THIS AGREEMENT, made as of March 25, 1998 by and between Grange National
Banc Corp. ("Banc Corp") and Grange National Bank ("Bank") (hereinafter
collectively referred to as the "Company"), and Thomas A. McCullough
("Executive").

                                   BACKGROUND

     Executive is currently serving, and is willing to continue to serve, as
President and Chief Executive Officer of both Banc Corp and Bank, each of which
desires to retain Executive in such position on the terms and conditions herein
set forth.

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

     1. Employment. Company agrees to employ Executive and Executive agrees to
serve as President and Chief Executive Officer of Banc Corp and Bank during the
Term of Employment as defined in Section 2 hereof. During the Term of
Employment, Executive shall devote his full business time and attention and his
best efforts to the affairs of the Company, and shall perform such duties
consistent with his position as shall be assigned by the Board of Directors of
the Company; provided, however, that Executive may engage in other activities,
such as activities involving personal investments, activities involving
charitable, educational, religious and similar types of organizations, speaking
engagements, membership on the boards of directors of other organizations not
competing with the Company and similar activities to the extent that such
activities do not inhibit, compete or conflict in any material way with the
performance of Executive's duties under this Agreement or the business of the
Company.

     2. Term of Employment. The initial term of employment hereunder shall be a
period of three years commencing on March 25, 1998 and ending on March 25, 2001.
The term of employment under this Agreement shall be extended automatically for
one additional year on each anniversary of the date of the commencement of the
initial term of employment unless either Company or Executive gives contrary
written notice to the other not less than 180 days before any such anniversary
date. References in this Agreement to "Term of Employment" shall refer to the
initial term of employment and any extensions to the initial term of employment.

     3. Compensation, Benefits and Business Expenses. For all services rendered
by Executive to Company in any capacity during the Term of Employment,
including, without limitation, services as an executive officer, director, or
member of any committee of the Company, or any subsidiary, affiliate or division
thereof, Executive shall be compensated as follows:

<PAGE>

     (a) Base Salary. Company shall pay to Executive a base annual salary as
determined by its Board of Directors in its sole discretion, payable in
substantially equal periodic installments during the calendar year in accordance
with the Company's usual payroll practice. The Board of Directors of the Company
shall review annually and, in light of such review, may in its sole discretion
increase such base annual salary taking into account Executive's
responsibilities, increase in the cost of living, increases in salaries of
executives of other similar corporations, performance of the Executive and the
Company, and other pertinent factors. Notwithstanding anything contained herein
to the contrary, Executive's base annual salary will in no event be less than
ninety thousand dollars ($90,000).

     (b) Bonus. The Company, in the sole discretion of its Board of Directors,
may award Executive annual bonuses based on his performance taking into account
the factors described in Section 3(a) above. The bonus, if any, in respect of
any calendar year, shall be paid on or before March 15 of the succeeding
calendar year.

     (c) Stock Options. Executive shall be eligible to receive grants under the
Company's stock option plans at the sole discretion of the Company's Board of
Directors.

     (d) Director's Fees. Executive shall be paid fees for service as a director
of Banc Corp and Bank in the same amounts and manner as are other directors of
Banc Corp and Bank who are not employees.

     (e) Benefit Plans. Executive shall be entitled to participate in all
employee benefit plans of the Company, as presently in effect or as they may be
modified or supplemented from time to time, including, without limitation, plans
providing retirement benefits, medical and dental insurance, life insurance,
disability insurance, and accidental death or dismemberment insurance.

     (f) Executive Supplemental Income Agreement. Executive shall be entitled to
the benefits of the Executive Supplemental Income Agreement between the Company
and Executive dated January 1, 1996, which agreement remains in full force and
effect.

     (g) Split Dollar Insurance Agreement. Executive shall be entitled to the
benefits of the Split Dollar Insurance Agreement between the Company and
Executive dated March 13, 1991 with respect to Policy No. 3478406 issued by the
Guardian Life Insurance Company, which agreement remains in full force and
effect.

     (h) Vacations and Sick Leave. Executive shall be entitled to paid annual
vacation periods not to exceed four weeks in any calendar year and to reasonable
sick leave in accordance with the Company's policies.

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<PAGE>

     (i) Automobile. The Company shall provide to Executive a standard-sized
automobile without cost to Executive and shall pay or reimburse all normal
expenses, insurance, maintenance, repairs and other operating charges and
expenses for such automobile.

     (j) Business Expense Reimbursement. Company shall pay or reimburse
Executive for all reasonable travel and other expenses incurred by Executive in
connection with the performance of his duties under this Agreement.

