. Post-Termination Obligations.

All payments and benefits to Executive under this Agreement shall be subject to
Executive’s compliance with this Section 9 for one (1) full year after the
earlier of the expiration of this Agreement or termination of Executive’s
employment with the Bank. Executive shall, upon reasonable notice, furnish such
information and assistance to the Company as may reasonably be required by the
Bank in connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party.

10. Non-Competition and Non-Disclosure.

(a) Upon any termination of Executive’s employment pursuant to Section 4 of this
Agreement, Executive agrees not to compete with the Bank or its subsidiaries for
a period of one (1) year following such termination in any city, town or county
in which Executive’s normal business office is located and the Bank or any of
its subsidiaries has an office or has filed an application for regulatory
approval to establish an office, determined as of the effective date of such
termination, except as agreed to pursuant to a resolution duly adopted by the
Board of

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Directors. Executive agrees that during such period and within said cities,
towns and counties, Executive shall not work for or advise, consult or otherwise
serve with, directly or indirectly, any entity whose business materially
competes with the depository, lending or other business activities of the Bank
or its subsidiaries. The parties hereto, recognizing that irreparable injury
will result to the Bank or its subsidiaries, its business and property in the
event of Executive’s breach of this Subsection 10(a) agree that in the event of
any such breach by Executive, the Bank or its subsidiaries, will be entitled, in
addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive’s partners, agents,
servants, employees and all persons acting for or under the direction of
Executive. Executive represents and admits that in the event of the termination
of his employment pursuant to Section 4 of this Agreement, Executive’s
experience and capabilities are such that Executive can obtain employment in a
business engaged in other lines and/or of a different nature than the Bank or
its subsidiaries, and that the enforcement of a remedy by way of injunction will
not prevent Executive from earning a livelihood. Nothing herein will be
construed as prohibiting the Bank or its subsidiaries from pursuing any other
remedies available to the Bank or its subsidiaries for such breach or threatened
breach, including the recovery of damages from Executive.

(b) Executive recognizes and acknowledges that the knowledge of the business
activities and plans for business activities of the Bank and its subsidiaries as
it may exist from time to time, is a valuable, special and unique asset of the
business of the Bank and its subsidiaries. Executive will not, during or after
the term of his employment, disclose any knowledge of the past, present, planned
or considered business activities of the Bank and its subsidiaries thereof to
any person, firm, corporation or other entity for any reason or purpose
whatsoever unless expressly authorized by the Board of Directors or required by
law. Notwithstanding the foregoing, Executive may disclose any knowledge of
banking, financial and/or economic principles, concepts or ideas which are not
solely and exclusively derived from the business plans and activities of the
Bank or its subsidiaries. In the event of a breach or threatened breach by
Executive of the provisions of this Section 10(b), the Bank will be entitled to
an injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Bank or its subsidiaries or from rendering any services to any person, firm,
corporation or other entity to whom such knowledge, in whole or in part, has
been disclosed or is threatened to be disclosed. Nothing herein will be
construed as prohibiting the Bank from pursuing any other remedies available to
the Bank for such breach or threatened breach, including the recovery of damages
from Executive.

11. Death and Disability.

(a) Death. Notwithstanding any other provision of this Agreement to the
contrary, in the event of Executive’s death during the term of this Agreement,
the Bank shall immediately pay his estate any salary and bonus accrued but
unpaid as of the date of his death, and, for a period of six (6) months after
Executive’s death, the Bank shall continue to provide his dependents medical
insurance benefits existing on the date of his death and shall pay Executive’s
designated beneficiary all compensation that would otherwise be payable to him
pursuant to Section 3(a) of

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this Agreement. This provision shall not negate any rights Executive or his
beneficiaries may have to death benefits under any employee benefit plan of the
Company or the Bank.

