AMENDED AND RESTATED EMPLOYMENT
AGREEMENT


 


THIS AMENDED AND RESTATED EMPLOYMENT
AGREEMENT (“Agreement”) is effective as of the 1st day of January 2013, between QNB CORP., a Pennsylvania
business corporation (the “Corporation”), QNB BANK, a state chartered banking institution (the “Bank”),
and DAVID W. FREEMAN, an adult individual (“Executive”).


 


WITNESSETH:


 


WHEREAS, the Corporation, the Bank
and the Executive previously entered into an employment agreement dated September 7, 2010 (the “Prior Employment Agreement”);


 


WHEREAS, the Corporation, the Bank
and the Executive desire to amend and restate the Prior Employment Agreement to revise Executive’s title to President and
Chief Executive Officer of the Corporation and the Bank and to add a provision providing for an increased severance payment in
the event of termination of Executive’s employment under certain circumstances after a change in control of the Corporation
or the Bank.


 


WHEREAS, Executive desires to accept
such employment with the Corporation and the Bank, on the terms and conditions set forth in this Agreement.


 


AGREEMENT


 


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


 


1. Employment. The
Corporation and the Bank each hereby employs Executive and Executive hereby accepts employment with the Corporation and the Bank,
on the terms and conditions set forth in this Agreement.


 


2. Duties of Employee.


 


(a) Executive shall serve as President
and Chief Executive Officer of the Corporation and the Bank, respectively, and shall perform all duties and accept all responsibilities
incident to such positions as may be assigned to Executive by the Board of Directors of the Corporation (the “Board”)
or the Board of Directors of the Bank (the “Bank Board”). Executive shall devote Executive’s full time, attention,
and energies to the business of the Corporation and the Bank during the Employment Period (as defined in Section 3 of this
Agreement); provided, however, that this Section 2 shall not be construed as preventing Executive from (a) engaging in
activities incident or necessary to personal investments, (b) acting as a member of the board of directors of any non-profit
association or corporation, or (c) being involved in any other activity with the prior approval of the Board or the Bank Board.
Executive shall not engage in any business or commercial activities, duties, or pursuits which compete with the business or commercial
activities of the Corporation or the Bank, nor may Executive serve as a director or officer or in any other capacity in a company
which competes with the Corporation or the Bank.


 






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(b) During the term of this Agreement,
the Bank shall cause Executive to be nominated to the Bank Board, and use its reasonable efforts to cause Executive to be re-elected
to the Bank Board.


 


3. Term of Agreement.


 


(a) Employment Period. This
Agreement shall be for a period (the “Employment Period”) beginning on the effective date of this Agreement (January
1, 2013), and if not previously terminated pursuant to the terms of this Agreement, ending one year later; provided, however, that
the Employment Period shall be automatically renewed on the first anniversary date of the commencement of the Employment Period
(the “Renewal Date”) for a period ending one year from the Renewal Date unless either party shall give written notice
of non-renewal to the other party at least 90 days prior to the Renewal Date, in which event this Agreement shall terminate at
the end of the Employment Period. If this Agreement is renewed on the Renewal Date, it will be automatically renewed on the first
anniversary date of the Renewal Date and each subsequent anniversary (the “Annual Renewal Date”) for a period ending
one year from each Annual Renewal Date, unless either party gives written notice of non-renewal to the other party at least 90
days prior to the Annual Renewal Date, in which case this Agreement shall terminate at the end of the Employment Period.


