EX 10.1 Fainor Amended and Restated Employment Agreement


    

      AMENDED
        AND RESTATED

      EMPLOYMENT
        AGREEMENT

      


      


      This
        EMPLOYMENT AGREEMENT (this “Agreement") is made and entered into as of December
        28, 2006 by and among Keystone Nazareth Bank & Trust Company (the “Bank”),
        KNBT Bancorp, Inc. (the “Company”) (the Bank and the Company are collectively
        referred to as the “Employer”), and Scott V. Fainor (the
        "Executive").

      


      


      W
        I T N E
        S S E T H :

      


      


      WHEREAS,
        in connection with the execution of the Agreement and Plan of Merger between
        Keystone Savings Bank (now known as Keystone Nazareth Bank & Trust Company)
        and First Colonial Group, Inc. (“First Colonial”) (the “Merger Agreement”), the
        Bank and the Executive entered into an Employment Agreement dated March 5,
        2003
        (the “Original Agreement”);

      


      WHEREAS,
        in January 2005, the Original Agreement was amended to provide that for purposes
        thereof the Effective Date was December 31, 2004;

      


      WHEREAS,
        in accordance with the terms of Section 29 of the Original Agreement and
        in
        connection with the consummation of the transactions contemplated by the
        Merger
        Agreement, the Company became a party to the Original Agreement; 

      


      WHEREAS,
        the Executive and the Employer desire to amend and restate the Original
        Agreement in order to make changes to comply with Section 409A of the Internal
        Revenue Code of 1986, as amended (the “Code”), as well as certain other
        changes;

      


      WHEREAS,
        the Employer desires to ensure that the Company and the Bank are assured
        of the
        continued availability of the Executive's services as provided in this
        Agreement; and

      


      WHEREAS,
        the Executive is willing to serve the Company and the Bank on the terms and
        conditions hereinafter set forth.

      


      NOW,
        THEREFORE, in consideration of the premises and the mutual covenants and
        conditions hereinafter set forth, the Employer and the Executive hereby agree
        as
        follows:

      


      SECTION
        1. EFFECTIVE
        DATE; EMPLOYMENT.

      


      For
        purposes of this Agreement, “Effective Date” shall mean December 31, 2004,
provided
        that
        this
        amendment and restatement shall be effective as of the date first written
        above.
        The Employer agrees to employ the Executive, and the Executive hereby agrees
        to
        such employment, during the period and upon the terms and conditions set
        forth
        in this Agreement.

      


      SECTION
        2. EMPLOYMENT
        PERIOD.

      


      (a) The
        terms
        and conditions of this Agreement shall be and remain in effect through December
        31, 2009 plus such extensions, if any, as are provided pursuant to Section
        2(b)
        hereof (the "Employment Period").

      


      (b) Except
        as
        provided in Section 2(c), beginning on December 31, 2007 and on each subsequent
        December 31st
        during
        the Employment Period, the Employment Period shall automatically be extended
        for
        one additional year, unless either the Company or the Bank, on the one hand,
        or
        the Executive, on the other hand, elects not to extend the Agreement further
        by
        giving written notice thereof to the other parties at least 30 days prior
        to
        such annual anniversary date. Upon termination of the Executive's employment
        with either of the Employer for any reason whatsoever, any annual extensions
        provided pursuant to this Section 2(b), if not theretofore discontinued,
        shall
        automatically cease.

      


      (c) Nothing
        in this Agreement shall be deemed to prohibit the Employer at any time from
        terminating the Executive's employment during the Employment Period for any
        reason upon at least 30 days written notice to the Executive, other than
        termination for Cause which shall be governed by Section 10 hereof, provided
        that
        the
        relative rights and obligations of the Employer and the Executive in the
        event
        of any such termination shall be determined under this Agreement. Furthermore,
        notwithstanding anything to the contrary herein, no extension of this Agreement
        pursuant to Section 2(b) shall occur that would extend the term of this
        Agreement beyond December 31st
        of the
        year in which the Executive reaches age 65.

      


      
        
          
          

        

        
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      SECTION
        3. DUTIES.

      


      (a) Throughout
        the Employment Period, the Executive shall serve as the President and the
        Chief
        Executive Officer of each of the Employer, having such power, authority and
        responsibility and performing such duties as are prescribed by or under the
        Bylaws of each of the Company and the Bank and as are customarily associated
        with such positions. The Executive shall devote his full business time,
        attention, skills and efforts (other than during weekends, holidays, vacation
        periods, and periods of illness or leaves of absence and other than as permitted
        or contemplated by Section 7 hereof) to the business and affairs of the Employer
        and shall use his best efforts to advance the interests of the
        Employer.

      


      (b) Throughout
        the Employment Period, the Board of Directors of the Bank (the “Bank Board”)
        shall nominate the Executive to be a director of the Bank when his term expires,
        subject to the fiduciary duties of the Bank Board, and the Company agrees
        to
        approve his election as a director of the Bank. Throughout the Employment
        Period, the Board of Directors of the Company (the “Company Board”) shall
        nominate the Executive to be a director of the Company when his term expires
        and
        recommend his election to the shareholders of the Company, subject to the
        fiduciary duties of the Company Board.

      


      SECTION
        4. CASH
        AND
        OTHER COMPENSATION.

      


      (a) In
        consideration for the services to be rendered by the Executive hereunder,
        the
        Employer shall pay to him a salary of four hundred and ten thousand dollars
        ($410,000) annually (“Base Salary”). The Executive's Base Salary shall be
        payable in approximately equal installments in accordance with the Company’s and
        the Bank’s customary payroll practices for senior officers. Base Salary shall
        include any amounts of compensation deferred by the Executive under any
        tax-qualified retirement or welfare benefit plan or any other deferred
        compensation arrangement. The Company Board and the Bank Board shall review
        the
        Executive's annual rate of salary at such times during the Employment Period
        as
        they deem appropriate, but not less frequently than once every twelve months,
        and may, in their respective discretion, approve an increase therein. In
        addition to salary, the Executive may receive other cash compensation from
        the
        Employer for services hereunder at such times, in such amounts and on such
        terms
        and conditions as the Company Board or the Bank Board may determine from
        time to
        time. Any increase in the Executive’s annual salary shall become the Base Salary
        of the Executive for purposes hereof. The Executive’s Base Salary as in effect
        from time to time cannot be decreased by the Employer without the Executive’s
        express prior written consent.

       

      (b) The
        Executive shall be entitled to participate in an equitable manner with all
        other
        executive officers of the Employer in discretionary bonuses as authorized
        by the
        Company Board and/or the Bank Board to executive officers. No other compensation
        provided for in this Agreement shall be deemed a substitute for the Executive’s
        right to participate in such bonuses when and as declared by the Company
        Board
        and/or the Bank Board.

