EXHIBIT 10.3



                  NORTH PENN BANK AND NORTH PENN BANCORP, INC.
                              EMPLOYMENT AGREEMENT

         This AGREEMENT ("Agreement") is made effective as of June 1, 2005 by
and among North Penn Bank (the "Bank"), a Pennsylvania state-chartered savings
bank, with its principal administrative office at 216 Adams Avenue, Scranton,
Pennsylvania 18503; North Penn Bancorp, Inc., a corporation organized under the
laws of the Commonwealth of Pennsylvania, the holding company for the Bank (the
"Holding Company"); and Thomas A. Byrne ("Executive").

         WHEREAS, the Bank wishes to assure itself of the services of Executive
for the period provided in this Agreement; and

         WHEREAS, the Executive is willing to serve in the employ of the Bank on
a full-time basis for said period; and

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:

1.       POSITION AND RESPONSIBILITIES.

         a. During the period of Executive's employment hereunder, Executive
agrees to serve as Senior Vice President for Commercial Lending of the Bank. The
Executive shall render administrative and management services to the Bank such
as are customarily performed by persons situated in a similar executive
capacity. During said period, Executive also agrees to serve, if elected, as an
officer and/or a director of the Holding Company or any subsidiary of the Bank.

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

2.       TERMS.

         a. The period of Executive's employment under this Agreement shall be
deemed to have commenced as of June 1, 2005 and shall continue for a period of
twenty-four (24) full calendar months thereafter. Commencing on June 1, 2005 and
continuing on each anniversary thereafter, the disinterested members of the
board of directors of the Bank ("Board") may extend the Agreement an additional
year such that the remaining term of the Agreement shall be twenty-four (24)
months unless the Executive elects not to extend the term of this Agreement by
giving written notice in accordance with Section 8 of this Agreement. The Board
will review the Agreement and Executive's performance annually for purposes of
determining whether to extend the Agreement and the rationale and results

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thereof shall be included in the minutes of the Board's meeting. The Board shall
give notice to the Executive as soon as possible after such review as to whether
the Agreement is to be extended.

         b. Notwithstanding anything herein to the contrary, Executive's
employment with the Bank may be terminated by the Bank or the Executive during
the term of this Agreement, subject to the terms and conditions of this
Agreement.

3.       COMPENSATION AND EXPENSES.

         a. SALARY. The Bank shall pay Executive as compensation a salary in an
amount not less than the Base Salary in effect on the date of signing this
Agreement ("Base Salary"). The Base Salary shall be payable bi-weekly. During
the period of this Agreement, Executive's Base Salary shall be reviewed at least
annually. Such review shall be conducted by the Board or by a Committee of the
Board delegated such responsibility by the Board. The Committee or the Board may
increase Executive's Base Salary. Any increase in Base Salary shall become the
"Base Salary" for purposes of this Agreement. In addition to the Base Salary
provided in this Subsection, the Bank shall also provide Executive, at no
premium cost to Executive, with all such other benefits as are provided
uniformly to permanent full-time employees of the Bank.

         b. PERFORMANCE BONUS. Services performed by Executive under this
Agreement, Executive shall be entitled to receive a bonus based upon the
attainment of certain goals, which goals will be established by the Board. The
annual bonus shall be strictly determined at the discretion of the Board based
upon an annual review of Executive's ability to grow loans acceptable to the
Board. The payment of any such bonuses shall not reduce or otherwise affect any
other obligation of the Bank to Executive provided for in this Agreement.

         c. EMPLOYEE BENEFIT PLANS. The Executive shall be entitled to
participate in any employee benefit plans, arrangements and perquisites
substantially equivalent to those in which Executive was participating or
otherwise deriving benefit from immediately prior to the beginning of the term
of this Agreement, and the Bank will not, without Executive's prior written
consent, make any changes in such plans, arrangements or perquisites which would
materially adversely affect Executive's rights or benefits thereunder, except to
the extent such changes are made applicable to all Bank employees eligible to
participate in such plans, arrangements and perquisites on a non-discriminatory
basis. Without limiting the generality of the foregoing provisions of this
Subsection, Executive shall be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plans, medical coverage or any other employee benefit plan
or arrangement made available by the Bank in the future to its senior executives
and key management employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and arrangements.