 


(b) Termination for Cause. Notwithstanding
the provisions of Section 3(a) of this Agreement, this Agreement may be terminated by the Corporation or the Bank for Cause
(as defined herein). As used in this Agreement, “Cause” shall mean any of the following:


 


(i) Executive is convicted of or
pleads guilty or nolo contendere to a felony, a crime of falsehood, or a crime involving moral turpitude, or the actual
incarceration of Executive for a period of 30 consecutive days or more;


 


(ii) A government regulatory agency
recommends or orders in writing that the Corporation or the Bank terminate the employment of Executive with the Corporation or
the Bank or relieve Executive of Executive’s duties as such relate to the Corporation or the Bank;


 


(iii) Executive willfully and continuously
fails to follow the lawful instructions of the Board or the Bank Board (which instructions must be consistent with the terms of
this Agreement), other than a failure resulting from Disability;


 


(iv) A willful act of material dishonesty
on the part of Executive with respect to any material matter involving the Corporation or the Bank;


 


(v) Executive willfully fails to
timely report to the Board or the Bank Board information having a material adverse effect on Corporation or Bank business operations;


 


(vi) Theft or material misuse by
Executive of Corporation or Bank property;


 






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(vii) Executive fails to conform
in any material respect to the Corporation’s or Bank’s code of conduct; or


 


(viii) A material breach of this
Agreement by Executive.


 


For purposes of this Agreement,
“code of conduct” means the policies and procedures related to employment of employees by the Corporation or the Bank
set forth in the Corporation’s or Bank’s employee handbook or any similar document. The code of conduct may be amended
and updated at any time. The term “code of conduct” shall also include any other policy or procedure that may be adopted
by the Corporation or the Bank and communicated to Executive.


 


Anything herein to the contrary
notwithstanding, Executive’s employment shall not be terminated for Cause, within the meaning of clauses (iii) — (viii)
above unless written notice stating the basis for the termination is provided to Executive and Executive (together with Executive’s
own counsel) has an opportunity to be heard before the Board or the Bank Board, as applicable, and, after such hearing, a majority
of the Board or the Bank Board (excluding Executive), as applicable, duly votes to terminate Executive for Cause.


 


If this Agreement is terminated for Cause,
all of Executive’s rights under this Agreement shall cease as of the effective date of such termination, except that:


 


(i) the Bank shall pay to Executive
the unpaid portion, if any, of Executive’s Annual Base Salary through the date of termination; and


 


(ii) the Bank shall provide to Executive
such post-employment benefits, if any, as may be provided for under the terms of the employee benefit plans of the Corporation
and the Bank then in effect.


 


(c) Termination for Good Reason.
Notwithstanding the provisions of Section 3(a) of this Agreement, this Agreement shall terminate automatically upon Executive’s
termination of employment for Good Reason. The term “Good Reason” shall mean, without Executive’s express written
consent, (i) a material reduction in Executive’s Annual Base Salary; (ii) a material diminution in Executive’s authority,
duties, or responsibilities; (iii) a material change in the geographic location at which Executive must perform the services under
this Agreement; or (iv) any other action or inaction that constitutes a material breach by the Corporation or the Bank of this
Agreement, in all cases after notice from Executive to the Corporation or the Bank within ninety (90) days after the initial existence
of any such condition that the condition constitutes Good Reason and the failure of the Corporation or the Bank to cure such situation
within thirty (30) days after said notice.


 


If such termination occurs for Good Reason,
then the Bank shall pay Executive such benefits as are set forth in Sections 5 or 6 of this Agreement, as applicable.


 


(d) Death. Notwithstanding the
provisions of Section 3(a) of this Agreement, this Agreement shall terminate automatically upon Executive’s death and
Executive’s rights under this Agreement shall cease as of the date of such termination, except that (i) the Bank shall
pay to Executive’s spouse, personal representative, or estate the unpaid portion, if any, of Executive’s Annual Base
Salary through date of death and the balance of the payments (if any) owing pursuant to Section 15(b) below, and (ii) the
Bank shall provide to Executive’s dependents any benefits due under the Corporation’s and the Bank’s employee
benefit plans.


 






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(e) Disability. Executive, the
Corporation, and the Bank agree that if, in the judgment of the Board, Executive is unable, as a result of illness or injury, to
perform the essential functions of Executive’s position on a full-time basis with or without a reasonable accommodation and
without posing a direct threat to Executive or others for a period of six months (a “Disability”), the Corporation
and the Bank will suffer an undue hardship in continuing Executive’s employment as set forth in this Agreement. Accordingly,
this Agreement shall terminate at the end of the six-month period, and all of Executive’s rights under this Agreement shall
cease, with the exception of those rights which Executive may have under the Corporation’s and the Bank’s benefit plans.