      


      
        
          
          

        

        
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      SECTION
        5. EMPLOYEE
        BENEFIT PLANS AND PROGRAMS.

      


      (a) During
        the Employment Period, the Executive shall be treated as an employee of the
        Company and the Bank and shall be entitled to participate in and receive
        benefits under any and all qualified or non-qualified retirement, pension,
        savings or profit-sharing plans, any and all group life, health (including
        hospitalization, medical and major medical), dental, accident and long term
        disability insurance plans, and any other employee benefit and compensation
        plans (including, but not limited to, any incentive compensation plans or
        programs, stock option and appreciation rights plans and restricted stock
        plans)
        as may from time to time be maintained by, or cover employees of, the Company
        and the Bank, in accordance with the terms and conditions of such employee
        benefit plans and programs and compensation plans and programs and consistent
        with the Company's and the Bank’s customary practices. Any grants under a
        restricted stock plan to the Executive shall be at the discretion of either
        the
        Company Board or the committee that administers such plan. Nothing paid to
        the
        Executive under any such plan or program will be deemed to be in lieu of
        other
        compensation to which the Executive is entitled under this
        Agreement.

      


      (b) During
        the Employment Period, the Employer shall provide the Executive with an
        automobile allowance equal to $1,000 per month.

      


      (c) During
        the Employment Period, the Employer shall reimburse the Executive for his
        monthly membership dues to be a member of the Saucon Valley Country
        Club.

      


      SECTION
        6. INDEMNIFICATION
        AND INSURANCE.

      


      (a) During
        the Employment Period and for a period of six years thereafter, the Employer
        shall cause the Executive to be covered by and named as an insured under
        any
        policy or contract of insurance obtained by them to insure their directors
        and
        officers against personal liability for acts or omissions in connection with
        service as an officer or director of the Employer or service in other capacities
        at the request of the Employer. The coverage provided to the Executive pursuant
        to this Section 6 shall be of the same scope and on the same terms and
        conditions as the coverage (if any) provided to other officers or directors
        of
        the Employer or any successors.

      


      (b) To
        the
        maximum extent permitted under applicable law, the Employer shall indemnify
        the
        Executive against and hold him harmless from any costs, liabilities, losses
        and
        exposures that may be incurred by the Executive in his capacity as a director
        or
        officer of the Employer or any subsidiary or affiliate.

      



      
        
          
          

        

        
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      SECTION
        7. OUTSIDE
        ACTIVITIES.

      


      The
        Executive may (a) serve as a member of the boards of directors of such business,
        community and charitable organizations as he may disclose to and as may be
        approved by the Employer (which approval shall not be unreasonably withheld),
        and (b) perform duties as a trustee or personal representative or in any
        other
        fiduciary capacity, provided
        that
        in each
        case such service shall not materially interfere with the performance of
        his
        duties under this Agreement or present any conflict of interest. The Executive
        may also engage in personal business and investment activities which do not
        materially interfere with the performance of his duties hereunder, provided
        that
        such
        activities are not prohibited under any code of conduct or investment or
        securities trading policy established by the Employer and generally applicable
        to all similarly situated executives. If the Executive is discharged or
        suspended, or is subject to any regulatory prohibition or restriction with
        respect to participation in the affairs of the Bank, he shall continue to
        perform services for the Company in accordance with this Agreement but shall
        not
        directly or indirectly provide services to or participate in the affairs
        of the
        Bank in a manner inconsistent with the terms of such discharge or suspension
        or
        any applicable regulatory order. 

      


      SECTION
        8. WORKING
        FACILITIES AND EXPENSES.

      


      It
        is
        understood by the parties that the Executive's principal place of employment
        shall be at the Employer’s principal executive office located in Bethlehem,
        Pennsylvania, or at such other location within 25 miles
        of
        the address of such principal executive office, or at such other location
        as the
        Employer and the Executive may mutually agree upon. The Employer shall provide
        the Executive at his principal place of employment with a private office,
        secretarial services and other support services and facilities suitable to
        his
        position with the Employer and necessary or appropriate in connection with
        the
        performance of his assigned duties under this Agreement. The Employer shall
        reimburse the Executive for his ordinary and necessary business expenses
        attributable to the Employer’s business, including, without limitation, the
        Executive's travel and entertainment expenses incurred in connection with
        the
        performance of his duties for the Employer under this Agreement, in each
        case
        upon presentation to the Employer of an itemized account of such expenses
        in
        such form as the Employer may reasonably require. 

      


      SECTION
        9. TERMINATION
        OF EMPLOYMENT WITH BENEFITS.

      


      (a) The
        Executive shall be entitled to the benefits described in Section 9(b) in
        the
        event that either prior to a Change in Control or more than two years after
        a
        Change in Control as defined in Section 11(a): 

      


      (i) his
        employment with the Employer terminates during the Employment Period as a
        result
        of the Executive's resignation within six full calendar months
        following:

      


      (A) the
        failure of either the Company Board or the Bank Board to appoint or re-appoint
        the Executive to the positions with the Company stated in Section 3(a) of
        this
        Agreement;

      


      (B) the
        expiration of a 30-day period following the date on which the Executive gives
        written notice to the Employer of its material failure, whether by amendment
        of
        the Articles of Incorporation or Bylaws of either the Company or the Bank,
        or by
        action of the Company Board, the Company's shareholders, the Bank Board,
        the
        Bank’s shareholder(s), or otherwise, to vest in the Executive the functions,
        duties or responsibilities prescribed in Section 3(a) of this Agreement,
        unless,
        during such 30-day period, the Employer cures such failure;


      
        
          
          

        

        
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      (C) the
        expiration of a 30-day period following the date on which the Executive gives
        written notice to the Employer of its material breach of any term, condition
        or
        covenant contained in this Agreement (including, without limitation, any
        reduction of the Executive's rate of Base Salary in effect from time to time
        and
        any change in the terms and conditions of any compensation or benefit program
        in
        which the Executive participates which, either individually or together with
        other changes, has a material adverse effect on the aggregate value of his
        total
        compensation package), unless, during such 30-day period, the Employer cures
        such failure;

      


      (D) a
        change
        in the Executive's principal place of employment by a distance in excess
        of 25
        miles
        from the Employer’s principal executive office in Bethlehem,
        Pennsylvania;

      


      (E) the
        receipt by the Executive of written notice pursuant to Section 2(b) hereof
        that
        the Employment Period is not being extended as of any annual anniversary
        date of
        the Effective Date; or

      


      (F) the
        termination of the Executive’s employment by either the Company or the Bank for
        reasons other than those specified in Section 10 hereof; or

      


      (ii) the
        Executive's employment with the Employer is terminated (A) by the Employer
        during the Employment Period for any reason other than for "cause," death
        or
“Disability,” as provided in Section 10(a) or (B) pursuant to the provisions of
        Section 9(c).

