Exhibit 10

                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the "Agreement"), effective as of the 3rd day of
January, 2006 (the "Effective Date"), by and between Penn Security Bank & Trust,
a Pennsylvania  state  chartered  community bank and trust company (the "Bank"),
and Penseco  Financial  Services  Corporation,  a Pennsylvania  corporation (the
"Parent") (together the "Company"),  and Craig W. Best (the "Executive"),  reads
as follows:

                                    ARTICLE I

                                    RECITALS

     WHEREAS,  the  Executive  is  an  individual  qualified  by  education  and
experience  to serve as both the Bank's  and the  Parent's  President  and Chief
Executive Officer; and

     WHEREAS,  the Company  desires to appoint the  Executive as both the Bank's
and the  Parent's  President  and Chief  Executive  Officer  and to  employ  the
Executive on the terms and conditions set forth in this Agreement; and

     WHEREAS, the Executive desires to be so employed by the Company.

     NOW, THEREFORE,  in consideration of the foregoing and the mutual covenants
and promises  contained  herein and other good and valuable  consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  and intending to be
legally bound hereby, the parties agree as follows:

                                   ARTICLE II

                                   DEFINITIONS

     Section  2.1.  "Accrued   Obligations"  shall  mean,  as  of  the  Date  of
Termination, to the extent not theretofore paid, the sum of (i) Executive's Base
Salary  through the Date of  Termination,  (ii) the amount of any bonus or other
incentive  compensation  for any  completed  bonus  period and other vested cash
compensation  earned by Executive as of the Date of Termination  under the terms
of any  compensation and benefit plans,  programs or arrangements  maintained in
force by the Company,  and (iii) any vacation pay,  expense  reimbursements  and
other cash  entitlements  accrued by the Executive,  in accordance  with Company
policy, as of the Date of Termination.

     Section 2.2. "Bank Board" means the Board of Directors of the Bank.

     Section 2.3.  "Cause"  means:  (i) conviction of, or the entry of a plea of
guilty or no contest  to, a felony or any other crime that causes the Company or
any of its subsidiaries or affiliates public disgrace or disrepute, or adversely
affects the Company's operations,  financial  performance,  or relationship with
its customers;  (ii) fraud,  embezzlement  or other  misappropriation  of funds,
excluding  immaterial and inadvertent action not taken in bad faith and


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which is remedied by Executive within ten (10) days after his receipt of written
notice  thereof from the Company  specifying  in  reasonable  detail the alleged
improper action;  (iii) habitual  insobriety or illegal use of controlled drugs;
(iv) breach of this Agreement  having a material  adverse economic effect on the
Company taken as a whole,  if not cured within (30) days  following  Executive's
receipt from the Company of written  notice  thereof  specifying  in  reasonable
detail the alleged  breach;  or (v) refusal to perform the lawful and reasonable
directives  of the Bank  Board or Parent  Board,  unless  such  refusal is cured
within  (30) days  following  Executive's  receipt  from the  Company of written
notice  thereof,  specifying  the  directives  Executive  allegedly  refused  to
perform, or unless Executive gives written notice of good faith objection to any
such directive based on his reasonable belief that compliance with same would be
inconsistent with fiduciary duties or with any applicable law, rule, regulation,
order,  ordinance,  applicable accounting standard,  insurance policy,  employee
benefit plan or any other material  agreement,  instrument or undertaking ("Good
Faith  Objection").  In the event of Good  Faith  Objection  by  Executive,  his
refusal to perform any  directive of the Bank Board or Parent Board shall not be
Cause for termination  unless Executive  persists in such refusal after the Bank
Board or Parent Board,  as applicable,  obtains,  from an  independent  law firm
selected  by the  Bank  Board  or  Parent  Board  in  its  sole  and  reasonable
discretion,  with a written  reasoned  legal opinion that it is more likely than
not that  compliance  with  the  directive  at issue  would  not  result  in any
violation (an "Independent Opinion").

     Section 2.4.  "Change in Control"  shall be deemed to have  occurred if (i)
any  "person" or "group" (as such terms are used in Sections  13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),  other
than any Company employee stock ownership plan or an equivalent retirement plan,
becomes  the  beneficial  owner  (as such term is used in  Section  13(d) of the
Exchange Act), directly or indirectly,  of securities of Parent representing 50%
or more of the  combined  voting  power  of  Parent's  then  outstanding  voting
securities,  (ii) Parent  Board  ceases to consist of a majority  of  Continuing
Directors  (as  defined  below),  (iii)  the  consummation  of a sale  of all or
substantially  all of the Company's  assets or a liquidation (as measured by the
fair  value of the  assets  being  sold  compared  to the  fair  value of all of
Parent's  assets),  or (iv) a merger  or other  combination  occurs  such that a
majority of the equity  securities of the resultant entity after the transaction
are not owned by those who owned a  majority  of the  equity  securities  of the
Parent prior to the transaction.  A "Continuing Director" shall mean a member of
the  Parent  Board  who  either  (i) is a member of the  Parent  Board as of the
Effective  Date or (ii) is  nominated  or  appointed to serve as a Director by a
majority of the then Continuing Directors.

     Section  2.5.  "Change in Control  Termination"  means the  termination  of
Executive's  employment  under this Agreement by the Company or its successor(s)
or permitted  assign(s)  without  Cause or by Executive  for Good Reason,  which
occurs within 12 months following a Change in Control.

     Section 2.6. "Code" means the Internal Revenue Code of 1986, as amended.

     Section 2.7.  "Date of  Termination"  has the meaning given to that term in
Section 3.7.


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     Section 2.8. "Disability" means a condition entitling Executive to benefits
under the Bank's long term disability plan,  policy or arrangement.  Termination
as a result  of a  Disability  will not be  construed  as a  termination  by the
Company "without Cause."

     Section 2.9. "Good Reason" means any of the following,  without Executive's
prior consent:  (i) a material,  adverse change in title,  authority,  duties or
reporting   relationships   (including  the  assignment  of  duties   materially
inconsistent with the Executive's position);  (ii) a reduction in Base Salary or
annual or long term bonus or incentive compensation  opportunities  described in
Article III; (iii) any other  material  breach of this Agreement by the Company,
excluding  inadvertent  action which is remedied by the Company  within ten (10)
days after its receipt of written notice  thereof from the Executive  specifying
in  reasonable  detail the alleged  breach;  (iv)  executive  being  required to
relocate to a principal  place of employment  more than 50 miles from  Scranton,
Pennsylvania; (v) the failure by the Company to obtain the assumption in writing
of its obligation to perform this Agreement,  to the extent required pursuant to
Section 5.4; (vi) any failure to nominate or re-nominate  Executive for election
to the Bank Board or the Parent  Board or any  failure  by the  shareholders  to
elect or re-elect  Executive to the Bank Board or Parent Board; (vii) any demand
by the Bank Board or the Parent Board that  Executive  comply with any directive
(including   without   limitation  a  directive  that  he  refrain  from  taking
recommended  action) as to which Executive made a written Good Faith  Objection,
unless the Bank  Board or the Parent  Board or both,  as  applicable,  obtain an
Independent  Opinion;  or (viii) the occurrence of any of the following based on
the  financial  condition  of the  Company  as of the date  Executive  commences
employment  by the  Company or caused by any  action or event  prior to the date
Executive commences employment by the Company: (a) the general assignment by the
Bank or the Parent for the benefit of its creditors;  (b) the filing by the Bank
or the Parent of a petition  under  Chapter 7 or Chapter 11 of the United States
Bankruptcy Code or any other Federal,  state or foreign bankruptcy,  insolvency,
receivership  or  similar  law now or  hereafter  in effect  (collectively,  the
"Bankruptcy Laws"); (c) the failure by the Bank or the Parent to controvert in a
timely and appropriate  manner, or the acquiescence by the Bank or the Parent in
writing to, any  petition  filed  against it in any  involuntary  case under the
Bankruptcy  Laws; or (d) the  commencement  of an involuntary  proceeding or the
filing of an involuntary  petition  seeking (x) liquidation,  reorganization  or
other  relief  in  respect  of the  Bank or the  Parent  or its  debts,  or of a
substantial part of its assets, under the Bankruptcy Laws or (y) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Bank or the  Parent or for a  substantial  part of the assets of either,
if, in either such case, such proceeding or petition shall continue  undismissed
for 60 days or an order,  judgment or decree  approving  or ordering  any of the
foregoing shall be entered,  or an order for relief against the Company shall be
entered  in an  involuntary  case  under  the  Bankruptcy  Laws.  The  events or
conditions described in this Section 2.9 will not constitute Good Reason unless:
(a) the  Executive  provides the Company with written  objection to the event or
condition within 30 days of the first occurrence of such event or condition, (b)
the Company does not reverse or otherwise cure the event or condition  within 30
days of receiving that written  objection or the Company  notifies the Executive
in writing that it does not intend to cure the event or  condition,  and (c) the
Executive resigns his employment within 30 days following the expiration of that
Cure Period.  For purposes of this Section 2.8, the Cure Period shall end on the
earlier of the date the  Company  notifies  Executive  in writing  that does not
intend to cure the event or  condition  referenced  in the


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Executive's  written objection,  or the 30th day following the Company's receipt
of such written objection.