     4. Termination of Employment Other Than in Connection with a Change in
Control.

     (a) Definitions. For purposes of this Agreement, the following terms have
the indicated meanings:

          (i) The term "Cause" means (A) Executive's conviction of or plea of
     guilty or nolo contendere to a felony or first degree misdemeanor; (B) the
     receipt of a final written directive or order of any governmental
     regulatory agency or entity requiring the removal of Executive as chief
     Executive Officer; (C) Executive's failure to comply with any provision of
     this Agreement; or (D) Executive engaging in conduct involving personal
     dishonesty, breach of fiduciary duty for personal profit, willful violation
     of any law or regulation, willful failure to comply with the lawful
     policies of the Company's Board of Directors or persistent negligence,
     incompetence or misconduct, which conduct in the reasonable judgment of the
     Company's Board of Directors has caused or will cause substantial damage to
     the Company's financial condition.

          (ii) The term "Constructive Discharge" means the failure of the
     Company or its successors without the prior consent of Executive to fulfill
     the obligations under this Agreement in any material respect, including any
     material change by the Company in the functions, duties or responsibilities
     of the Executive's position with the Company which would (without regard to
     a change in title) reduce the ranking, responsibility, importance or
     scope of such position.

          (iii) The term "Permanent Disability" means the inability of the
     Executive to work for a period of six full calendar months during any eight
     consecutive calendar months due to illness or injury of a physical or
     mental nature, supported by the completion by Executive's attending
     physician of a medical certification form outlining the disability and
     treatment.

          (iv) The term "Without Cause" means a reason for termination of
     Executive's employment by the Company other than Permanent Disability,
     retirement, expiration of the Term of Employment, or Cause.


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<PAGE>

     (b) Termination for Permanent Disability or Without Cause or Constructive
Discharge. In the event that Executive's employment hereunder is terminated by
the Company or Executive due to Permanent Disability, by the Company Without
Cause or by Executive by reason of Constructive Discharge, the Company shall, as
severance pay, continue, subject to the provisions of Sections 6 and 7 below, to
pay Executive's base salary as in effect at the time of such termination until
the expiration of the Term of Employment ("Severance Period"); provided, that in
the case of Permanent Disability, such payments shall be offset by any amounts
otherwise paid to Executive under the Company's disability program generally
available to other employees. In addition, earned but unpaid base salary as of
the date of termination of employment shall be payable in full. Group medical
and dental, life, disability (if applicable), and other insurance shall be
continued at the Company's expense through the end of the Severance Period.

     (c) Termination for Cause or Death or Voluntary Termination by Executive.
In the event that the Executive's employment hereunder is terminated by the
Company for Cause or by Executive's death or if Executive voluntarily terminates
his employment with the Company for reasons other than a Constructive Discharge
or Permanent Disability, any earned but unpaid base salary as of the date of
termination of employment shall be payable in full. However, no other payments
shall be made, or benefits provided, by the Company under this Agreement except
for stock options to the extent exercisable under the plans, benefits provided
under the Split Dollar Insurance Agreement dated March 13, 1991, and the
Executive Supplemental Income Agreement dated January 1, 1996, and any other
benefits which the Executive is entitled to receive under the terms of employee
benefit programs maintained by the Company for its employees. Executive shall
give the Company three (3) months' written notice prior to any voluntary
termination by him for reasons other than Constructive Discharge, Permanent
Disability, or a Change in Control.


     5. Termination of Employment in Connection with a Change in Control.

     (a) Definitions. For purposes of this Agreement, the following terms shall
have the indicated meanings:

          (i) The term "Change in Control" means:

               (A) a change in control of Banc Corp which would be required to
          be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
          promulgated under the Securities Exchange Act of 1934 ("Exchange
          Act"), provided that, without limitation, such a change in control
          shall be deemed to have occurred if any "persons" (as such term is
          used in Sections 13(d) and 14(d) of the Exchange Act in effect on the
          date hereof), other than Banc Corp or any "person" who on the date
          hereof is a director of officer of Banc Corp, is or becomes the
          "beneficial owner" (as


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<PAGE>

          defined in Rule 13(d)-3 under the Exchange Act), directly or
          indirectly, of securities of Banc Corp representing 25% or more of the
          combined voting power of Banc Corp's then outstanding securities;

               (B) (1) any consolidation, merger or other similiar type of
          transaction involving Banc Corp in which all of the holders of voting
          stock of the Banc Corp immediately before the consolidation, merger or
          similar transaction will not own 50% or more of the voting shares of
          the continuing or surviving corporation immediately after such
          consolidation, merger or similar transaction, or (2) any sale, lease,
          exchange or other transfer (in one transaction or a series of related
          transactions) of all or substantially all of the assets of Banc Corp;
          or

               (C) if during any period of two consecutive years during the term
          of this Agreement, individuals who at the beginning of such period
          constitute the Board of Directors of Banc Corp cease for any reason to
          constitute at least a majority thereof, unless the election of each
          director who was not a director at the beginning of such period has
          been approved in advance by directors representing at least two-thirds
          of the directors then in office who were directors at the beginning of
          the period.