(b)Disability

        (i) The Bank or Executive may terminate Executive’s employment after
having established Executive’s Disability. For purposes of this agreement,
“Disability” means a physical or mental infirmity that impairs Executive’s
ability to substantially perform his duties under this Agreement and that
results in Executive becoming eligible for long-term disability benefits under
the Company’s or the Bank’s long-term disability plan (or, if the Bank has no
such plan in effect, that impairs Executive’s ability to substantially perform
his duties under this Agreement for a period of one hundred eighty (180)
consecutive days). The Board of Directors shall determine whether or not
Executive is and continues to be permanently disabled for purposes of this
Agreement, in good faith, based upon competent medical advice and other factors
that they reasonably believe to be relevant. As a condition to any benefits, the
Board of Directors may require Executive to submit to such physical or mental
evaluations and tests as it deems reasonably appropriate.

        (ii) In the event of Disability, Executive’s obligation to perform
services under this Agreement will terminate. In the event of such termination,
Executive shall continue to receive (x) one hundred percent (100%) of his
monthly Base Salary (at the annual rate in effect on the Date of Termination)
through the one hundred eightieth (180th) day following the Date of Termination
by reason of Disability and (y) sixty percent (60%) of his monthly base salary
from the one hundred eighty-first (181st) day following termination through the
earlier of the date of his death or the date he attains age 65. Such payments
shall be reduced by the amount of any short- or long-term disability benefits
payable to Executive under any disability program sponsored by the Company or
the Bank. In addition, during any period of Executive’s Disability, Executive
and his dependents shall, to the greatest extent possible, continue to be
covered under all benefit plans (including, without limitation, retirement plans
and medical, dental and life insurance plans) of the Company or the Bank in
which Executive participated prior to the occurrence of Executive’s Disability,
on the same terms as if Executive were actively employed by the Company.

12. Source of Payments.

(a) All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank. The Company, however, unconditionally
guarantees payment and provision of all amounts and benefits due hereunder to
Executive and, if such amounts and benefits due from the Bank are not timely
paid or provided by the Bank, such amounts and benefits shall be paid or
provided by the Company.

(b) Notwithstanding any provision herein to the contrary, to the extent that
payments and benefits, as provided by this Agreement, are paid to or received by
Executive under the Employment Agreement in effect between Executive and the
Company (the “Company

11

Agreement”), such compensation payments and benefits paid by the Company will be
subtracted from any amount due simultaneously to Executive under similar
provisions of this Agreement. Payments pursuant to this Agreement and the
Company Agreement shall be allocated in proportion to the level of activity and
the time expended on such activities by Executive as determined by the Company
and the Bank.

13. Effect of Prior Agreements and Existing Benefit Plans.

This Agreement contains the entire understanding between the parties hereto and
supersedes any prior employment agreement between the Bank or any predecessor of
the Bank and Executive, except that this Agreement shall not affect or operate
to reduce any benefit or compensation inuring to Executive of a kind elsewhere
provided. No provision of this Agreement shall be interpreted to mean that
Executive is subject to receiving fewer benefits than those available to him
without reference to this Agreement.

14. No Attachment.

(a) Except as required by law, no right to receive payments under this Agreement
shall be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge or hypothecation, or to execution, attachment, levy
or similar process or assignment by operation of law, and any attempt, voluntary
or involuntary, to affect any such action shall be null, void and of no effect.

(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Company and their respective successors and assigns.

15. Modification and Waiver.

(a) This Agreement may not be modified or amended except by an instrument in
writing signed by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future as to any act other than that specifically waived.

16. Severability.

If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall, to the full extent consistent with
law, continue in full force and effect.

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17. Headings for Reference Only.

The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

18. Governing Law.

This Agreement shall be governed by the laws of Pennsylvania without regard to
principles of conflicts of law of that State.

19. Arbitration.

Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration, conducted before a panel of three
(3) arbitrators sitting in a location selected by Executive within fifty (50)
miles from the location of the Bank, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

In the event any dispute or controversy arising under or in connection with
Executive’s termination is resolved in favor of Executive, whether by judgment,
arbitration or settlement, Executive shall be entitled to the payment of all
back-pay, including salary, bonuses and any other cash compensation, fringe
benefits and any compensation and benefits due Executive under this Agreement.