     Section 2.10. "Parent Board" means the Board of Directors of Parent.

     Section 2.11.  "Restricted  Period" means the period  commencing on the day
that  Executive's  employment  with the  Company  terminates  for any reason and
ending on the first anniversary of such termination.

                                   ARTICLE II

                           EMPLOYMENT AND COMPENSATION

     Section 3.1. Employment Term.
                  ---------------

     (a) The Company  shall  employ  Executive,  and  Executive  hereby  accepts
employment  with the Company,  upon the terms and  conditions  set forth in this
Agreement, for the period beginning on the Effective Date and continuing through
the third  anniversary of the date of this  Agreement  (the "Initial  Term") and
shall  thereafter  automatically  renew for additional one year periods (each, a
"Renewal Term"),  unless sooner  terminated in accordance with this Agreement or
written  notice  is given by one party to the  other at least  thirty  (30) days
prior to the  expiration of the Initial Term or any Renewal Term, as applicable.
The Initial Term and any Renewal Term are herein collectively referred to as the
"Term." This Agreement shall not become effective, and the Company shall have no
liability  under this  Agreement  (including  any appendices or exhibits to this
Agreement), unless Executive reports to commence service under this Agreement on
the Effective Date.

     (b) If Executive  dies while  employed by the Company,  this  Agreement and
Executive's employment by the Company shall automatically  terminate on the date
of Executive's death. The Company may terminate  Executive's  employment and all
other  positions  with the Company upon written  notice to Executive at any time
(i) due to the Disability of Executive,  (ii) for Cause, or (iii) without Cause,
for any or no reason.  Executive  may  terminate  his  employment  and all other
positions with the Company at any time (i) for Good Reason, or (ii) without Good
Reason,  for any or no reason.  Notwithstanding  the generality of the preceding
sentence,  in the event that Executive  resigns from his employment  pursuant to
this Section  3.1(b) without Good Reason for any or no reason,  Executive  shall
give  thirty  (30) days  written  notice to the  Company  prior to the  proposed
effective date of such resignation,  and such resignation shall not be effective
until the expiration of such notice period,  unless such notice is waived by the
Company (in which case such  resignation  shall be  effective  as of the date of
such  waiver).  Notwithstanding  the second  sentence  of this  Section,  if the
Company  elects to  terminate  Executive's  employment  pursuant to this Section
3.1(b) for any reason other than  Disability  or Cause,  the Company  shall give
Executive  thirty (30) days written notice prior to the proposed  effective date
of such termination. At any time after delivery by the Company of written notice
to Executive of  termination  without  Cause  (including  a  termination  due to
non-renewal  of the Term) or after  Executive's  delivery  of written  notice of
resignation,  the Company may relieve Executive of his duties,  responsibilities
and authority and terminate  Executive's  active  employment,  provided that the
Company shall remain  obligated to pay or provide,  as applicable,


<PAGE>


to Executive all payments and benefits  Executive would otherwise be entitled to
receive during the 30-day notice period.

     Section 3.2. Positions and Duties.
                  --------------------

     (a) Executive will serve as President and Chief  Executive  Officer ("CEO")
for each of the Bank and Parent,  reporting directly to the Parent Board and its
Chairman and will have all duties customarily  associated with the position of a
CEO, all duties as are set forth in the  Company's  bylaws for such position and
all duties as are delegated to the CEO from time to time by the Board. Executive
shall devote his best  efforts and  substantially  all of his business  time and
services to the Company (with  reasonable  time off for  vacation,  holidays and
illness or other temporary disability excepted).

     (b) As soon as reasonably practicable following the Effective Date, each of
the  Parent  Board  and Bank  Board  will  nominate,  recommend  and  bring to a
shareholder  vote the election of Executive to each of the Parent Board and Bank
Board,  in accordance with the  organization  documents and bylaws of Parent and
the Bank, as applicable.  In light of the compensation paid to Executive for his
employment  under this  Agreement,  he will not be  entitled  to any  additional
compensation for his service as a member of either Board. Executive's membership
on  the  Parent  Board  and  the  Bank  Board  shall  terminate  effective  upon
Executive's  termination of employment for any reason,  and Executive  agrees to
cooperate  to  assure  that his  termination  of  membership  on such  Boards is
appropriately documented.

     Section 3.3. Other Activities.  Nothing contained herein shall preclude the
Executive  from (i)  engaging  in  charitable  and  community  activities;  (ii)
participating in industry and trade organization activities;  (iii) managing his
and his family's personal investments and affairs; and (iv) delivering lectures,
fulfilling  speaking  engagements  or  teaching  at  educational   institutions;
provided that such  activities do not interfere with the regular  performance of
his duties and  responsibilities  under this  Agreement  and do not  violate his
obligations under Article IV of this Agreement.

     Section  3.4.  Compensation.  The Company  shall pay or cause to be paid or
provided to Executive the following compensation and benefits:

     (a) Base Salary.  Executive will receive an initial base salary of $230,000
per annum,  paid in accordance with the Company's  payroll  practices.  The base
salary  shall be  reviewed  on an  annual  basis by the  Bank  Board  and may be
increased  (but not  decreased)  from time to time at the discretion of the Bank
Board.  The  initial  base  salary  or  such  later  increased  base  salary  is
hereinafter referred to as Executive's "Base Salary."

     (b) Bonus.

          (i) Annual  Bonus for 2006  Fiscal  Year.  For the 2006  fiscal  year,
     Executive will be eligible for and receive bonuses equal to:

               (A) Five  percent  of his Base  Salary,  if  Executive  submits a
          strategic  plan for the Company that is  reasonably  acceptable to the
          Bank Board;


<PAGE>


               (B) Five  percent of his Base Salary if (x) the Bank's net income
          for the 2006 fiscal year  increases  by 8% or more from the Bank's net
          income for the 2005 fiscal year,  (y) the Bank's  return on equity for
          the 2006  fiscal  year is 12% or more  and (z) the  Bank's  return  on
          assets for the 2006 fiscal year is 1.2% or more;

               (C) Five  percent of his Base Salary if Executive  establishes  a
          system to measure customer  satisfaction that is reasonably acceptable
          to the Bank Board; and

               (D) Five  percent of his Base Salary if Executive  establishes  a
          performance  measurement  system  for  employees  that  is  reasonably
          acceptable to the Bank Board.

          (ii) Annual  Bonus for Fiscal  Years  beginning  after 2006.  For each
     fiscal year ending during the Term but after  December 31, 2006,  Executive
     will be eligible  for an annual  bonus of up to twenty  percent of his Base
     Salary,  less payroll  withholdings,  based upon  parameters to be mutually
     agreed upon by Executive  and Bank's Board.  At the  discretion of the Bank
     Board, the Company may pay Executive additional bonuses.

          (iii) Attainment of any financial performance goals under this Section
     3.4(b) will be determined by the Bank Board  reasonably  and in good faith.
     Any bonuses  payable  under this Section  3.4(b) will be paid within thirty
     (30)  days  following  the  approval  of the  Company's  audited  financial
     statements  for the  applicable  fiscal year by the audit  committee of the
     Bank Board,  provided that  Executive has not resigned  without Good Reason
     and has not been  terminated  for Cause before such payment date.  The Bank
     Board and Executive shall  reasonably and good faith agree upon adjustments
     to corporate or personal  performance  goals,  so that required  departures
     from the Company's  operating  budget,  changes in  accounting  principles,
     acquisitions,   dispositions,  mergers,  consolidations,   other  corporate
     transactions or  extraordinary  events,  and other factors  influencing the
     achievement  or  calculation  of such goals do not affect the  operation of
     this Section 3.4(b) in a manner  inconsistent  with the  achievement of its
     intended purposes.