      


      (b) Upon
        the
        termination of the Executive’s employment pursuant to Section 9(a) of this
        Agreement either prior to a Change in Control as defined in Section 11(a)
        or
        more than two years after a Change in Control, the Employer shall pay and
        provide to the Executive (or, in the event of his subsequent death, to his
        estate):

      


      (i) his
        earned but unpaid Base Salary (including, without limitation, all items which
        constitute wages under applicable law and the payment of which is not otherwise
        provided for in this Section 9(b)) as of the date of the termination of his
        employment, such payment to be made at the time and in the manner prescribed
        by
        law applicable to the payment of wages but in no event later than 30 days
        after
        termination of employment;

      


      (ii) the
        benefits, if any, to which he is entitled under the employee benefit plans
        and
        programs and compensation plans and programs maintained for the benefit of
        the
        Company's and the Bank’s officers and employees through the date of the
        termination of his employment;

      


      (iii) continued
        group life, health, dental, accident and long term disability insurance
        benefits, in addition to that provided pursuant to Section 9(b)(ii), and
        after
        taking into account the coverage provided by any subsequent employer, if
        and to
        the extent necessary to provide for the Executive, for the period beginning
        on
        the date on which his employment terminates and ending on the earlier of
        (A) the
        last day of the Employment Period (the “Remaining Employment Period”) or (B) 24
        months from the date of termination (with such lesser period being the “Coverage
        Period”), coverage equivalent to the coverage to which he would have been
        entitled under such plans if he had continued to be employed during such
        period
        at the highest annual rate of salary achieved during the Employment
        Period;


      
        
          
          

        

        
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      (iv) within
        30
        days following the date on which his employment terminates, a lump sum payment,
        in an amount equal to the present value of the Base Salary that the Executive
        would have earned if he had continued to be employed during the Coverage
        Period
        at the highest annual rate of Base Salary achieved during the Employment
        Period,
        such present value to be determined using a discount rate equal to the
        applicable short-term federal rate prescribed under Section 1274(d) of the
        Code,
        compounded using the compounding periods corresponding to the Company's and
        the
        Bank’s regular payroll periods for their officers, and such lump sum to be paid
        in lieu of all other payments of Base Salary provided for under this Agreement
        in respect of the Coverage Period;

      


      (v) within
        30
        days following the date on which his employment terminates, a lump sum payment
        in an amount equal to the excess, if any, of:

      


      (A) the
        present value of the aggregate benefits to which he would be entitled under
        any
        and all qualified defined benefit pension plans and non-qualified plans related
        thereto maintained by, or covering employees of, the Company and the Bank
        if he
        were 100% vested thereunder and had continued to be employed during the Coverage
        Period at the highest annual rate of Base Salary achieved during the Employment
        Period; over

      


      (B) the
        present value of the benefits to which he is actually entitled under such
        defined benefit pension plans as of the date on which his employment terminates;
        such present values to be determined using the mortality tables prescribed
        under
        Section 415(b)(2)(E)(v) of the Code and a discount rate, compounded monthly,
        equal to the annualized rate of interest prescribed by the Pension Benefit
        Guaranty Corporation for the valuation of immediate annuities payable under
        terminating single-employer defined benefit plans for the month in which
        the
        Executive's employment terminates ("Applicable PBGC Rate");

      


      (vi) within
        30
        days following the date on which his employment terminates, a lump sum payment
        in an amount equal to the present value of the additional employer contributions
        to which he would have been entitled under any and all qualified defined
        contribution plans and non-qualified plans related thereto maintained by,
        or
        covering employees of, the Company and the Bank as if he were 100% vested
        thereunder and had continued to be employed during the Coverage Period at
        the
        highest annual rate of Base Salary achieved during the Employment Period
        and
        making the maximum amount of employee contributions, if any, required or
        permitted under such plan or plans, such present value to be determined on
        the
        basis of a discount rate, compounded using the compounding period that
        corresponds to the frequency with which employer contributions are made to
        the
        relevant plan, equal to the applicable short-term federal rate prescribed
        under
        Section 1274(d) of the Code, provided that no payments shall be made pursuant
        to
        this subsection (vi) with respect to the Company’s Employee Stock Ownership Plan
        (“ESOP”) if the ESOP is terminated effective as of a date within one year of the
        date of the termination of the Executive’s employment;

      


      (vii) within
        30
        days following the date on which his employment terminates, a lump sum payment
        in an amount equal to the present value of the payments that would have been
        made to the Executive under any cash bonus or long-term or short-term cash
        incentive compensation plan maintained by, or covering employees of, the
        Company
        and the Bank if he had continued to be employed during the Coverage Period
        and
        had earned in each calendar year that ends during the Coverage Period a bonus
        or
        incentive award that equals the highest annual bonus or incentive award paid
        to
        the Executive during the preceding 36 calendar months, with the present value
        of
        such payments to be determined using a discount rate equal to the applicable
        short-term federal rate prescribed under Section 1274(d) of the Code, compounded
        using the compounding periods corresponding to the Company’s and the Bank’s
        schedule of paying bonuses;


      
        
          
          

        

        
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      (viii) for
        the
        first year following the date on which his employment terminates, reimbursement
        for all reasonable expenses incurred by the Executive in connection with
        the
        search for new employment, including without limitation those of a placement
        agency or service, and reimbursement for all reasonable relocation expenses
        incurred by the Executive in connection with securing new employment; provided,
        however, that the amounts payable by the Employer pursuant to this subsection
        (viii) shall not exceed $75,000; and

      


      (ix) within
        30
        days following the occurrence of an event described in Section 9(a), upon
        the
        surrender of then outstanding options or appreciation rights (other than
        options
        or appreciation rights which do not, by their terms, vest in the event of
        a
        Change in Control as defined in Section 11(a) hereof) previously issued to
        the
        Executive under any stock option and appreciation rights plan or program
        maintained by, or covering employees of, the Employer, a lump sum payment
        in an
        amount equal to the product of:

      


      (A) the
        excess of (I) the fair market value of a share of stock of the same class
        as the
        stock subject to the option or appreciation right, determined as of the date
        on
        which his employment terminates, over (II) the exercise price per share for
        such
        option or appreciation right, as specified in or under the relevant plan
        or
        program; multiplied by

      


      (B) the
        number of shares with respect to which options or appreciation rights are
        being
        surrendered.