 


(f) Resignation from Board of Directors.
In the event Executive’s employment under this Agreement is terminated for any reason, if applicable, Executive’s service
as a Director of the Corporation, the Bank, and any affiliate or subsidiary thereof shall immediately terminate. This Section 3(f)
shall constitute a resignation notice for such purposes.


 


4. Employment Period Compensation.
Benefits and Expenses.


 


(a) Annual Base Salary. For
services performed by Executive under this Agreement, the Bank shall pay Executive an annual base salary during the Employment
Period at the rate of $305,000 per year, minus applicable withholdings and deductions, payable at the same times as salaries are
payable to other executive employees of the Bank (the “Annual Base Salary”). The Annual Base Salary shall be reviewed
annually by the Board or the Bank Board and either may, from time to time, increase Executive’s Annual Base Salary, and any
and all such increases shall be deemed to constitute amendments to this Section 4(a) to reflect the increased amounts, effective
as of the date established for such increases.


 


(b) Bonus. The Board and the
Bank Board may provide for the payment of an annual bonus to Executive as it deems appropriate to provide incentive to Executive
and to reward Executive for Executive’s performance. Such bonus may, but need not be, determined in accordance with any incentive
bonus programs for executive officers as approved by the Board and the Bank Board.


 


(c) Vacations, Holidays, etc.
Executive shall be entitled to five weeks vacation. Such vacation time shall be subject to the policies as established from time
to time by the Bank Board. Executive shall also be entitled to all paid holidays, sick days, and personal days provided by the
Bank to its regular full-time employees and executive officers.


 


(d) Stock Based Incentives.
During the term of this Agreement, Executive shall be eligible for such stock based incentives as may be granted from time to time
by the Board under the Corporation’s stock based incentive plans and as are consistent with Executive’s responsibilities
and performance.


 






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(e) Employee Benefits Plans.
Executive shall be entitled to participate in all health, dental, vision, life insurance, and disability benefit plans available
on a general basis to other executive officers of the Corporation and the Bank; provided, however, that the Corporation and the
Bank reserve the right, from time to time, to amend in any respect and to terminate all such benefit plans; and provided further
that any reduction in such benefits must be applicable to all employees generally.


 


(f) Additional Benefits.


 


(i) Executive shall be entitled
to participate in the Bank’s long-term disability and accidental death benefit plans; provided, however, that the Bank reserves
the right, from time to time, to amend in any respect and to terminate such benefit plans; and provided further that any reduction
in such benefits must be applicable to all employees generally.


 


(ii) The Executive shall be eligible
to participate in the Corporation’s retirement savings plan in accordance with the terms of the plan; provided, however,
that the Corporation reserves the right, from time to time, to amend in any respect and to terminate such benefit plan; and provided
further that any reduction in such benefits must be applicable to all employees generally.


 


(g) Business Expenses. During
the term of this Agreement, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by
Executive, which are properly accounted for, in accordance with the policies and procedures established by the Board or the Bank
Board for its executive officers.


 


(h) Club Membership and Dues.
During the term of this Agreement, the Bank agrees to pay the initiation fees and dues for Executive to be a member of a country
club to be agreed upon by the Bank and Executive. The Bank also agrees to reimburse Executive for all ordinary, necessary, and
reasonable business-related expenses incurred by Executive on Bank business at such country club. As a condition to receiving such
reimbursements, the Executive shall submit to the Bank on a timely basis business expense reports, including substantiation sufficient
to enable the Bank to deduct the reimbursed expenses for tax purposes.