     (c)  General  Employee   Benefits.   The  Executive  will  be  eligible  to
participate in the employee  pension plan, the retirement  profit-sharing  plan,
health insurance,  term life insurance, long term disability insurance and other
employee benefit plans,  policies or arrangements  maintained by the Company for
its employees  generally,  in a manner and to an extent at least as favorable as
is afforded to the most favorably treated  executive of the Company,  subject to
the terms and conditions of such plans, policies or arrangements. This paragraph
will not limit the Company's  ability to amend,  modify or terminate such plans,
policies or arrangements at any time for any reason.

     (d) Vacation. In addition to holidays observed by the Bank, Executive shall
be entitled to at least 20 working days paid  vacation  time during each year of
employment or if greater than 20 working days per year,  such period as the Bank
Board shall approve,  without  reduction in salary or other  benefits.  Vacation
days that  remain  unused  at the end of any year  will  accrue or expire to the
extent  provided by the  Company's  vacation  policy,  as in effect from time to
time.


<PAGE>


     (e)  Automobile.  The Company  will  provide  Executive  with the use of an
appropriate   automobile,   together   with   reasonable   insurance   coverage,
maintenance, and reimbursement of reasonable fuel expenses.

     (f) Country  Club/Dining Club. The Company will reimburse Executive for the
membership costs for an appropriate  country club/dining club in accordance with
Company policy.

     (g) Other Executive Perquisites and Benefits. Executive will participate in
all other  perquisites and benefit programs offered  generally by the Company to
its other  executives  in a manner and to an extent at least as  favorable as is
afforded  to the  most  favorably  treated  executive  of the  Company.  Without
limitation,  Executive shall  participate in the supplemental  executive pension
plan and the Company shall purchase term life  insurance for Executive  having a
death benefit of $500,000.

     (h) Relocation and Related Expenses.  Executive will relocate his principal
residence and the Company will reimburse Executive up to $50,000 for any and all
documented  and  reasonable   moving   expenses  and  reasonable  new  residence
establishment expenses,  including,  but not limited to brokers fees, attorneys'
fees,  recording  fees,  title insurance fees and real estate transfer taxes for
the sale of  Executive's  current  principal  residence  or in the  purchase  of
Executive's  new residence or both,  fees or points paid in connection  with the
purchase of Executive's new residence,  necessary travel,  and meals arising out
of Executive's  relocation (the "Relocation  Allowance") and the attorneys' fees
and  costs  Executive  incurred  in  connection  with  this  Agreement  and  the
Appendices. In addition, the Company will reimburse Executive for the reasonable
costs of temporary  housing for up to 90 days  following the Effective Date (the
"Temporary Housing Allowance").

     (i)  Tax  Gross-Up  of  Relocation  Reimbursement.  The  Company  will  pay
Executive a tax  gross-up  payment in an amount such that,  after the payment of
all federal and state  income  taxes on any and all  portions of the  Relocation
Allowance and the Temporary  Housing Allowance that are not excludible from such
taxes  and the  additional  payment  made  pursuant  to this  paragraph  3.4(j),
Executive  will be in the same  after-tax  position as if the entire  Relocation
Allowance and the Temporary  Housing  Allowance were excludible from Executive's
income for federal and state income tax purposes.

     (j)  Incentive   Compensation  Grant.   Executive  will  be  granted  stock
appreciation  rights (SARs) with respect to 10,000 shares of the Parent's common
stock in accordance  with the terms of the award  agreement  attached  hereto as
Appendix A. The  Company  will work in good faith with  Executive  to develop by
January 1, 2007 a long-term incentive  compensation plan for executives in which
Executive will participate.

     Section 3.5. Reimbursement of Expenses. Executive will be reimbursed by the
Company for all reasonable  business expenses incurred by him in accordance with
the Company's customary expense reimbursement policies as in effect from time to
time.

     Section 3.6. Indemnification.
                  ---------------


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     (a) The Company  agrees that (i) if the  Executive  is made a party,  or is
threatened  to be made a party,  to any  threatened  or actual  action,  suit or
proceeding, whether civil, criminal, administrative, investigative, appellate or
other (each, a "Proceeding") by reason of the fact that he is or was a director,
officer,  employee, agent, manager,  consultant or representative of the Company
or is or was  serving at the  request of the  Company  as a  director,  officer,
member, employee, agent, manager, consultant or representative of another entity
or (ii) if any claim,  demand,  request,  investigation,  dispute,  controversy,
threat,  discovery  request or request for  testimony or  information  (each,  a
"Claim") is made, or threatened to be made, that arises out of or relates to the
Executive's service in any of the foregoing capacities, then the Executive shall
promptly be  indemnified  and held harmless by the Company to the fullest extent
legally  permitted  or  authorized  by the  Bank's or  Parent's  certificate  of
incorporation,  bylaws or Board  resolutions or, if greater,  by the laws of the
Commonwealth of Pennsylvania,  against any and all costs, expenses,  liabilities
and losses (including, without limitation, attorney's fees, judgments, interest,
expenses of  investigation , penalties,  fines,  ERISA excise taxes or penalties
and  amounts  paid or to be paid in  settlement)  incurred  or  suffered  by the
Executive in connection therewith, and such indemnification shall continue as to
the Executive even if he has ceased to be a director,  member, employee,  agent,
manager,  consultant or  representative of the Company or other entity and shall
inure to the benefit of the Executive's heirs, executors and administrators. The
Company shall advance to the Executive all costs and expenses incurred by him in
connection  with any such  Proceeding  or Claim  within 15 days after  receiving
written notice  requesting  such an advance.  Such notice shall include,  to the
extent  required by applicable law, an undertaking by the Executive to repay the
amount  advanced  if  he  is  ultimately   determined  not  to  be  entitled  to
indemnification against such costs and expenses.

     (b)  Neither the failure of the Bank or Parent  (including  the  respective
Board,  independent  legal  counsel  or  stockholders  of either) to have made a
determination in connection with any request for  indemnification or advancement
under Section 3.6(a) that the Executive has satisfied any applicable standard of
conduct,  nor a  determination  by the Bank or Parent  (including the respective
Board,  independent  legal counsel or stockholders of either) that Executive has
not met any  applicable  standard of conduct  shall  create a  presumption  that
Executive has not met an applicable standard of conduct.

     Section 3.7.  Severance;  Severance  Payments.  Upon a  termination  of his
employment  with the Company (the effective  date of such  termination is herein
referred to as the "Date of  Termination"),  Executive  will be entitled only to
such  compensation,  benefits and rights as described in this Section 3.7 and in
any other agreement,  including but not limited to any stock appreciation rights
agreement, between Executive and the Company.

     (a)  Termination  without  Cause or for Good  Reason.  Except as  otherwise
provided  in this  Section  3.7,  if  Executive's  employment  by the Company is
terminated by the Company for any reason other than Cause (i.e.,  without Cause)
or if Executive  terminates his  employment  for Good Reason,  Executive will be
entitled to:

          (i) Payment of all Accrued Obligations;


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          (ii)  Continuation  of Executive's  Base Salary as of the Date of such
     Termination for a period of 12 months from the Date of Termination, payable
     in accordance with the Company's payroll practices;

          (iii)  Payment by the  Company of the  applicable  premiums  otherwise
     payable for COBRA  continuation  coverage for Executive (and, to the extent
     covered  immediately  prior to the  date of  Executive's  termination,  his
     spouse and dependents) for a period of 12 months (or if COBRA  continuation
     coverage  expires  or is  otherwise  unavailable,  then,  in lieu  thereof,
     Executive will receive  monthly  payments equal to the monthly  "applicable
     premium,"  as that term is defined  under  COBRA,  for a period equal to 12
     months); and

          (iv)  Payment by the Company to an  outplacement  firm of  Executive's
     choice of a lump sum cash payment of $30,000 (or such greater amount as the
     Bank Board or the Parent Board may approve) for outplacement assistance.