      


      The
        Employer and the Executive agree that the Employer may condition the payments
        and benefits (if any) due under Sections 9(b)(iii), (iv), (v), (vi), (vii)
        and
        (viii) on the receipt of the Executive's resignation from any and all positions
        which he holds as an officer, director or committee member with respect to
        the
        Employer or any of its subsidiaries or affiliates.

      


      (c) In
        the
        event the Executive’s employment is terminated by voluntary resignation
        (including voluntary retirement) subsequent to the Executive reaching age
        65 but
        before the end of the Employment Period other than pursuant to Section 9(a)
        and
        such termination occurs either before a Change in Control as defined in Section
        11(a) or more than two years after a Change in Control, the Employer shall
        pay
        and provide to the Executive (or, in the event of his subsequent death, to
        his
        estate):

       

      
        (i) his
          earned but unpaid Base Salary as of the date of the termination of his
          employment, such payment to be made at the time and in the manner prescribed
          by
          law applicable to the payment of wages but in no event later than 30 days
          after
          termination of employment;

        


        (ii) the
          benefits, if any, to which he is entitled under the employee benefit plans
          and
          programs and compensation plans and programs maintained for the benefit
          of the
          Company's and the Bank’s officers and employees through the date of the
          termination of his employment;

         

        (iii) in
          eighteen (18) equal monthly installments beginning with the first business
          day
          of the month following the Executive’s termination of employment an aggregate
          amount equal to 1.125 times his Base Salary as in effect immediately prior
          to
          his termination; and

         

        (iv) continued
          group health and dental insurance benefits at the same level as in effect
          as of
          the date of termination of employment for a period of eighteen (18) months
          beginning on the date his employment terminates.

         


        
          
            
            

          

          
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      SECTION
        10. TERMINATION
        WITHOUT ADDITIONAL EMPLOYER LIABILITY.

      


      (a) In
        the
        event that the Executive's employment with the Employer shall terminate during
        the Employment Period on account of:

      


      (i) 
        the
        discharge of the Executive for "cause," which, for purposes of this Agreement,
        shall mean a discharge because either the Company Board or the Bank Board
        determines that the Executive has: (A) willfully failed to perform his
        assigned duties under this Agreement, other than any failure resulting from
        the
        Executive’s incapacity due to physical or mental injury or illness; (B)
        committed an act involving moral turpitude in the course of his employment
        with
        the Employer and its subsidiaries; (C) engaged in willful misconduct; (D)
        breached his fiduciary duties for personal profit; (E) willfully violated,
        in
        any material respect, any law, rule or regulation (other than traffic violations
        or similar offenses), written agreement or final cease-and-desist order with
        respect to his performance of services for the Company or the Bank, as
        determined by the Company Board or the Bank Board; or (F) materially
        breached the terms of this Agreement and failed to cure such material breach
        during a 15-day period following the date on which the Company Board or the
        Bank
        Board gives written notice to the Executive of the material breach;

      


      (ii) the
        Executive's voluntary resignation from employment (including voluntary
        retirement) with the Company and the Bank for reasons other than those specified
        in Section 9(a)(i) and other than pursuant to the provisions of Section 9(c);
        or

      


      (iii) 
        the
        death of the Executive while employed by the Employer, or the termination
        of the
        Executive's employment because of "Disability" as defined in Section 10(c)
        below;

      


      then
        in
        any of the foregoing events, the Employer shall have no further obligations
        under this Agreement, other than (A) the payment to the Executive of his
        earned
        but unpaid Base Salary as of the date of the termination of his employment,
        (B)
        the payment to the Executive of the benefits to which he is entitled under
        all
        applicable employee benefit plans and programs and compensation plans and
        programs, and (C) the provision of such other benefits, if any, to which
        he is
        entitled as a former employee under the Company's or the Bank’s employee benefit
        plans and programs and compensation plans and programs.

      


      (b) For
        purposes of this Section 10, no act or failure to act, on the part of the
        Executive, shall be considered "willful" unless it is done, or omitted to
        be
        done, by the Executive in bad faith or without reasonable belief that the
        Executive's action or omission was in the best interests of the Employer.
        Any
        act, or failure to act, based upon authority given pursuant to a resolution
        duly
        adopted by the Company Board, the Bank Board or based upon the written advice
        of
        counsel for the Employer shall be conclusively presumed to be done, or omitted
        to be done, by the Executive in good faith and in the best interests of the
        Employer. The cessation of employment of the Executive shall not be deemed
        to be
        for "cause" within the meaning of Section 10(a)(i) unless and until there
        shall
        have been delivered to the Executive a copy of a resolution duly adopted
        by the
        affirmative vote of three-fourths of the members of the Company Board or
        the
        Bank Board at a meeting of such Board called and held for such purpose (after
        reasonable notice is provided to the Executive and the Executive is given
        an
        opportunity, together with counsel, to be heard before such Board), finding
        that, in the good faith opinion of such Board, the Executive is guilty of
        the
        conduct described in Section 10(a)(i) above, and specifying the particulars
        thereof in detail.


      
        
          
          

        

        
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      (c) “Disability”
        shall be deemed to have occurred after the Executive has been absent from
        his
        duties hereunder on a full-time basis for six consecutive months due to any
        physical or mental injury or disease that prevents the Executive from engaging
        in substantially all of his duties. The existence of such physical or mental
        injury or disease shall be determined by either (i) a physician selected
        by the
        Employer, with the physician to certify the existence or absence of such
        injury
        or disease to the Employer and the Executive or (ii) if disability insurance
        coverage exists in which the Executive participates, the insurance company
        pursuant to which the Executive is provided long-term disability insurance.
        For
        purposes of this section, the Executive shall be deemed to have been absent
        from
        his duties hereunder on a full-time basis for six consecutive months if he
        has
        not, within any six-month period, attended to his duties on a full-time basis
        for 15 consecutive business days within such six-month period.

      


      (d) During
        any period in which the Executive is absent due to physical or mental injury
        or
        disease, the Employer may, without breaching this Agreement, appoint another
        person or persons to act as interim President and interim Chief Executive
        Officer pending the Executive’s return to his duties on a full-time basis
        hereunder or his termination as a result of such Disability. Prior to the
        Executive’s employment being terminated due to Disability under Section 10(e)
        hereof, the Executive shall continue to receive his full Base Salary, bonuses
        and other benefits to which he is entitled under this Agreement, including
        continued participation in all employee benefit plans and programs.

      


      (e) The
        Employer may provide notice to the Executive in writing that they intend
        to
        terminate the Executive’s employment under this Agreement, with the termination
        date to be on or after the date that the Executive has been absent from his
        duties hereunder on a full-time basis for six consecutive months due to any
        physical or mental injury or disease. At the time his employment hereunder
        is
        terminated due to Disability, (i) the Executive shall not be entitled to
        any
        payments or benefits pursuant to Sections 4 and 5 hereof for periods subsequent
        to such date of termination, and (ii) the Executive shall become entitled
        to
        receive the Disability payments that may be available under any applicable
        long-term disability plan or other benefit plan.