 


5. Rights in Event of Termination
of Employment after a Change in Control.


 


(a) In the event that Executive’s
employment is involuntarily terminated by the Corporation or the Bank without Cause (other than for death or Disability) during
the term of this Agreement after a Change in Control (as defined in Section 5(c) below) or Executive’s employment is voluntarily
terminated by Executive for Good Reason (as defined in Section 3(c) above) after a Change in Control, Executive shall be entitled
to receive:


 


(i) Executive shall be paid, within
twenty (20) days following termination, a lump-sum cash payment equal to two (2) times Executive’s Annual Base Salary then
in effect (or immediately prior to any reduction resulting in a termination by Executive for Good Reason). Such amount shall be
subject to federal, state, and local tax withholdings.


 






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(ii) Continuation of employer-provided
healthcare benefits for two years at the levels and cost to Executive and his qualified dependents in effect on the date of Executive’s
termination, and thereafter to elect, at Executive’s or his qualified dependents’ cost, COBRA continuation for the
remainder of Executive’s or his qualified dependents’ COBRA eligibility, if any, it being understood that Executive’s
and his dependents’ COBRA eligibility period will include the period during which the Company is providing benefits under
this Section. Notwithstanding the foregoing, in the event the Bank is unable to provide such healthcare benefits due to the applicable
nondiscrimination requirements of Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”), Executive
shall receive a dollar amount equal to the cost to Executive of obtaining such benefits (or substantially similar benefits) on
or within 30 days following the date of termination.


 


(b) Executive shall not be required
to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, nor shall the
amount of payment or the benefit provided for in this Section 5 be reduced by any compensation earned by Executive as the
result of employment by another employer or by reason of Executive’s receipt of or right to receive any retirement or other
benefits after the date of termination of employment or otherwise.


 


(c) As used in this Agreement, “Change
in Control” of the Corporation shall mean


 


(i) a merger, consolidation or division
involving the Corporation or the Bank, (B) a sale, exchange, transfer or other disposition of substantially all of the assets
of the Corporation or the Bank, or (C) a purchase by the Corporation or the Bank of substantially all of the assets of another
entity, unless (y) such merger, consolidation, division, sale, exchange, transfer, purchase or disposition is approved in
advance by sixty-six and two-thirds percent (66 2/3%) or more of the members of the Board of Directors of the Corporation or the
Bank who are not interested in the transaction and (z) a majority of the members of the Board of Directors of the legal entity
resulting from or existing after any such transaction and the Board of Directors of such entity’s parent corporation, if
any, are former members of the Board of Directors of the Corporation or the Bank; or


 


(ii) any “person” (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)), other than
the Corporation or the Bank or any “person” who on the date hereof is a director or officer of the Corporation or the
Bank, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Corporation or the Bank representing twenty-five percent (25%) or more of the combined voting power of Corporation
or Bank’s then outstanding securities;


 


(iii) during the period of two (2) consecutive
years during the term of Executive’s employment under this Agreement, individuals who at the beginning of such period constitute
the Board of Directors of the Corporation or the Bank 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 sixty-six and two-thirds percent (66 2/3%) of the directors then in office who were directors at the beginning of the
period; or


 






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(iv) any other transaction involving
the Corporation or the Bank similar in effect to any of the foregoing and designated as a Change in Control by the Board.


 


(d) In the event Executive becomes
entitled to any of the payments set forth in this Section 5, he shall not be entitled to any of the payments set forth in Section
6.


 


6. Rights in Event of Termination
of Employment Prior to a Change in Control.


 


(a) In the event Executive’s
employment is involuntarily terminated by the Corporation or the Bank without Cause (other than for death or Disability) prior
to a Change in Control (as defined in Section 5(c) above) or Executive’s employment is voluntarily terminated by Executive
for Good Reason prior to a Change in Control, Executive shall be entitled to receive:


 


(i) Continuation of Executive’s
Annual Base Salary then in effect (or immediately prior to any reduction resulting in a termination by Executive for Good Reason)
for a period of 12 months commencing on or within 30 days following the date of such termination, in accordance with the Bank’s
normal payroll practices then in effect; and


 