     (b) Change in Control Termination. In lieu of any compensation and benefits
payable under Section 3.7(a),  in the event that  Executive's  employment by the
Company  ceases  due to a  Change  in  Control  Termination,  Executive  will be
entitled to:

          (i) Payment of all Accrued Obligations;

          (ii)  Continuation  of Executive's  Base Salary as of the date of such
     termination  for a period of 24  months,  payable  in  accordance  with the
     Company's payroll practices; and

          (iii)  Payment by the  Company  of the  applicable  premium  otherwise
     payable for COBRA  continuation  coverage for Executive (and, to the extent
     covered  immediately  prior to the  date of  Executive's  termination,  his
     spouse and dependents) for a period of 24 months (or if COBRA  continuation
     coverage  expires  or is  otherwise  unavailable,  then,  in lieu  thereof,
     Executive will receive  monthly  payments equal to the monthly  "applicable
     premium,"  as that term is defined  under  COBRA,  for a period equal to 24
     months;

          (iv)  All SARs and any  stock  options  and any  other  equity  awards
     granted shall immediately vest and become exercisable; and

          (v)  Payment by the  Company to an  outplacement  firm of  Executive's
     choice of a lump sum cash payment of $30,000 (or such greater amount as the
     Bank Board or the Parent Board may approve) for outplacement assistance.

     (c)  Termination  Following  Expiration  of  a  Term.  In  the  event  of a
termination by the Company of Executive's employment following the expiration of
any Initial Term or Renewal Term,  the Company shall pay or provide to Executive
the amounts, benefits and rights described in Section 3.7(a).

     (d)  Except  as  provided  in  this  Section  3.7,  all   compensation  and
participation  in all benefit  plans and programs will cease at the time of such
termination,  subject to the terms of any benefits or compensation plans then in
force and  applicable  to  Executive,  and the  Company  shall  have no  further
liability or obligation by reason of such termination,


<PAGE>


provided,  however,  that nothing in this paragraph shall affect or be deemed to
affect  Executive's rights to accrued or vested benefits under any benefit plan,
program or arrangement.  The payments and benefits described in this Section 3.7
are in  lieu  of,  and not in  addition  to,  any  other  severance  arrangement
maintained by the Company.  Notwithstanding any provision of this Agreement, the
payments  and  benefits  described  in  this  Section  3.7  are  conditioned  on
Executive's  execution  and  delivery to the Company of a release  substantially
identical to that attached hereto as Appendix B in a manner  consistent with the
requirements  of the Older Workers  Benefit  Protection  Act and any  applicable
state law (the "Release").  The severance benefits described in this Section 3.7
will begin to be paid or provided as soon as the  Release  becomes  irrevocable.
Any  payments  to be made  to  Executive  and any  benefits  to be  provided  to
Executive pursuant to this Section 3.7 shall be paid or provided, as applicable,
to Executive's beneficiaries, heirs or estate in the event of Executive's death.

     (e) Other Terminations.  If Executive's  employment with the Company ceases
for any reason  other than as described  in Sections  3.7(a),  3.7(b) and 3.7(c)
above  (including but not limited to  termination  (a) by the Company for Cause,
(b) as a result of Executive's death, (c) as a result of Executive's Disability,
or (d) by Executive  without  Good  Reason,  then the  Company's  obligation  to
Executive  will be limited  solely to the  payment of Accrued  Obligations.  All
compensation  and  participation  in  benefits  will  cease  at the time of such
termination  and,  except as  otherwise  provided  by COBRA or the terms of such
plans,  the Company will have no further  liability or  obligation  by reason of
such termination. The foregoing will not be construed to limit Executive's right
to  payment  or  reimbursement  for  claims  incurred  prior to the date of such
termination  under any  insurance  contract  funding an employee  benefit  plan,
policy  or  arrangement  of the  Company  in  accordance  with the terms of such
insurance  contract or Executive's right to accrued or vested benefits under the
terms of any employee  benefit  plan,  fringe  benefit  program or other benefit
arrangement.

     Section 3.8.  Limitation  on Payments.  If any payment or benefit due under
this  Agreement,  together with all other  payments and benefits that  Executive
receives or is entitled to receive from the Company or any of its  subsidiaries,
affiliates or related entities, would (if paid or provided) constitute an Excess
Parachute Payment (as defined below), the amounts otherwise payable and benefits
otherwise  due under  this  Agreement  will be  limited  to the  minimum  extent
necessary to ensure that no portion  thereof will fail to be  tax-deductible  to
the Company by reason of Section 280G of the Code. The  determination of whether
any  payment  or  benefit  would  (if paid or  provided)  constitute  an  Excess
Parachute  Payment  will  be  made  by  the  Parent  Board,  in its  good  faith
discretion, based on the advice of the Company's auditors.

     (a)  Adjustments  Necessary  to Comply  with  Maximum  Payment  Limit.  If,
notwithstanding  the initial  application  of Section 3.8, the Internal  Revenue
Service  determines that any amount paid or benefit  provided to Executive would
constitute an Excess Parachute  Payment,  Section 3.8 will be reapplied based on
the Internal Revenue  Service's  determination and Executive will be required to
repay to the Company any Overpayment (as defined below) immediately upon receipt
of written notice of the applicability of this section.

     (b) Definitions. For purposes of this Agreement:


<PAGE>


          (i) "Excess Parachute Payment" has the same meaning as used in Section
280G(b)(1) of the Code.

          (ii) "Overpayment" means any amount paid to Executive in excess of the
maximum payment limit of Section 3.8 of this Agreement.

                                   ARTICLE IV

                       RESTRICTIVE COVENANTS AND REMEDIES

     Section 4.1. Confidential Information.
                  ------------------------

     (a) In  consideration of the employment by the Company of Executive and the
consideration  outlined in Article 3 of this Agreement,  and as an inducement to
the  Company  to  continue  to  entrust  Executive  with its Trade  Secrets  (as
hereinafter  defined),  Executive agrees that Executive will not use for himself
or  disclose  to any  person  any  Trade  Secret  of the  Company  or any of its
subsidiaries  or affiliates  obtained by Executive as a result of his employment
by the  Company  unless  authorized  in  writing  by the  Company  to do so. For
purposes of this Agreement,  Trade Secrets will be deemed to include, but not be
limited  to, all  confidential  information,  including  price  lists,  patents,
designs, inventions, copyrighted materials, product lists, marketing strategies,
personnel files,  customer lists, and all other information or material received
by Executive  in  connection  with his  employment  by the Company  which is not
otherwise available to the general public. Upon cessation of Executive's service
to the Company for any reason,  all written or electronic  materials  evidencing
Trade Secrets, and all copies thereof, in the possession or control of Executive
shall be delivered  to the Company.  The term Trade  Secrets  shall  exclude (i)
information that is or subsequently  becomes publicly  available other than as a
result of Executive's  breach of this  Agreement;  (ii) is acquired from another
source not under a duty of confidentiality to the Company and not as a result of
a breach  of this  Agreement;  (iii) is  independently  developed  by  Executive
without  use of the Trade  Secrets;  (iv) is  approved  for release by the Bank,
Parent or both; or (v) is required to be disclosed by court order,  subpoena, in
connection with a civil or criminal investigative demand, the discovery rules of
any court or  otherwise  by law or legal  process.

     Section 4.2. Ownership of Inventions and Ideas. Executive acknowledges that
the  Company  shall be the sole owner of all the  results  and  proceeds  of his
service to the  Company,  including  but not  limited  to, all  patents,  patent
applications,  patent rights, formulas,  copyrights,  inventions,  developments,
discoveries,  other improvements,  data,  documentation,  drawings,  charts, and
other written,  audio and/or visual  materials  relating to equipment,  methods,
products,  processes or programs in connection with or useful to the business of
the  Company  or  any of  its  subsidiaries  or  affiliates  (collectively,  the
"Developments")  which  Executive,  by himself or in conjunction  with any other
person,  may conceive,  make,  acquire,  acquire knowledge of, develop or create
during  Executive's  employment by the Company,  free and clear of any claims by
Executive  (or any  successor or assignee of Executive) of any kind or character
whatsoever.  Executive acknowledges that all copyrightable Developments shall be
considered works made for hire under the Federal Copyright Act. Executive hereby
assigns  and  transfers  his  right,  title  and  interest  in and  to all  such
Developments and agrees that he shall, at the request of the Company, execute or
cooperate with the Company in any patent applications, execute such


<PAGE>


assignments,  certificates or other instruments,  and do any and all other acts,
as the Company  from time to time  reasonably  deems  necessary  or desirable to
evidence, establish, maintain, perfect, protect, enforce or defend the Company's
right, title and interest in or to any such Developments.