      


      SECTION
        11. PAYMENTS
        UPON A CHANGE IN CONTROL.

      


      (a) The
        term
“Change in Control” means the occurrence of any of the following:

      


      (1) any
        person or “group” of persons (as provided under Section 409A of the Internal
        Revenue Code of 1986, as amended (the “Code”), and any Internal Revenue Service
        (the “IRS”) guidance and regulations issued under Section 409A of the Code)
        acquires ownership of stock of the Company or the Bank that, together with
        stock
        held by such person or group, constitutes more than 50% of the total fair
        market
        value or total voting power of the outstanding stock of the Company or the
        Bank,
        provided that the stock of the Company or the Bank remains outstanding after
        such acquisition and provided further that if the person or group of persons
        is
        already deemed to own more than 50% of the total fair market value or total
        voting power, then the acquisition of additional stock by such person or
        group
        of persons shall not constitute an additional Change of Control;

      


      (2) any
        person or “group” of persons (as provided under Section 409A of the Code and any
        IRS guidance and regulations issued under Section 409A of the Code) acquires
        (or
        has acquired during the 12-month period ending on the date of the most recent
        acquisition by such person or group of persons) ownership of stock of the
        Company or the Bank possessing 35% or more of the total voting power of the
        stock of the Company or the Bank, provided that if a person or group of persons
        that is deemed to have effective control of the Company or the Bank pursuant
        to
        this clause acquires additional stock of the Company or the Bank, such
        additional acquisition shall not constitute an additional Change of
        Control;


      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      


      (3) a
        majority of the members of the Board of Directors of the Company is replaced
        during any 12-month period by directors whose appointment or election is
        not
        endorsed by a majority of the Board of Directors of the Company prior to
        the
        date of the appointment or election, provided that if a person or group of
        persons that is deemed to have effective control of the Company or the Bank
        pursuant to this clause acquires stock of the Company or the Bank that would
        trigger either clauses (1) or (2) above, such acquisition of stock shall
        not
        constitute an additional Change of Control; and 

      


      (4) any
        person or “group” of persons (as provided under Section 409A of the Code and any
        IRS guidance and regulations issued under Section 409A of the Code) acquires
        (or
        has acquired during the 12-month period ending on the date of the most recent
        acquisition by such person or group of persons) assets from the Company or
        the
        Bank that have a total gross fair market value equal to 40% or more of the
        total
        gross fair market value of all of the assets of the Company or the Bank,
        as the
        case may be, immediately prior to such acquisition or acquisitions. For purposes
        of this provision, “gross fair market value” means the value of the assets of
        the Company or the Bank, as the case may be, or the value of the assets being
        disposed of, determined without regard to any liabilities associated with
        such
        assets. A transfer of assets by the Company or the Bank to related persons,
        shareholders or entities shall not be treated as a Change of Control to the
        extent that such transfers are excluded from the definition of a change in
        control under Section 409A of the Code and the regulations issued
        thereunder.

      


      (b) For
        purposes of determining whether a Change in Control has occurred, persons
        will
        not be considered to be acting as a group solely because they purchase or
        own
        stock of the Company at the same time.

      


      (c) Upon
        the
        occurrence of a Change in Control prior to the expiration of the Employment
        Period, the Executive shall be entitled to receive a severance benefit in
        an
        amount as calculated hereunder. If the Executive is not terminated as of
        the
        Change in Control, he shall receive a lump sum payment within 25 days after
        the
        effective time of such Change in Control in an amount equal to 1.5 times
        the
        Executive’s Base Amount, as hereinafter defined, from the Employer. If the
        Executive’s employment is terminated as of the Change of Control, he shall
        receive a lump sum payment within 25 days after the effective time of such
        Change in Control in an amount equal to 3.0 times the Executive’s Base Amount
        from the Employer, minus $1.00. If the Executive’s employment is not terminated
        as of the Change in Control but is terminated within one year thereafter
        by
        either the Employer for other than cause or by the Executive upon the occurrence
        of any of the events set forth in Section 9(a)(i), in addition to the payment
        made at or within 25 days of the Change in Control, the Executive shall receive
        a lump sum payment upon termination of employment from the Employer or its
        predecessor in an amount equal to 1.5 times the Executive’s Base Amount as
        calculated in connection with the Change in Control. If the Executive’s
        employment is terminated more than one year but less than two years after
        the
        Change in Control by either Employer other than for cause or by the Executive
        upon the occurrence of any of the events set forth in Section 9(a)(i), in
        addition to the payment made at or within 25 days of the Change in Control,
        he
        shall receive a lump sum payment upon termination from the Employer or its
        predecessor in an amount equal to 1.5 times the Executive’s Base Amount as if
        the Change in Control had occurred as of the date of termination; provided
        however,
        that for
        purposes of calculating the Executive’s Base Amount for purposes of this
        sentence, any income related to the initial severance payment paid to the
        Executive at or within 25 days of the Change in Control pursuant to this
        Section
        11(c) shall be excluded. For purposes hereof “Base Amount” shall be equal to the
        Executive’s “base amount” (excluding any income resulting from the vesting of
        restricted stock or the exercise of non-qualified options on or prior to
        the
        Effective Date) as defined under Section 280G of the Code. The Executive
        shall
        not be entitled to receive any payments or benefits under Section 9 of this
        Agreement if he receives payments pursuant to this Section 11(b) unless his
        employment is terminated more than two years after a Change in
        Control.


      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      


      SECTION
        12. TAX
        INDEMNIFICATION.

      


      (a) If
        the
        payments and benefits pursuant to this Agreement, either alone or together
        with
        other payments and benefits which the Executive has the right to receive
        from
        the Employer and their subsidiaries, would constitute a “parachute payment” as
        defined in Section 280G(b)(2) of the Code (the “Initial Parachute Payment”),
        then the Company shall pay to the Executive, at the time such payments or
        benefits are paid and subject to applicable withholding requirements, a cash
        amount equal to the sum of the following: 

      


      (i) twenty
        (20) percent (or such other percentage equal to the tax rate imposed by Section
        4999 of the Code) of the amount by which the Initial Parachute Payment exceeds
        the Executive’s “base amount” from the Employer and their subsidiaries
        (including their predecessors), as defined in Section 280G (b)(3) of the
        Code,
        with the difference between the Initial Parachute Payment and the Executive’s
        base amount being hereinafter referred to as the “Initial Excess Parachute
        Payment”; and

      


      (ii) such
        additional amount (tax allowance) as may be necessary to compensate the
        Executive for the payment by the Executive of state and federal income and
        excise taxes on the payment provided under clause (i) above and on any payments
        under this clause (ii). In computing such tax allowance, the payment to be
        made
        under clause (i) above shall be multiplied by the “gross up percentage” (“GUP”).
        The GUP shall be determined as follows:

      


      
        	 	 	
                Tax
                  Rate

              	 
	 	
                GUP
                  =

              	 	 
	 	 	
                1
                  Tax Rate

              	 


      

      


      The
        Tax
        Rate for purposes of computing the GUP shall be the highest marginal federal
        and
        state income and employment-related tax rate (including Social Security and
        Medicare taxes), including any applicable excise tax rate, applicable to
        the
        Executive in the year in which the payment under clause (i) above is made,
        and
        shall also reflect the phase-out of deductions and the ability to deduct
        certain
        of such taxes.