(ii) Continuation of employer-provided
healthcare benefits for one year at the levels and cost to Executive and his qualified dependents in effect on the date of Executive’s
termination, and thereafter to elect, at Executive’s or his qualified dependents’ cost, COBRA continuation for the
remainder of Executive’s or his qualified dependents’ COBRA eligibility, if any, it being understood that Executive’s
and his dependents’ COBRA eligibility period will include the period during which the Company is providing benefits under
this Section. Notwithstanding the foregoing, in the event the Bank is unable to provide such healthcare benefits due to the applicable
nondiscrimination requirements of Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”), Executive
shall receive a dollar amount equal to the cost to Executive of obtaining such benefits (or substantially similar benefits) on
or within 30 days following the date of termination.


 


(b) Executive shall not be required
to mitigate the amount of any payment provided for in this Section 6 by seeking other employment or otherwise, nor shall the
amount of payment provided for in this Section 6 be reduced by any compensation earned by Executive as the result of employment
by another employer or by reason of Executive’s receipt of or right to receive any retirement or other benefits after the
date of termination of employment or otherwise.


 


(c) In the event Executive becomes
entitled to any of the payments set forth in this Section 6, he shall not be entitled to any of the payments set forth in Section
5.


 


 



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7. Covenant Not to Compete.


 


(a) Executive hereby acknowledges and
recognizes the highly competitive nature of the business of the Corporation and the Bank and accordingly agrees that, during and
for the applicable period set forth in Section 7(c) hereof, Executive shall not:


 


(i) enter into or be engaged (other
than by the Corporation or the Bank), directly or indirectly, either for Executive’s own account or as agent, consultant,
employee, partner, officer, director, proprietor, investor (except as an investor owning less than 5% of the stock of a publicly
owned company), or otherwise of any person, firm, corporation, or enterprise engaged in (A) the banking (including bank holding
company) or financial services industry or (B) any other activity in which Corporation or the Bank or any of their subsidiaries
are engaged during the Employment Period, in any county in which, at the date of termination of Executive’s employment, a
branch location, office, loan production office, or trust or asset and wealth management office of Corporation, the Bank, or any
of their subsidiaries are located (“Non-Competition Area”); or


 


(ii) solicit, directly or indirectly,
any “person” (as such term is defined under Section 3 of the Employee Retirement Income Security Act of 1974, as amended)
who is, or was during the then most recent 12-month period, a customer of the Corporation or the Bank or any of their respective
subsidiaries to divert their business from the Corporation and/or the Bank; or


 


(iii) solicit, directly or indirectly,
any person who is, or was during the then most recent 12-month period, employed by the Corporation or the Bank or any of their
respective subsidiaries to leave the employ of the Corporation or the Bank.


 


(b) It is expressly understood and
agreed that, although the parties consider the restrictions contained in Section 7(a) hereof reasonable for the purpose of preserving
for the Corporation, the Bank, and their subsidiaries their good will and other proprietary rights, if a final judicial determination
is made by a court having jurisdiction that the time or territory or any other restriction contained in this Section 7(a) hereof
is an unreasonable or otherwise unenforceable restriction against Executive, the provisions of Section 7(a) hereof shall not be
rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court
may judicially determine or indicate to be reasonable.


 


(c) The provisions of this Section
7 shall be applicable commencing on the effective date of this Agreement and continuing for 12 months after the effective date
of the termination of Executive’s employment; provided, however, that in the event Executive’s employment terminates
as a result of delivery of a notice of non-renewal by the Corporation or the Bank in accordance with Section 3(a), Executive shall
not be subject to the restrictions contained in Section 7(a)(i). Notwithstanding the above provisions, if Executive violates the
provisions of this Section 7 and the Corporation or the Bank must seek enforcement of the provisions of Section 7 and is successful
in enforcing the provisions, either pursuant to a settlement agreement, or pursuant to court order, the restrictions set forth
in this Section 7 shall remain in effect for one full year following the date of the settlement agreement or court order.