     Section 4.3. Restrictive  Covenants.  In consideration of the employment by
the Company of  Executive  and the  consideration  outlined in Article 3 of this
Agreement, Executive agrees to be bound by this Section 4.3. Executive will not,
directly  or  indirectly,  do any of the  following  during  the  Term  and  the
Restricted Period:

     (a) engage or participate in any business activity substantially similar to
an activity from which the Company or its  subsidiaries  or  affiliates  derives
revenue  (or,  with  respect to the  application  of this  provision  during the
Restricted Period, engage or participate in any such business activity within 50
miles of any Company  branch or office  operating  or  preparing  imminently  to
operate on the date Executive's employment ends) (a "Competing Business");

     (b)  become  interested  in  (as  owner,   stockholder,   lender,  partner,
co-venturer, director, officer, employee, agent or consultant) any person, firm,
corporation,  association  or other entity  engaged in any  Competing  Business.
Notwithstanding the foregoing,  Executive may hold up to 4.9% of the outstanding
securities of any class of any publicly traded securities of any company;

     (c) solicit or call on,  either  directly or  indirectly,  for  purposes of
selling goods or services competitive with goods or services sold by the Company
or any of its  subsidiaries  or  affiliates,  any customer with whom the Company
shall have dealt or any prospective customer that the Company has identified and
solicited at any time during Executive's employment by the Company;

     (d)  adversely  influence or attempt to adversely  influence  any supplier,
customer or potential customer of the Company to terminate or modify any written
or oral agreement or course of dealing with the Company;

     (e)  adversely  influence or attempt to adversely  influence  any person to
terminate or modify any employment, consulting, agency, distributorship or other
arrangement with the Company; or

     (f) employ or retain,  or arrange to have any other person or entity employ
or retain, any employee,  consultant, agent or distributor of the Company or any
of its  subsidiaries  or affiliates (or with respect to the  application of this
provision during the Restricted  Period, any person or entity who, within the 12
months  preceding  the date  Executive's  employment  by the Company  ends,  was
employed or engaged by the Company or any of its  subsidiaries  or affiliates as
an employee, consultant, agent or distributor).

     Executive acknowledges that the restrictions contained in Sections 4.1, 4.2
and 4.3 are reasonable and necessary to protect the legitimate  interests of the
Company  and its  subsidiaries  and  affiliates  and  that the  duration  of the
Restricted  Period,  and the  provisions  of


<PAGE>


Sections 4.1, 4.2 and 4.3, are reasonable given Executive's  position within the
Company  and  the  substantial   consideration  payable  under  this  Agreement.
Executive  further  acknowledges  that  Sections  4.1,  4.2 and 4.3 are included
herein in order to induce the Company to enter into this  Agreement and that the
Company  would not have  entered  into this  Agreement  in the  absence of these
provisions.

     Section 4.4. Enforcement.
                  -----------

     (a) Specific  Enforcement.  Executive  acknowledges that any breach by him,
willfully or otherwise,  of this Article 4 will cause continuing and irreparable
injury  to the  Company  for which  monetary  damages  would not be an  adequate
remedy.  Executive  will not, in any action or  proceeding to enforce any of the
provisions of this Agreement,  assert the claim or defense that such an adequate
remedy at law exists. In the event of any such breach by Executive,  the Company
or its subsidiaries or affiliates, as applicable, will have the right to enforce
this  Agreement  by  seeking  injunctive  or other  relief in any court and this
Agreement  will not in any way  limit  remedies  of law or in  equity  otherwise
available to the Company or its subsidiaries or affiliates, as applicable.

     (b) Restitution. If Executive breaches any part of Section 4.1, 4.2 or 4.3,
the Company or its subsidiaries or affiliates as applicable, will have the right
and remedy to require  Executive  to account  for and pay over to the Company or
its  subsidiaries or affiliates all  compensation,  profits,  monies,  accruals,
increments or other  benefits  derived or received by Executive as the result of
such  breach.  This right and remedy will be in addition to, and not in lieu of,
any other rights and remedies  available to the Company or its  subsidiaries  or
affiliates, as applicable, under law or in equity.

     (c) Extension of Restricted  Period. If Executive breaches Section 4.1, 4.2
or 4.3, the Restricted Period will be extended by an amount of time equal to the
period that Executive was in breach.

     (d) Judicial Modification. If any court determines that Section 4.1, 4.2 or
4.3, or this Section 4.4 (or any part thereof) is  unenforceable  because of its
duration  or  geographic  scope,  that court will have the power to modify  that
section and, in its modified form, that section will then be enforceable.

     (e) Restrictions Enforceable in All Jurisdictions.  If any court holds that
Section  4.1,  4.2 or  4.3,  or  this  Section  4.4 (or  any  part  thereof)  is
unenforceable  by  reason  of its  breadth  or  scope  or  otherwise,  it is the
intention of the parties  hereto that such  determination  not bar or in any way
affect  the  right  of  the  Company  or  its  subsidiaries  or  affiliates,  as
applicable, to the relief provided above in the courts of any other jurisdiction
within the geographic scope of this section.

     (f) Disclosure of Protective  Provisions.  Executive agrees to disclose the
existence  and  terms of  Sections  4.1,  4.2 and 4.3 to any  employer  for whom
Executive  seeks  to work  during  the one  year  period  following  Executive's
cessation of  employment  by the  Company..  Executive  also agrees that,  for a
period  of one year  following  his  cessation  of  employment  by the  Company,
Executive will provide,  and that during the  Restricted  Period the


<PAGE>


Company  may  similarly  provide,  a copy of this  Section 4 to any  business or
enterprise (i) which Executive may directly or indirectly own, manage,  operate,
finance,  join,  control  or of  which  he may  participate  in  the  ownership,
management,  operation,  financing, or control, or (ii) with which Executive may
be connected  as an officer,  director,  employee,  partner,  principal,  agent,
representative,  consultant or otherwise,  or in connection with which Executive
may use or permit to be used Executive's name.

                                    ARTICLE V

                                  MISCELLANEOUS

     Section  5.1. No Liability of Officers and  Directors  for  Severance  Upon
Insolvency.  Notwithstanding  any other provision of the Agreement and intending
to be bound by this  provision,  Executive  hereby (a) waives any right to claim
payment of amounts owed to him, now or in the future, pursuant to this Agreement
from directors or officers of the Company if the Company becomes insolvent,  and
(b) fully and  forever  releases  and  discharges  the  Company's  officers  and
directors from any and all claims,  demands,  liens,  actions,  suits, causes of
action or judgments arising out of any present or future claim for such amounts.

     Section 5.2. Ability to Perform.
                  ------------------

     (a)  Executive  represents  and  warrants to the Company  that there are no
restrictions,  agreements  or  understandings  whatsoever to which he is a party
that would prevent or make unlawful his execution of this Agreement,  that would
be  inconsistent  or in conflict with this Agreement or Executive's  obligations
hereunder,  or that would otherwise prevent,  limit or impair the performance by
Executive of his duties under this Agreement on and after the Effective Date.

     (b) The Company represents and warrants to Executive that:

          (i)  Parent  and the Bank are  fully  authorized  by  action  of their
     respective  Boards  to enter  into  this  Agreement  and to  perform  their
     obligations  hereunder;  and  upon  the  execution  and  delivery  of  this
     Agreement by the  parties,  this  Agreement  shall be the valid and binding
     obligation of Parent and the Bank,  enforceable against Parent and the Bank
     in accordance with its terms. Neither Parent nor the Bank is subject to any
     restriction  which would prohibit  either one of them from entering into or
     performing its obligations under this Agreement.

          (ii)  The  Company  currently  has in  force  directors  and  officers
     liability  insurance  coverage policies with a policy limit of $10 million,
     renewable annually, the terms and conditions of which are set forth in such
     policies,  true  and  complete  copies  of which  the  Company  shall  have
     heretofore delivered to the Executive.  All such policies are in full force
     and effect, all premiums due and payable under such polices have been paid,
     and  the  Company  is  otherwise  in  compliance  with  such  policies.  No
     cancellation of any such policy has been threatened.  The Company agrees to
     maintain such policies or similar policies in effect throughout Executive's
     employment and for a period of six (6) years  following any  termination of
     such employment.