20. Payment of Legal Fees.

All reasonable legal fees paid or incurred by Executive pursuant to any dispute
or question of interpretation relating to this Agreement shall be paid or
reimbursed by the Bank, only if Executive is successful pursuant to a legal
judgment, arbitration or settlement.

21. Indemnification.

The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors’ and officers’
liability insurance policy at its expense and shall indemnify Executive (and his
heirs, executors and administrators) to the fullest extent permitted under
applicable law against all expenses and liabilities reasonably incurred by him
in connection with or arising out of any action, suit or proceeding in which he
may be involved by reason of his having been a director or officer of the Bank
(whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and

13

liabilities to include, but not be limited to, judgments, court costs,
attorneys’ fees and the cost of reasonable settlements.

22. Successor to the Bank and the Company.

The Bank and the Company shall require any successor or assignee, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Company, expressly
and unconditionally to assume and agree to perform the Bank’s and the Company’s
obligations under this Agreement, in the same manner and to the same extent that
the Bank and the Company would be required to perform if no such succession or
assignment had taken place.

23. Required Provisions.

(a) The Bank may terminate Executive’s employment at any time, but any
termination by the Bank, other than termination for Just Cause, shall not
prejudice Executive’s right to receive compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after termination for Just Cause as defined in Section 7
of this Agreement.

(b) If Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the Bank’s affairs by a notice served under
Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
§1818(e)(3) or (g)(1); the Bank ‘s obligations under this contract shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Bank may in its discretion: (i)
pay Executive all or part of the compensation withheld while their contract
obligations were suspended; and (ii) reinstate (in whole or in part) any of the
obligations which were suspended.

(c) If Executive is removed and/or permanently prohibited from participating in
the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or
8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1),
all obligations of the Bank under this contract shall terminate as of the
effective date of the order, but vested rights of the contracting parties shall
not be affected.

(d) If the Bank is in default as defined in Section 3(x)(1) of the Federal
Deposit Insurance Act, 12 U.S.C. §1813(x)(1) all obligations of the Bank under
this contract shall terminate as of the date of default, but this paragraph
shall not affect any vested rights of the contracting parties.

(e) All obligations of the Bank under this contract shall be terminated, except
to the extent determined that continuation of the contract is necessary for the
continued operation of the institution: (i) by the Director of the OTS (or her
designee), the FDIC or the Resolution Trust Corporation, at the time the FDIC
enters into an agreement to provide assistance to or on behalf of the Bank under
the authority contained in Section 13(c) of the Federal Deposit Insurance Act,
12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his designee) at the
time the Director

14

(or his designee) approves a supervisory merger to resolve problems related to
the operations of the Bank or when the Bank is determined by the Director to be
in an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.

(f) Any payments made to Executive pursuant to this Agreement, or otherwise, are
subject to and conditioned upon compliance with 12 U.S.C.ss.1828(k) and 12
C.F.R.ss.545.121 and any rules and regulations promulgated thereunder.

15 SIGNATURES

IN WITNESS WHEREOF, Northeast Pennsylvania Financial Corp. has caused this
Agreement to be executed and its seal to be affixed hereunto by its duly
authorized officer and its directors, and Executive has signed this Agreement,
on the 29th day of March, 2002.

ATTEST:                                        FIRST FEDERAL BANK

/s/ Megan Kennedy                              By:/s/ E. Lee Beard
------------------------------------              -----------------------------------------------------
Corporate Secretary                                  For the Entire Board of Directors

ATTEST:                                        NORTHEAST PENNSYLVANIA FINANCIAL CORP.

/s/ Megan Kennedy                              By:/s/ E. Lee Beard
------------------------------------              -----------------------------------------------------
Corporate Secretary                                  For the Entire Board of Directors

                  [SEAL]

WITNESS:                                       EXECUTIVE, Thomas L. Kennedy

/s/ Megan Kennedy                                 /s/ Thomas Kennedy
------------------------------------           -----------------------------------------------------------
Corporate Secretary

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