 






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(d) Executive hereby agrees that the
provisions of this Section 7 are fully assignable by the Corporation and the Bank to any successor. Executive also acknowledges
that the terms and conditions of this Section 7 will not be affected by the circumstances surrounding Executive’s termination
of employment.


 


(e) Executive acknowledges and agrees
that any breach of the restrictions set forth in this Section 7 will result in irreparable injury to the Corporation and the Bank
for which it shall have no meaningful remedy at law, and the Corporation and the Bank shall be entitled to injunctive relief in
order to enforce provisions hereof. Upon obtaining any such final and nonappealable injunction, the Corporation and the Bank shall
be entitled to pursue reimbursement from Executive and/or Executive’s employer of attorney’s fees and costs reasonably
incurred in obtaining such final and nonappealable injunction. In addition, the Corporation and the Bank shall be entitled to pursue
reimbursement from Executive and/or Executive’s employer of costs reasonably incurred in securing a qualified replacement
for any employee enticed away from the Corporation and the Bank by Executive. Further, the Corporation and the Bank shall be entitled
to set off against or obtain reimbursement from Executive of any payments owed or made to Executive hereunder.


 


8. Unauthorized Disclosure.
During the term of Executive’s employment hereunder, or at any later time, Executive shall not, without the written consent
of the Board and the Bank Board or a person authorized thereby (except as may be required pursuant to a subpoena or other legal
process), knowingly disclose to any person, other than an employee of the Corporation and the Bank or a person to whom disclosure
is reasonably necessary or appropriate in connection with the performance by Executive of Executive’s duties as an executive
of the Corporation and the Bank, any material confidential information obtained by Executive while in the employ of the Corporation
and the Bank with respect to any of the Corporation’s and the Bank’s or any of their subsidiaries’ services,
products, improvements, formulas, designs or styles, processes, customers, methods of business, or any business practices the disclosure
of which could be or will be damaging to the Corporation and the Bank; provided, however, that confidential information shall not
include any information known generally to the public (other than as a result of unauthorized disclosure by Executive or any person
with the assistance, consent, or direction of Executive) or any information of a type not other considered confidential by persons
engaged in the same business or a business similar to that conducted by the Corporation and the Bank or any information that must
be disclosed as required by law.


 


9. Cessation and Recovery on
Competition. If, during the applicable period set forth in Section 7(c), Executive, in the good faith judgment of the Board,
breaches, in any material respect, any of the restrictions contained in Section 7, the Corporation shall have the right, upon written
notice to Executive, to cease to make any further payments under Sections 5 or 6, as applicable, in addition to any other remedies
available the Corporation.


 


10. Indemnification; Liability
Insurance. The Corporation and the Bank shall indemnify Executive, to the fullest extent permitted by Pennsylvania law,
with respect to any threatened, pending, or contemplated action, suit, or proceeding brought against Executive by reason of the
fact that Executive is or was a director, officer, employee, or agent of the Corporation and the Bank or is or was serving at the
written request of the Corporation or the Bank as a director, officer, employee, or agent of another person or entity. Executive’s
right to indemnification provided herein is not exclusive of any other rights to which Executive may be entitled under any bylaw,
agreement, vote of shareholders, or otherwise, and shall continue beyond the term of this Agreement.


 






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11. Notices. Except
as otherwise provided in this Agreement, any notice required or permitted to be given under this Agreement shall be deemed properly
given if in writing and if mailed by registered or certified mail, postage prepaid with return receipt requested, to Executive’s
address, in the case of notices to Executive, and to the principal executive office of the Corporation, in the case of notice to
the Corporation or the Bank.


 


12. Waiver. No provision
of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing
and signed by Executive and an executive officer specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent
time.


 


13. Assignment. This
Agreement shall not be assignable by any party, except by the Bank and the Corporation to any successor in interest to its business.