<PAGE>


     Section  5.3.  Payments  Subject  to  Tax  Withholding.  All  payments  and
transfers  of  property  described  in this  Agreement  will be made  net of any
applicable tax withholding.

     Section 5.4.  Successors  and  Assigns.  This  Agreement  will inure to the
benefit of and be binding  upon the  Company  and  Executive  and the  Company's
successors   and  assigns  and  shall  inure  to  the  benefit  of   Executive's
beneficiaries,  executors,  administrators and heirs. Executive may not make any
assignment  of this  Agreement  or any interest  herein,  by operation of law or
otherwise,  except by will or the laws of descent and distribution.  The Company
shall  require any  successor  to all or a majority of its assets and  business,
whether direct or indirect, by means of purchase,  reorganization,  liquidation,
dissolution,  merger, consolidation,  transfer of assets or stock, or otherwise,
by agreement  in form and  substance  satisfactory  to  Executive,  expressly to
assume and agree to perform  this  Agreement  in the same manner and to the same
extent that the Bank and Parent would be required to perform  this  Agreement if
no succession had taken place. Regardless of whether such agreement is executed,
this Agreement shall be binding upon any successor of the Bank and/or the Parent
in accordance  with the operation of law and such successor  shall be deemed the
Bank  and/or  Parent  for  purposes  of  this  Agreement.   Except  as  provided
hereinabove, this Agreement may not be assigned by the Company.

     Section  5.5.  Severability.  Whenever  possible,  each  provision  of this
Agreement  will be interpreted in such manner as to be effective and valid under
applicable  law.  However,  if any  provision  of this  Agreement  is held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability will not affect any other provision, and this Agreement will be
reformed, construed and enforced as though the invalid, illegal or unenforceable
provision had never been herein contained.

     Section 5.6. Entire  Agreement;  Amendments.  Except as otherwise  provided
herein,  this Agreement  contains the entire agreement and  understanding of the
parties hereto relating to the subject matter hereof.  Therefore, this Agreement
merges and supersedes all prior and contemporaneous discussions,  agreements and
understandings of every nature relating to Executive's employment, compensation,
severance,  termination or any related matter. This Agreement may not be changed
or modified,  except by an Agreement in writing signed by both Executive and the
Company.

     Section  5.7.  Notice.  Any notice or  communication  required or permitted
under this Agreement will be made in writing and (a) sent by overnight  courier,
(b) mailed by certified or registered mail, return receipt requested or (c) sent
by telecopier, addressed as follows:

                 If to Executive:

                           Craig W. Best

                           or such other address as Executive may hereafter give
                             written notice of to Company


<PAGE>


                 If to the Company:

                           Pennseco Financial Services Corporation
                           150 North Washington Avenue
                           Scranton, PA 18503
                           Attn: Chairman of the Board of Directors

     Section  5.8.  Governing  Law.  This  Agreement  shall be  governed  by and
construed  in  accordance  with the laws of the  Commonwealth  of  Pennsylvania,
without  regard to the  principles of conflicts of laws rules of any state.  Any
legal proceeding arising out of or relating to this Agreement will be instituted
in a state  or  federal  court  in the  Commonwealth  of  Pennsylvania,  and the
Executive  and  the  Company  hereby  consent  to  the  personal  and  exclusive
jurisdiction  of such court(s) and hereby waive any  objection(s)  that they may
have to personal  jurisdiction,  the laying of venue of any such  proceeding and
any claim or defense of inconvenient forum.

     Section 5.9.  Counterparts and Facsimiles.  This Agreement may be executed,
including execution by facsimile signature, in one or more counterparts, each of
which will be deemed an original, and all of which together will be deemed to be
one and the same instrument.

     Section  5.10.Compliance  with  Section  409A of the Code.  Notwithstanding
anything  herein to the  contrary,  if payment of any of the  amounts to be made
pursuant  to this  Agreement  is  required  to be  postponed  in  order to avoid
disadvantageous  tax treatment  under Section 409A of the Internal  Revenue Code
(as added by the American  Jobs  Creation Act of 2004),  payment of such amounts
shall be postponed for up to six months until payment is permitted under Section
409A. If payment of any such amount is postponed,  the postponed portion will be
paid as soon as payment is permitted under Section 409A.

     Section  5.11.Remedies.  In the event of any  breach of this  Agreement  by
either  party,  the party injured by such breach shall be entitled to attorneys'
fees,  costs and expenses  incurred by reason of such breach,  if any,  together
with interest at the maximum rate permitted by law. This paragraph  shall not be
considered a waiver of or a  limitation  on the  remedies  available  under this
Agreement or at law or in equity for breach of this Agreement.


                            [signature page follows]


<PAGE>


     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement on the
1st day of November, 2005.


                                       PENSECO FINANCIAL SERVICES CORPORATION


                                       By:    /s/  Otto P. Robinson Jr.
                                              ----------------------------------

                                       Title: President
                                              ----------------------------------



                                       PENN SECURITY BANK & TRUST


                                       By:    /s/  Otto P. Robinson Jr.
                                              ----------------------------------

                                       Title: President
                                              ----------------------------------



                                       /s/ Craig W. Best
                                       -----------------------------------------
                                       CRAIG W. BEST


<PAGE>


                                   APPENDIX A

                       STOCK APPRECIATION RIGHTS AGREEMENT


     Effective  as of January 3, 2006 (the "Date of Grant")  and  subject to the
terms set forth herein,  Penseco Financial Services  Corporation (the "Company")
hereby  grants to Craig W.  Best (the  "Executive")  stock  appreciation  rights
(SARs) with respect to 10,000 Shares (as defined below) (the "Award").

                                    Article I
                                   Definitions


           (a) "Board" means the Company's Board of Directors.

           (b) "Cause" shall have the same meaning given it in the Employment
Agreement between Executive, the Company and Penn Security Bank & Trust, dated
January 2, 2006 (the "Employment Agreement").

           (c) "Change in Control" shall have the same meaning given it in the
Employment Agreement.

           (d) "Change in Control Termination" shall have the same meaning given
it in the Employment Agreement.

           (e) "Disability" shall have the same meaning given it in the
Employment Agreement.

           (f) "Fair Market Value" means as of any date: (i) the closing price
of the Share as reported on the principal nationally recognized stock exchange
on which the Shares are traded on such date, or if no prices are reported with
respect to such Shares on such date, the closing price of the Share on the last
preceding date on which there were reported prices of such Shares; or (ii) if
the Shares are not listed or admitted to unlisted trading privileges on a
nationally recognized stock exchange, the closing price of the Share as reported
by The Nasdaq Stock Market on such date, or if no prices of such Shares are
reported on such date, the closing price of the Shares on the last preceding
date on which there were reported prices of such Shares; or (iii) if Shares are
not listed or admitted to unlisted trading privileges on a nationally recognized
stock exchange or traded on The Nasdaq Stock Market, the Fair Market Value will
be determined by the Board acting in its good faith discretion, which
determination will be conclusive.

           (g) "Good Reason" shall have the same meaning given it in the
Employment Agreement.

           (h) "Shares" means shares of the Company's common stock, par value
$.01, subject to substitution or adjustment as provided in Article 3, Section
(c) hereof.


<PAGE>


                                   ARTICLE II
                                 Terms of Award

           Section 2.01    Vesting and Exercisability of SARs.

                  (a) Vesting. Executive's SARs will vest and become exercisable
in accordance with the following schedule, provided that Executive remains in
continuous service with the Company through the applicable vesting date:

         ------------------------------------ ------------------------
           Vesting Date                          No. of SARs Vested
         ------------------------------------ ------------------------
           1st Anniversary of Date of Grant            2,000
         ------------------------------------ ------------------------
           2nd Anniversary of Date of Grant            2,000
         ------------------------------------ ------------------------
           3rd Anniversary of Date of Grant            2,000
         ------------------------------------ ------------------------
           4th Anniversary of Date of Grant            2,000
         ------------------------------------ ------------------------
           5th Anniversary of Date of Grant            2,000
         ------------------------------------ ------------------------

                  (b) Vesting upon Termination of Service. In the event that
Executive's service to the Company terminates for any reason other than (i) a
Company-initiated termination for Cause; (ii) a Change in Control Termination or
(iii) a resignation by Executive for Good Reason, Executive will cease vesting
in any SARs and any unvested SARs will immediately terminate.