      


      (b) Notwithstanding
        the foregoing, if it shall subsequently be determined in a final judicial
        determination or a final administrative settlement to which the Executive
        is a
        party that the actual excess parachute payment as defined in Section 280G(b)(1)
        of the Code (before giving effect to the payments under Sections 12(a)(i)
        and
        (ii) above) is different from the Initial Excess Parachute Payment (such
        different amount being hereafter referred to as the “Determinative Excess
        Parachute Payment”), then the Company’s independent tax counsel or accountants
        shall determine the amount (the “Adjustment Amount”) which either the Executive
        must pay to the Company or the Company must pay to the Executive in order
        to put
        the Executive (or the Company, as the case may be) in the same position the
        Executive (or the Company, as the case may be) would have been if the Initial
        Excess Parachute Payment had been equal to the Determinative Excess Parachute
        Payment. In determining the Adjustment Amount, the independent tax counsel
        or
        accountants shall take into account any and all taxes (including any penalties
        and interest) paid by or for the Executive or refunded to the Executive or
        for
        the Executive’s benefit. As soon as practicable after the Adjustment Amount has
        been so determined, the Company shall pay the Adjustment Amount to the Executive
        or the Executive shall repay the Adjustment Amount to the Company, as the
        case
        may be.


      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      


      (c) In
        each
        calendar year that the Executive receives payments of benefits that constitute
        a
        parachute payment, the Executive shall report on his state and federal income
        tax returns such information as is consistent with the determination made
        by the
        independent tax counsel or accountants of the Company as described above.
        The
        Company shall indemnify and hold the Executive harmless from any and all
        losses,
        costs and expenses (including without limitation, reasonable attorneys’ fees,
        interest, fines and penalties) which the Executive incurs as a result of
        so
        reporting such information. The Executive shall promptly notify the Company
        in
        writing whenever the Executive receives notice of the institution of a judicial
        or administrative proceeding, formal or informal, in which the federal tax
        treatment under Section 4999 of the Code of any amount paid or payable under
        this Section 12 is being reviewed or is in dispute. The Company shall assume
        control at its expense over all legal and accounting matters pertaining to
        such
        federal tax treatment (except to the extent necessary or appropriate for
        the
        Executive to resolve any such proceeding with respect to any matter unrelated
        to
        amounts paid or payable pursuant to this Section 12) and the Executive shall
        cooperate fully with the Company in any such proceeding. The Executive shall
        not
        enter into any compromise or settlement or otherwise prejudice any rights
        the
        Company may have in connection therewith without the prior consent of the
        Company.

      


      (d) The
        Executive hereby agrees with the Employer and any successor thereto to in
        good
        faith consider and take steps commonly used to minimize or eliminate any
        tax
        liability or costs that would otherwise be created by the tax indemnification
        provisions set forth in Section 12 of this Agreement if requested to do so
        by
        the Employer or any successor thereto; provided,
        however,
        that the
        foregoing language shall neither require the Executive to take or not take
        any
        specific action in furtherance thereof nor contravene, limit or remove any
        right
        or privilege provided to the Executive under this Agreement.

      


      SECTION
        13. SOURCE
        OF
        PAYMENTS; NO DUPLICATION OF PAYMENTS.

      


      All
        payments provided in this Agreement shall be timely paid in cash or check
        from
        the general funds of the Company or the Bank. Payments pursuant to this
        Agreement shall be allocated between the Company and the Bank in proportion
        to
        the level of activity and the time expended on such activities by the Executive
        as determined by the Company and the Bank on a quarterly basis, unless the
        applicable provision of this Agreement specifies that the payment shall be
        made
        by either the Company or the Bank. In no event shall the Executive receive
        duplicate payments or benefits from the Company and the Bank.

      


      SECTION
        14. COVENANT
        NOT TO COMPETE.

      


      In
        the
        event the Executive’s employment with the Employer is terminated for any reason
        prior to the expiration of the Employment Period other than a termination
        of
        employment occurring within 30 days of a Change in Control, the Executive
        hereby
        covenants and agrees that for a period of two years following the date of
        his
        termination of employment with the Employer (or, if less, for the Remaining
        Employment Period), he shall not, without the written consent of the Employer,
        become an officer, employee, consultant, director or trustee of any savings
        bank, savings and loan association, savings and loan holding company, bank
        or
        bank holding company, or any direct or indirect subsidiary or affiliate of
        any
        such entity, that entails working within any county in which the Company
        or the
        Bank maintains an office as of the date of termination of the Executive’s
        employment.

      



      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      


      SECTION
        15. CONFIDENTIALITY.

      


      Unless
        he
        obtains the prior written consent of the Employer, the Executive shall at
        all
        times keep confidential and shall refrain from using for the benefit of himself,
        or any person or entity other than the Employer or its subsidiaries, any
        material document or information obtained from the Employer or its subsidiaries,
        in the course of his employment with any of them concerning their properties,
        operations or business (unless such document or information is readily
        ascertainable from public or published information or trade sources or has
        otherwise been made available to the public through no fault of his own)
        until
        the same ceases to be material (or becomes so ascertainable or available);
        provided,
        however,
        that
        nothing in this Section 15 shall prevent the Executive, with or without the
        Employer's consent, from participating in or disclosing documents or information
        in connection with any judicial or administrative investigation, inquiry
        or
        proceeding or the Company’s public reporting requirements to the extent that
        such participation or disclosure is required under applicable law.

      


      SECTION
        16. SOLICITATION.