 


14. Entire Agreement.
This Agreement contains the entire agreement of the parties relating to the subject matter of this Agreement and supersedes and
replaces any prior written or oral agreements between them respecting the within subject matter (including, without limitation,
the Prior Employment Agreement”).


 


15. Successors; Binding Agreement.


 


(a) The Corporation and the Bank will
require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all
of the business and/or assets of the Corporation and/or the Bank to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Corporation and the Bank would be required to perform it if no such succession had
taken place. As used in this Agreement, “Corporation” and “Bank” shall mean the Corporation and the Bank
as defined previously and any successor to its respective business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law or otherwise.


 


(b) This Agreement shall inure to the
benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, heirs, distributees,
devisees, or legatees. If Executive should die after a notice of termination for Good Reason is delivered by Executive, or following
termination of Executive’s employment without Cause, and any amounts would be payable to Executive under this Agreement if
Executive had continued to live, all such amounts shall be paid in accordance with the terms of this Agreement to Executive’s
devisee, legatee, or other designee, or, if there is no such designee, to Executive’s estate.


 






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16. Arbitration. The
Corporation, the Bank, and Executive recognize that in the event a dispute should arise between them concerning the interpretation
or implementation of this Agreement, lengthy and expensive litigation will not afford a practical resolution of the issues within
a reasonable period of time. Consequently, with the exception of the covenant provisions in Section 7, which the Corporation and/or
the Bank may seek to enforce in any court of competent jurisdiction, each party agrees that all disputes, disagreements, and questions
of interpretation concerning this Agreement are to be submitted to resolution, in Philadelphia, Pennsylvania, to the American Arbitration
Association (the “Association”) in accordance with the Association’s National Rules for the Resolution of Employment
Disputes or other applicable rules then in effect (“Rules”). The Corporation, the Bank, or Executive may initiate an
arbitration proceeding at any time by giving notice to the other in accordance with the Rules. The Corporation, the Bank, and Executive
may, as a matter or right, mutually agree on the appointment of a particular arbitrator from the Association’s pool. The
arbitrator shall not be bound by the rules of evidence and procedure of the courts of the Commonwealth of Pennsylvania but shall
be bound by the substantive law applicable to this Agreement. The decision of the arbitrator, absent fraud, duress, incompetence,
or gross and obvious error of act, shall be final and binding upon the parties and shall be enforceable in courts of proper jurisdiction.
Following written notice of a request for arbitration, the Corporation, the Bank, and Executive shall be entitled to an injunction
restraining all further proceedings in any pending or subsequently filed litigation concerning this Agreement, except as otherwise
provided herein.


 


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


 


18. Applicable Law.
This Agreement shall be governed by and construed in accordance with the domestic, internal laws of the Commonwealth of Pennsylvania,
without regard to its conflicts of laws principles.


 


19. Headings. The section
headings of this Agreement are for convenience only and shall not control or affect the meaning or construction or limit the scope
or intent of any of the provisions of this Agreement.


 


20. Regulatory Matters.
The obligations of the Corporation and the Bank under this Agreement shall in all events be subject to any required limitations
or restrictions imposed by or pursuant to the Federal Deposit Insurance Act or the Pennsylvania Banking Code of 1965 as the same
may be amended from time to time.


 


21. Limitations on Payments.
Notwithstanding anything in this Agreement to the contrary, in the event the payments and benefits payable hereunder to or on behalf
of Executive, when added to all other amounts and benefits payable to or on behalf of Executive, would result in the imposition
of an excise tax under Code Section 4999, the amounts and benefits payable hereunder shall be reduced to such extent as may be
necessary to avoid such imposition. All calculations required to be made under this Section will be made by the Corporation’s
independent public accountants, subject to the right of Executive’s representative to review the same. The parties recognize
that the actual implementation of the provisions of this Section are complex and agree to deal with each other in good faith to
resolve any questions or disagreements arising hereunder.