                  (c) Vesting Upon a Change in Control Termination or a
Resignation for Good Reason. In the event of a Change in Control Termination or
a resignation by Executive for Good Reason, the Company will cause any unvested
SARs to become vested and immediately exercisable.

                  (d) Rights upon Termination for Cause. In the event that
Executive's service to the Company terminates for Cause, Executive (or any
successor or legal representative) shall not have any rights under any SAR,
whether vested or unvested, and the Company shall not be obligated to make
payment (or have any other obligation or liability) under any SAR. In such
circumstances, Executive (or any successor or legal representative) will have no
right under such SAR regardless of whether Executive (or any successor or legal
representative) delivered a notice of exercise prior to termination of service
for Cause.

                  (e) Service with the Company's Subsidiaries and Affiliates.
Solely for purposes of this Award, service with the Company will be deemed to
include service with a subsidiary or an affiliate of the Company for so long as
that entity remains a subsidiary or an affiliate of the Company.

           Section 2.02    Exercise of SARs.

                  (a) Term. SARs which vest and become exercisable in accordance
with Section 2.01 may not be exercised later than the date that is ten (10)
years after the Date of Grant.

                  (b) SAR Exercise Price. The per SAR exercise price is [$43.00]
(the "Exercise Price"), which is the Fair Market Value per Share on the Date of
Grant.


<PAGE>


                  (c) Method of Exercise. Executive may exercise the vested
portion of his SARs by providing written notice to the Company stating the
election to exercise, together with such additional documents as the Company may
then require. Such written notice shall be signed by the Executive and shall be
delivered in person or by certified mail to the Secretary of the Company or such
other person as may be designated by the Company. The date of receipt by the
Secretary shall be the "Exercise Date."

                  (d) Amount of Payment. Any SAR granted hereunder will entitle
Executive, upon exercise of the SAR, to receive, in accordance with Section
2.02(e), either cash and/or Shares in an amount equal to the excess, if any, of
(a) the Fair Market Value per Share subject to the SAR on the Exercise Date,
over (b) the Exercise Price.

                  (e) Form of Payment. Upon exercise by Executive of any SAR
while Executive is employed by the Company, the Company will make payment to
Executive in the form of a lump sum cash payment, or in Shares, or in any
combination of cash and Shares, in the sole discretion of the Board, as soon as
administratively practicable following Executive's Exercise Date. Upon exercise
by Executive of any SAR after a termination of Executive's service with the
Company, the Company will make payment to Executive in the form of a lump sum
cash payment only.

                  (f) Partial Exercise. The Award may be exercised in whole or
in part; provided, however, that any exercise may apply only with respect to a
whole number of SARs.

                  (g) Restrictions on Exercise. The Company may require
Executive to make any representation or warranty to the Company as may be
required by or advisable under any applicable law or regulation.

           Section 2.03    Exercise Rights upon Termination of Service.

                  (a) SARs granted hereunder will remain exercisable after
termination of employment or other service only to the extent specified in this
Section 2.03.

                             (i) Termination by Reason of Death or Disability.
If Executive's service with the Company
terminates by reason of death or Disability, any SAR held by Executive may
thereafter be exercised, to the extent then exercisable, by Executive or his
legal representative of the estate or by the his legatee under his will, as
applicable, for a period expiring (i) 12 months from the date of death or
termination of service, as applicable, or, if sooner, then upon the expiration
of the term specified in Section 2.02(a).

                             (ii) Other Termination. If Executive's service with
the Company terminates for any reason
other than by reason of death, Disability or Cause, any SAR held by Executive
may thereafter be exercised by Executive, to the extent it was exercisable at
the time of, or becomes exercisable because of, such termination, for a period
expiring (i) 90 days from the date of termination of service, or, if sooner,
then upon the expiration of the term specified in Section 2.02(a).


<PAGE>


                                   Article III
                                  Miscellaneous


                  (a) Tax Withholding. The Company is hereby authorized to
withhold from any consideration payable or property transferable to Executive
any taxes required to be withheld by federal, state or local law in connection
with the grant or exercise of any SARs or the vesting or disposition of the
SARs.

                  (b) Tax Consequences. Executive acknowledges that the Company
has not advised him regarding his income tax liability in connection with the
exercise or vesting of any SAR. Executive has reviewed with his own tax advisors
the federal, state, local and foreign tax consequences of this Award and the
transactions contemplated by herein. Executive is relying solely on such
advisors and not on any statements or representations of the Company or any of
its subsidiaries or affiliates. Executive understands that he (not the Company)
will be responsible for his own tax liabilities arising in connection with this
Award and the transactions contemplated herein.

                  (c) Adjustment of Shares. In the event of any
recapitalization, stock split or combination, stock dividend or other similar
event or transaction affecting the Shares, equitable substitutions or
adjustments will be made by the Board, in its reasonable discretion to keep
Executive whole, to the number, type and issuer of Shares subject to outstanding
SARs, and to the Exercise Price of outstanding SARs.

                  (d) Change in Control. Notwithstanding anything to the
contrary set forth herein, in the event of any Change in Control, the Board may,
in its sole and absolute discretion and without the need for the consent of
Executive, take one or more of the following actions contingent upon the
occurrence of that Change in Control: (i) provide for the issuance of substitute
awards in lieu of any outstanding SARs that have been granted to Executive
pursuant to this Award; (provided, that the Board will ensure that any
substitute awards will substantially preserve the value, rights and benefits of
any outstanding SARs granted to Executive hereunder); or (ii) cancel any SAR
held by Executive in exchange for cash and/or other substitute consideration
with a value equal to (A) the number of Shares subject to that SAR, multiplied
by (B) the difference, if any, between the Fair Market Value per Share on the
date of the Change in Control and the Exercise Price of that SAR (provided, that
if the Fair Market Value per Share on the date of the Change in Control does not
exceed the Exercise Price of any such SAR, the Board may cancel that SAR without
any payment of consideration therefore).

                  (e) No Right to Continue Employment or Service. This Award
will not confer upon Executive any right to continue in the service of the
Company or any of its subsidiaries or affiliates, or limit in any respect the
right of the Company or its subsidiaries and affiliates to discharge Executive
at any time, with or without Cause and with or without notice.

                  (f) Non-Transferability. SARs subject to this Award may not be
sold, pledged, assigned, hypothecated, gifted, transferred or disposed of in any
manner either voluntarily or involuntarily by operation of law, other than by
will or by the laws of descent or distribution. During the Executive's lifetime,
SARs are exercisable only by Executive. Subject


<PAGE>

to the  foregoing,  the terms of this Award will be binding upon the  executors,
administrators and heirs of Executive.

                  (g) Entire Agreement. This Award, together with the Employment
Agreement, represents the entire agreement between the parties and supersedes
any prior agreement, written or otherwise, relating to the subject matter
hereof.

                  (h) Governing Law. This Award will be construed in accordance
with the laws of the Commonwealth of Pennsylvania, without regard to the
application of the principles of conflicts of laws.



IN WITNESS WHEREOF, this Award has been executed by the parties on the 3rd day
of January, 2006

                                       PENSECO FINANCIAL SERVICES CORPORATION


                                       By:     /s/  Richard E. Grimm
                                              ----------------------------------

                                       Title: Executive Vice-President
                                              ----------------------------------



                                       /s/ Craig W. Best
                                       -----------------------------------------
                                       CRAIG W. BEST


<PAGE>


                                   APPENDIX B

                     RELEASE AND NON-DISPARAGEMENT AGREEMENT


                  THIS RELEASE AND NON-DISPARAGEMENT AGREEMENT (this "Release")
is made as of the ___ day of _______, _____ by and between Penn Security Bank &
Trust, a Pennsylvania state chartered community bank and trust company, Penseco
Financial Services Corporation, a Pennsylvania corporation, (together the
"Company") and Craig Best (the "Executive").

                  WHEREAS, the Executive's employment as an executive of the
Company has terminated; and

                  WHEREAS, pursuant to Section 3.7 of the Employment Agreement
by and between the Company and the Executive, effective as of January 2, 2006
(the "Agreement"), the Company has agreed to pay the Executive certain amounts
and to provide him with certain rights and benefits, subject to the execution of
this Release.