      


      The
        Executive hereby covenants and agrees that, for a period of two years following
        his termination of employment with the Employer for any reason, he shall
        not,
        without the written consent of the Employer, either directly or
        indirectly:

      


      (a) solicit,
        offer employment to, or take any other action intended, or that a reasonable
        person acting in like circumstances would expect, to have the effect of causing
        any officer or employee of the Employer or any of its subsidiaries or affiliates
        to terminate his employment and accept employment or become affiliated with,
        or
        provide services for compensation in any capacity whatsoever to, any savings
        bank, savings and loan association, bank, bank holding company, savings and
        loan
        holding company, or other institution engaged in the business of accepting
        deposits, making loans or doing business within the counties specified in
        Section 14;

      


      (b) provide
        any information, advice or recommendation with respect to any such officer
        or
        employee to any savings bank, savings and loan association, bank, bank holding
        company, savings and loan holding company, or other institution engaged in
        the
        business of accepting deposits, making loans or doing business within the
        counties specified in Section 14, that is intended, or that a reasonable
        person
        acting in like circumstances would expect, to have the effect of causing
        any
        officer or employee of the Employer or any of its subsidiaries or affiliates
        to
        terminate his employment and accept employment or become affiliated with,
        or
        provide services for compensation in any capacity whatsoever to, any savings
        bank, savings and loan association, bank, bank holding company, savings and
        loan
        holding company, or other institution engaged in the business of accepting
        deposits, making loans or doing business within the counties specified in
        Section 14; or

      


      (c) solicit,
        provide any information, advice or recommendation or take any other action
        intended, or that a reasonable person acting in like circumstances would
        expect,
        to have the effect of causing any customer of the Company or the Bank to
        terminate an existing business or commercial relationship with the Company
        or
        the Bank.

      



      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      


      SECTION
        17. NO
        EFFECT
        ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.

      


      The
        termination of the Executive's employment during the Employment Period or
        thereafter, whether by the Employer or by the Executive, shall have no effect
        on
        the vested rights of the Executive under the Company's or the Bank’s qualified
        or non-qualified retirement, pension, savings, thrift, profit-sharing or
        stock
        bonus plans, group life, health (including hospitalization, medical and major
        medical), dental, accident and long term disability insurance plans, or other
        employee benefit plans or programs, or compensation plans or programs in
        which
        the Executive was a participant.

      


      SECTION
        18. SUCCESSORS
        AND ASSIGNS.

      


      (a) This
        Agreement is personal to each of the parties hereto, and no party may assign
        or
        delegate any of its rights or obligations hereunder without first obtaining
        the
        written consent of the other parties; provided, however, that the Employer
        will
        require any successor or assign (whether direct or indirect, by purchase,
        merger, consolidation or otherwise) to all or substantially all of the business
        and/or assets of the Employer, by an assumption agreement in form and substance
        satisfactory to the Executive, to expressly assume and agree to perform this
        Agreement in the same manner and to the same extent that the Employer would
        be
        required to perform it if no such succession or assignment had taken place.
        Failure of the Employer to obtain such an assumption agreement prior to the
        effectiveness of any such succession or assignment shall be a breach of this
        Agreement and shall entitle the Executive to compensation from the Employer
        in
        the same amount and on the same terms as the compensation pursuant to Sections
        9
        and 11 hereof. For purposes of implementing the provisions of this Section
        18(a), the date which any such succession becomes effective shall be deemed
        the
        date of termination of the Executive’s employment.

      


      (b) This
        Agreement and all rights of the Executive hereunder shall inure to the benefit
        of and be enforceable by the Executive’s personal and legal representatives,
        executors, administrators, successors, heirs, distributees, devises and
        legatees.

      


      SECTION
        19. NOTICES.

      


      Any
        communication required or permitted to be given under this Agreement, including
        any notice, direction, designation, consent, instruction, objection or waiver,
        shall be in writing and shall be deemed to have been given at such time as
        it is
        delivered personally, or five days after mailing if mailed, postage prepaid,
        by
        registered or certified mail, return receipt requested, addressed to such
        party
        at the address listed below or at such other address as one such party may
        by
        written notice specify to the other party:

      


      If
        to the
        Executive:

      


      Scott
        V.
        Fainor

      At
        the
        address last appearing

      on
        the
        personnel records of

      the
        Executive

      



      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      


      If
        to the
        Employer:

      


      KNBT
        Bancorp, Inc.

      Keystone
        Nazareth Bank & Trust Company

      Route
        512
        and Highland Avenue

      Bethlehem,
        Pennsylvania 18017

      (or
        the
        address of the Company’s or the Bank’s principal executive office, if
        different)

      Attention:
        Chairman of the Board

      


      with
        a
        copy, in the case of a notice to the Employer, to:

      


      Elias,
        Matz, Tiernan & Herrick L.L.P.

      734
        15th
        Street,
        N.W.

      Washington,
        D.C. 20005

      Attention:
        Raymond A. Tiernan, Esq.

      Philip
        Ross Bevan, Esq.

      


      SECTION
        20. INDEMNIFICATION
        FOR ATTORNEYS' FEES.

      


      (a) The
        Employer shall indemnify, hold harmless and defend the Executive against
        reasonable costs, including legal fees and expenses, incurred by him in
        connection with or arising out of any action, suit or proceeding in which
        he may
        be involved, as a result of his efforts, in good faith, to defend or enforce
        the
        terms of this Agreement. For purposes of this Agreement, any settlement
        agreement which provides for payment of any amounts in settlement of the
        Employer's obligations hereunder shall be conclusive evidence of the Executive's
        entitlement to indemnification hereunder, and any such indemnification payments
        shall be in addition to amounts payable pursuant to such settlement agreement,
        unless such settlement agreement expressly provides otherwise.

      


      (b) The
        Employer's obligation to make the payments provided for in this Agreement
        and
        otherwise to perform its obligations hereunder shall not be affected by any
        set-off, counterclaim, recoupment, defense or other claim, right or action
        which
        the Employer may have against the Executive or others. Unless it is determined
        that a claim made by the Executive was either frivolous or made in bad faith,
        the Employer agrees to pay as incurred, to the full extent permitted by law,
        all
        legal fees and expenses which the Executive may reasonably incur as a result
        of
        or in connection with his consultation with legal counsel or arising out
        of any
        action, suit, proceeding or contest (regardless of the outcome thereof) by
        the
        Employer, the Executive or others regarding the validity or enforceability
        of,
        or liability under, any provision of this Agreement or any guarantee of
        performance thereof (including as a result of any contest by the Executive
        about
        the amount of any payment pursuant to this Agreement), plus in each case
        interest on any delayed payment at the applicable federal rate provided for
        in
        Section 7872(f)(2)(A) of the Code. This Section 20(b) shall apply whether
        such
        consultation, action, suit, proceeding or contest arises before, on, after
        or as
        a result of a Change in Control.

      


      SECTION
        21. SEVERABILITY.

      


      A
        determination that any provision of this Agreement is invalid or unenforceable
        shall not affect the validity or enforceability of any other provision hereof.
        