 






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22. Recovery of Bonuses and
Incentive Compensation. Notwithstanding anything in this Agreement to the contrary, all bonuses and incentive compensation
paid hereunder (whether in equity or in cash) shall be subject to recovery by the Corporation or the Bank in the event that such
bonuses or incentive compensation are based on materially inaccurate financial statements or other materially inaccurate performance
metric criteria; provided that a determination as to the recovery of a bonus or incentive compensation shall be made within 36
months following the date such bonus or incentive compensation was paid. In the event that the Board or the Bank Board, as applicable,
determines by at least a majority vote that a bonus or incentive compensation payment to Executive is recoverable pursuant to this
Section, Executive shall reimburse all or a portion of such bonus or incentive compensation, to the fullest extent permitted by
law, as soon as practicable following written notice to Executive by the Corporation or the Bank of the same.


 


23. Application of Code Section
409A.


 


(a) Notwithstanding anything in this
Agreement to the contrary, the receipt of any benefits under this Agreement as a result of a termination of employment shall be
subject to satisfaction of the condition precedent that Executive undergo a “separation from service” within the meaning
of Treas. Reg. § 1.409A-1(h) or any successor thereto. In addition, if Executive is deemed to be a “specified employee”
within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provisions of any benefit
that is required to be delayed pursuant to Code Section 409A(a)(2)(B), such payment or benefit shall not be made or provided prior
to the earlier of (i) the expiration of the six (6) month period measured from the date of Executive’s “separation
from service” (as such term is defined in Treas. Reg. § 1.409A-1(h)), or (ii) the date of Executive’s death (the
“Delay Period”). Within ten (10) days following the expiration of the Delay Period, all payments and benefits delayed
pursuant to this Section (whether they would have otherwise been payable in a single sum or in installments in the absence of such
delay) shall be paid or reimbursed to Executive in a lump sum, and any remaining payments and benefits due under this Agreement
shall be paid or provided in accordance with the normal payment dates specified for them herein.


 


(b) Except as otherwise expressly provided
herein, to the extent any expense reimbursement or other in-kind benefit is determined to be subject to Code Section 409A, the
amount of any such expenses eligible for reimbursement or in-kind benefits in one calendar year shall not affect the expenses eligible
for reimbursement or in-kind benefits in any other taxable year (except under any lifetime limit applicable to expenses for medical
care), in no event shall any expenses be reimbursed or in-kind benefits be provided after the last day of the calendar year following
the calendar year in which Executive incurred such expenses or received such benefits, and in no event shall any right to reimbursement
or in-kind benefits be subject to liquidation or exchange for another benefit.


 






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(c) Any payments made pursuant to Sections
5 or 6, to the extent of payments made from the date of termination through March 15th of the calendar year following such date,
are intended to constitute separate payments for purposes of Treas. Reg. §1.409A-2(b)(2) and thus payable pursuant to the
“short-term deferral” rule set forth in Treas. Reg. §1.409A-1(b)(4); to the extent such payments are made following
said March 15th, they are intended to constitute separate payments for purposes of Treas. Reg. §1.409A-2(b)(2) made upon an
involuntary termination from service and payable pursuant to Treas. Reg. §1.409A-1(b)(9)(iii), to the maximum extent permitted
by said provision.


 


(d) To the extent it is determined
that any benefits described in Sections 5 or 6 are taxable to Executive, they are intended to be payable pursuant to Treas. Reg.
§1.409A-1(b)(9)(v), to the maximum extent permitted by said provision.


 


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


 





	ATTEST:	 	QNB CORP.	 
	 	 	 	 
	/s/ Charles Meredith III	 	By:	/s/ Thomas J. Bisko
	Secretary	 	 	 
	 	 	 	 
	 	 	 	 
	ATTEST:	 	QNB BANK	 
	 	 	 	 
	/s/ Charles Meredith III	 	By:	/s/ Thomas J. Bisko
	Secretary	 	 	 
	 	 	 	 
	 	 	 	 
	WITNESS:	 	EXECUTIVE	 
	 	 	 	 
	/s/ Bret H. Krevolin	 	 	/s/ David W. Freeman







 


 






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