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

     1. Consideration. The Executive acknowledges that: (i) the payments, rights
and benefits set forth in Article 3 of the Agreement constitute full settlement
of all his rights under the Agreement, (ii) he has no entitlement under any
other severance or similar arrangement maintained by the Company, and (iii)
except as provided in Section 3.7 of the Agreement or otherwise provided
specifically in this Release, the Company does not and will not have any other
liability or obligation to the Executive. The Executive further acknowledges
that, in the absence of his execution of this Release, the benefits and payments
specified in Section 3.7 of the Agreement would not otherwise be due to him.

     2. Release and Covenant Not to Sue.

                  2.1 Except as provided in Section 2.3, below, the Executive
hereby fully and forever releases and discharges the Company, and all
predecessors and successors, assigns, stockholders, affiliates, officers,
directors, trustees, employees, agents and attorneys, past and present (the
Company and each such person or entity is referred to as a "Released Person")
from any and all claims, demands, liens, agreements, contracts, covenants,
actions, suits, causes of action, obligations, controversies, debts, costs,
expenses, damages, judgments, orders and liabilities, of whatever kind or
nature, direct or indirect, in law, equity or otherwise, whether known or
unknown, arising through the date of this Release, out of the Executive's
employment by the Company or the termination thereof, including, but not limited
to, any claims for relief or causes of action under the Age Discrimination in
Employment Act, 29 U.S.C. ss. 621 et seq., or any other federal, state or local
statute, ordinance or regulation regarding discrimination in employment and any
claims, demands or actions based upon alleged wrongful or retaliatory discharge
or breach of contract under any state or federal law.

                  2.2 The Executive expressly represents that he has not filed a
lawsuit or initiated any other administrative proceeding against a Released
Person and that he has not assigned any claim against a Released Person. The
Executive further promises not to initiate a lawsuit or to bring any other claim
against the other arising out of or in any way related to the Executive's
employment by the Company or the termination of that employment. This Release
will not prevent the Executive from filing a charge with the Equal Employment
Opportunity Commission (or similar state agency) or participating in any
investigation conducted by the Equal Employment Opportunity Commission (or
similar state agency); provided, however, that any claims by the Executive for
personal  relief in connection with such a charge or investigation (such as
reinstatement or monetary damages) would be barred.


<PAGE>


                  2.3 The foregoing provisions do not and will not be deemed to
release the Company from or to affect the Executive's rights with respect to:
(a) claims solely to enforce this Release; (b) claims solely to enforce Section
3.7 of the Agreement;(c) claims solely to enforce the terms of any incentive
award agreement between the Executive and the Company;(d) claims for
indemnification, defense or both under the Company's By-Laws, certificate of
incorporation, Board resolutions, insurance policies or (if greater) applicable
state law; or (e) claims for vested benefits under the terms of any employee
benefit plan, as such terms are defined and used in and under ERISA; or (f)
claims based on events subsequent to the effective date of this Release.

     3. Restrictive Covenants. The Executive acknowledges that restrictive
covenants contained in Article IV of the Agreement will survive the termination
of his employment. The Executive affirms that those restrictive covenants are
reasonable and necessary to protect the legitimate interests of the Company,
that he received adequate consideration in exchange for agreeing to those
restrictions and that he will abide by those restrictions.

     4. Non-Disparagement. The Executive will not disparage any Released Person
or otherwise take any action which could reasonably be expected to adversely
affect the personal or professional reputation of any Released Person, except as
may be required by law or in connection with any legal proceeding,
interrogatory, subpoena, civil investigative demand or other legal process. The
Company agrees that neither it nor any of its officers or directors will make
any statement or otherwise take any action which could reasonably be expected to
adversely affect the personal or professional reputation of the Executive,
except as may be required by law or in connection with any legal proceeding,
interrogatory, subpoena, civil investigative demand or other legal process.

     5. Cooperation. The Executive further agrees that, subject to reimbursement
of his reasonable and/or authorized expenses, he will cooperate as fully as is
reasonable with the Company and its counsel with respect to any matter
(including litigation, investigations, or governmental proceedings) in which the
Executive was in any way involved during his employment with the Company. The
Executive shall render such cooperation following reasonable notice from the
Company in as timely a manner as is reasonable under the circumstances,
considering constraints due to: other employment; service on Boards of
Directors; significant personal commitments (such as prescheduled vacations); or
any illness, injury or other medical disability. Nothing in this section does or
shall be construed to obligate the Executive to violate any law or legal or
professional ethical standard or obligation. Subject to the foregoing, Executive
agrees to provide his time and services pursuant to this section without any
payment (other than expense reimbursements) while he is receiving severance
payments pursuant to Section 3.7 of the Agreement. Thereafter, except to the
extent prohibited by law or by the Code of Professional Responsibility, the
Company shall pay Executive for his time pursuant to this Section at an hourly
rate equal to the sum resulting from dividing his final Base Salary by 2080.

     6. Rescission Right. The Executive expressly acknowledges and recites that
(a) he has read and understands the terms of this Release in its entirety, (b)
he has entered into this Release knowingly and voluntarily, without any duress
or coercion; (c) he has been advised orally and is hereby advised in writing to
consult with an attorney with respect to this Release before signing it; (d) he
was provided twenty-one (21) calendar days after receipt of the Release to
consider its terms before signing it; and (e) he is provided seven (7) calendar
days from the date of signing to terminate and revoke this Release, in which
case this Release shall be  unenforceable,  null and void.  The  Executive may
revoke this Release during those seven (7) days by providing  written  notice of
revocation  to the Company at the address specified in Section 5.7 of the
Agreement.

     7. Challenge. If the Executive violates or challenges the enforceability of
any provisions of the Restrictive Covenants or this Release, no further
payments, rights or benefits under Section 3.7 of the Agreement will be due to
the Executive.

     8. Miscellaneous.


<PAGE>


                  8.1. No Admission of Liability. This Release is not to be
construed as an admission of any violation of any federal, state or local
statute, ordinance or regulation or of any duty owed by the Company to the
Executive or of any duty owed by Executive to the Company. There have been no
such violations, and the Company and Executive specifically deny any such
violations.

                  8.2. No Reinstatement. The Executive agrees that he will not
apply for reinstatement with the Company or seek in any way to be reinstated,
re-employed or hired by the Company in the future.

                  8.3. Successors and Assigns. This Release shall inure to the
benefit of and be binding upon the Company and the Executive and their
respective successors, permitted assigns, executors, administrators and heirs.
The Executive may not make any assignment of this Release or any interest
herein, by operation of law or otherwise, except by will or the laws of descent
and distribution. The Company may assign this Release as provided in Section 5.4
of the Agreement.

                  8.4. Severability. Whenever possible, each provision of this
Release will be interpreted in such manner as to be effective and valid under
applicable law. However, if any provision of this Release is held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability will not affect any other provision, and this Release will be
reformed, construed and enforced as though the invalid, illegal or unenforceable
provision had never been herein contained.

                  8.5. Entire Agreement; Amendments. Except as otherwise
provided herein, this Release contains the entire agreement and understanding of
the parties hereto relating to the subject matter hereof, and merges and
supersedes all prior and contemporaneous discussions, agreements and
understandings of every nature relating to the subject matter hereof, except for
the provisions of the Agreement which contemplate performance subsequent to
termination of Executive's employment. This Release may not be changed or
modified, except by an agreement in writing signed by each of the parties
hereto.

                  8.6. Governing Law. This Release shall be governed by, and
enforced in accordance with, the laws of the Commonwealth of Pennsylvania,
without regard to the application of the principles of conflicts of laws.

                  8.7. Counterparts and Facsimiles. This Release may be
executed, including execution by facsimile signature, in multiple counterparts,
each of which shall be deemed an original, and all of which together shall be
deemed to be one and the same instrument.


                            [Signature page follows]


<PAGE>


                  IN WITNESS WHEREOF, the Company has caused this Release to be
executed by its duly authorized officer, and the Executive has executed this
Release, in each case as of the date first above written.

                              PENSECO FINANCIAL SERVICES CORPORATION


                              By:______________________________

                              Title: __________________________



                              PENN SECURITY BANK & TRUST


                              By:______________________________

                              Title: __________________________



                                                --------------------------------
                                                CRAIG BEST