      



      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      


      SECTION
        22. WAIVER.

      


      Failure
        to insist upon strict compliance with any of the terms, covenants or conditions
        hereof shall not be deemed a waiver of such term, covenant or condition.
        A
        waiver of any provision of this Agreement must be made in writing, designated
        as
        a waiver, and signed by the party against whom its enforcement is sought.
        Any
        waiver or relinquishment of any right or power hereunder at any one or more
        times shall not be deemed a waiver or relinquishment of such right or power
        at
        any other time or times.

      


      SECTION
        23. COUNTERPARTS.

      


      This
        Agreement may be executed in two or more counterparts, each of which shall
        be
        deemed an original, and all of which shall constitute one and the same
        Agreement.

      


      SECTION
        24. GOVERNING
        LAW.

      


      This
        Agreement shall be governed by and construed and enforced in accordance with
        the
        laws of the Commonwealth of Pennsylvania applicable to contracts entered
        into
        and to be performed entirely within the Commonwealth of Pennsylvania, except
        to
        the extent that federal law controls.

      


      SECTION
        25. HEADINGS
        AND CONSTRUCTION.

      


      The
        headings of sections in this Agreement are for convenience of reference only
        and
        are not intended to qualify the meaning of any section. Any reference to
        a
        section number shall refer to a section of this Agreement, unless otherwise
        stated.

      


      SECTION
        26. ENTIRE
        AGREEMENT; MODIFICATIONS.

      


      This
        instrument contains the entire agreement of the parties relating to the subject
        matter hereof, and supersedes in its entirety any and all prior agreements,
        understandings or representations relating to the subject matter hereof,
        including but not limited to the Original Agreement. No modifications of
        this
        Agreement shall be valid unless made in writing and signed by the parties
        hereto; provided, however, that if the Employer determines, after a review
        of
        the final regulations issued under Section 409A of the Code and all applicable
        IRS guidance, that this Agreement should be further amended to avoid triggering
        the tax and interest penalties imposed by Section 409A of the Code, the Employer
        may amend this Agreement to the extent necessary to avoid triggering the
        tax and
        interest penalties imposed by Section 409A of the Code.

      


      SECTION
        27. REQUIRED
        REGULATORY PROVISIONS.

      


      Notwithstanding
        anything herein contained to the contrary, any payments to the Executive
        by the
        Employer, whether pursuant to this Agreement or otherwise, are subject to
        and
        conditioned upon their compliance with Section 18(k) of the Federal Deposit
        Insurance Act, 12 U.S.C. Section 1828(k), and the regulations promulgated
        thereunder in 12 C.F.R. Part 359.

      



      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      


      SECTION
        28. DISPUTE
        RESOLUTION.

      


      (a) In
        the
        event of any dispute, claim, question or disagreement arising out of or relating
        to this Agreement or the breach hereof, the parties hereto shall use their
        best
        efforts to settle such dispute, claim, question or disagreement. To this
        effect,
        they shall consult and negotiate with each other, in good faith, and,
        recognizing their mutual interests, attempt to reach a just and equitable
        solution satisfactory to both parties.

      


      (b) If
        they
        do not reach such a solution within a period of thirty (30) days, then the
        parties agree first to endeavor in good faith to amicably settle their dispute
        by mediation under the Commercial Mediation Rules of the American Arbitration
        Association (the “AAA”), before resorting to arbitration.

      


      (c) Thereafter,
        any unresolved controversy or claim arising out of or relating to this Agreement
        or the breach thereof, upon notice by any party to the other, shall be submitted
        to and finally settled by arbitration in accordance with the Commercial
        Arbitration Rules (the “Rules”) of the AAA in effect at the time demand for
        arbitration is made by any such party. The parties shall mutually agree upon
        a
        single arbitrator within thirty (30) days of such demand. In the event that
        the
        parties are unable to so agree within such thirty (30) day period, then within
        the following thirty (30) day period, one arbitrator shall be named by each
        party. A third arbitrator shall be named by the two arbitrators so chosen
        within
        ten (10) days after the appointment of the first two arbitrators. In the
        event
        that the third arbitrator is not agreed upon, he or she shall be named by
        the
        AAA. Arbitration shall occur in Bethlehem, Pennsylvania or such other location
        as may be mutually agreed to by the parties.

      


      (d) The
        award
        made by all or a majority of the panel of arbitrators shall be final and
        binding, and judgment may be entered based upon such award in any court of
        law
        having competent jurisdiction. The award is subject to confirmation,
        modification, correction or vacation only as explicitly provided in Title
        9 of
        the United States Code. The prevailing party shall be entitled to receive
        any
        award of pre- and post-award interest as well as attorney’s fees incurred in
        connection with the arbitration and any judicial proceedings related thereto.
        The parties acknowledge that this Agreement evidences a transaction involving
        interstate commerce. The United States Arbitration Act and the Rules shall
        govern the interpretation, enforcement, and proceedings pursuant to this
        Section. Any provisional remedy which would be available from a court of
        law
        shall be available from the arbitrators to the parties to this Agreement
        pending
        arbitration. Either party may make an application to the arbitrators seeking
        injunctive relief to maintain the status quo, or may seek from a court of
        competent jurisdiction any interim or provisional relief that may be necessary
        to protect the rights and property of that party, until such times as the
        arbitration award is rendered or the controversy otherwise
        resolved.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      


      IN
        WITNESS WHEREOF, the Employer has caused this Agreement to be executed and
        the
        Executive has hereunto set his hand, all as of the day and year first above
        written.

      


      THIS
        AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED
        BY THE
        PARTIES.

      


      


      
        	 	
                 

              	 	 	 
	 	 	 	 	
                Scott
                  V. Fainor, Executive

              
	 	 	 	 	 
	
                ATTEST:

              	 	 	
                KEYSTONE
                  NAZARETH BANK

              
	 	 	 	
                &
                  TRUST COMPANY

              
	 	 	 	 	 
	
                BY:

              	 	 	
                BY:
                  

              	 
	
                Name:

              	
                Michele
                  A. Linsky

              	 	
                Name:

              	
                Jeffrey
                  P. Feather

              
	
                Title:

              	
                Corporate
                  Secretary

              	 	
                Title:

              	
                Chairman
                  of the Board 

              
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
                [Seal]

              	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
                ATTEST:

              	 	 	
                KNBT
                  BANCORP, INC.

              
	 	 	 	 	 
	
                BY:

              	 	 	
                BY:
                  

              	 
	
                Name:

              	
                Michele
                  A. Linsky

              	 	
                Name:

              	
                Jeffrey
                  P. Feather

              
	
                Title:

              	
                Corporate
                  Secretary

              	 	
                Title:

              	
                Chairman
                  of the Board