          (ii) The term "Termination upon a Change in Control" means a
     termination of employment of Executive upon or within 12 months after a
     Change in Control, or prior to a Change in Control, following the date of a
     public announcement by the Company ("Announcement Date") of a prospective
     transaction which, if consummated, would be a Change in Control, either:

               (A) initiated by the Company for any reason other than (1)
          Executive's death or (2) for Cause as defined herein; or

               (B) initiated by Executive (1) due to Constructive Discharge
          during the period beginning on the Announcement Date and ending 12
          months following the Change in Control, or (2) for any reason during
          the 12 months following the Change in Control.

          (iii) The term "Separation Period" means the three-year period
     beginning on the date of Executive's Termination upon a Change in Control.

     (b) Payments for Termination upon a Change in Control. Within 30 days of
Executive's Termination upon a Change in Control, Company shall pay to Executive
in a single payment in cash and/or provide to Executive (as applicable), the
following:

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<PAGE>

          (i) Executive's earned but unpaid base salary as of the date of
     termination and all benefits, if any, due under the Company's benefit and
     compensation plans;

          (ii) three times the average aggregate annual salary, bonus and
     director's fees paid to Executive by the Company and includable in
     Executive's gross income for federal income tax purposes during the three
     calendar years preceding the taxable year in which the date of termination
     occurs; and

          (iii) continued medical and dental, life, disability and other
     insurance during the Separation Period with coverage equivalent to coverage
     to which Executive had been entitled prior to termination.

Notwithstanding the above provisions of this Section 5(b), if the lump sum
severance payment under this Section 5(b), either along or together with other
payments which Executive has the right to receive from the Company, would
constitute a "parachute payment" (as defined in Section 280G of the Internal
Revenue Code of 1986, as amended ["Code"]), such lump sum severance payment
shall be reduced to the largest amount as will result in no portion of the lump
sum severance payment under this Section 5(b) being subject to the excise tax
imposed by Section 49999 of the Code. The determination of any reduction in the
lump sum severance payment under this Section 5(b) pursuant to the foregoing
provision shall be made by independent counsel to the Company in consultation
with the independent certified public accountants of the Company.

     6. Agreement Not to Compete. Without the consent in writing of the Board
of Directors of the Company, Executive shall not, during the Term of Employment
(which includes any Severance Period as defined in Section 4(b) hereof) engage
directly or indirectly in any banking business competing with the Company, which
business has offices within 30 miles of any banking office of the Company;
provided, however, that Executive shall not hereby be precluded or prohibited
from owning passive investments, including securities of other banking
institutions, so long as such ownership does not require him to devote any time
to the management or control of the business or activities in which he has
invested. The provisions of this Section 6 shall be inapplicable if Executive's
employment has been terminated by reason of a Change in Control.

     7. Non-Disclosure of Confidential Information. During the Term of
Employment, or following Executive's termination of employment for any reason
whatsoever, Executive shall not disclose, use, transfer or sell, except in the
course of employment with the Company, any confidential information or
proprietary data of the Company so long as such information or proprietary data
remains confidential and has not been disclosed or is otherwise in the public
domain, except as required by law or pursuant to legal process.


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<PAGE>


     8. Withholding Taxes. The Company may directly or indirectly withhold from
any payment made hereunder all Federal, state, municipal or other taxes as shall
be required pursuant to any law or governmental regulation or ruling.

     9. No Mitigation. Executive shall not be required to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this Agreement be reduced by any compensation earned by Executive from
other employment or otherwise.

     10. Consolidation, Merger or Sale of Assets. Nothing in this Agreement
shall preclude the Company form consolidating or merging into or with, or
transferring all or substantially all of its assets to another corporation which
assumes this Agreement and all obligations and undertakings of the Company
hereunder.

     11. Prior Agreements. The Split Dollar Insurance Agreement between the
Company and the Executive dated March 13, 1991 and the Executive Supplement
Income Agreement between the Company and Executive dated January 1, 1996 remain
in full force and effect. The personal Service Contract between the Company and
Executive dated July 16, 1987 and the Deferred Compensation Agreement between
the Company and Executive dated January 1, 1996 are hereby terminated. Except as
otherwise provided herein, this Agreement constitutes the entire understanding
between the Company and Executive relating to the employment of Executive by the
Company and supersedes and cancels all prior written or oral agreements or
understandings with respect to the subject matter of this Agreement.

     12. Miscellaneous.

         (a) All notices, request, demands and other communications required or
permitted hereunder shall be given in writing and shall be deemed to have been
duly given if delivered or mailed, postage prepaid, by same day or other night
mail as follows:

         To Company:

         Chairman of the Board
         Grange National Banc Corp.
         Main and Bee Streets
         Laceville, Pennsylvania 18623

         To Executive:

         Thomas A. McCullough
         RR #1, Box 1595
         Laceville, Pennsylvania 18623


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