         d. VACATIONS. During the term of this Agreement, Executive shall be
entitled to three (3) weeks paid annual vacation. However, Executive shall not
be entitled to receive any additional compensation for failure to take a
vacation, nor shall Executive be able to accumulate unused vacation time from
one year to the next, except to the extent authorized by the Board.


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         e. AUTOMOBILE. During the term of this Agreement, the Bank shall
provide Executive with exclusive use of an automobile mutually agreed upon by
Executive and the Bank. The Bank shall be responsible and shall pay for all
costs of insurance coverage, repairs, maintenance and other operating and
incidental expenses, including license, fuel and oil. The Bank shall provide
Executive with a replacement automobile at approximately the time Executive's
automobile reaches three (3) years of age or 50,000 miles, whichever is first,
and approximately every three (3) years or 50,000 miles thereafter, upon the
same terms and conditions.

         f. LIFE INSURANCE. Executive shall receive life insurance in an amount
equal to three (3) times his base salary. Any amount of life insurance over the
life insurance company's limit shall be paid to Executive's estate upon death.

         g. MORTGAGE INTEREST RATE DISCOUNT. Consistent with the discount
provided to all employees, Executive shall receive an interest rate discount of
2.00% from the Bank on any primary residential mortgage loan held by the Bank
while under the employ of the Bank. Upon Executive's death, the discount of
2.00% shall continue for the life of the mortgage loan. However, if Executive or
the Bank terminates Executive's employment for any other reason, including
retirement, Executive shall no longer be eligible for such discount. Executive
will be responsible to pay the total amount of all future mortgage payments due
after Executive's termination, except in the event of death, without the benefit
of a discounted interest rate.

         h. EXPENSE PAYMENTS AND REIMBURSEMENTS. Executive shall be reimbursed
for all reasonable out-of-pocket expenses that he shall incur in connection with
his service under this Agreement upon substantiation of such expenses in
accordance with applicable policies of the Holding Company and the Bank.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

         a. Upon the occurrence of an Event of Termination (as herein defined)
during the Executive's term of employment under this Agreement, the provisions
of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Holding Company of Executive's full-time
employment hereunder for any reason other than a termination governed by Section
5(a) hereof, or Termination for Cause, as defined in Section 7 hereof; (ii)
Executive's resignation from the Bank's employ upon (A) any failure to elect or
reelect or to appoint or reappoint Executive as Senior Vice President for
Commercial Lending, unless consented to by the Executive, (B) a material change
in Executive's function, duties, or responsibilities with the Bank, which change
would cause Executive's position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in
Section 1, above, unless consented to by Executive, (C) a relocation of
Executive's principal place of employment by more than 50 miles from its
location at the effective date of this Agreement, unless consented to by the
Executive, (D) a material reduction in the benefits and perquisites to the
Executive from those being provided as of the effective date of this Agreement,
unless consented to by the Executive, (E) a liquidation or dissolution of the
Bank or Holding Company or (F) breach of this Agreement by the Bank. Upon the
occurrence of any event described in clauses (A), (B), (C), (D), (E) or (F),
above, Executive shall have the right to elect to terminate his employment under
this Agreement by resignation upon not less than sixty (60) days prior written
notice given within six full calendar months after the event giving rise to said
right to elect.

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         b. Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 8, the Bank shall be obligated to pay
Executive, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, a sum equal to the sum of: (i)
the amount of the remaining payments that the Executive would have earned if he
had continued his employment with the Bank during the remaining term of this
Agreement at the Executive's Base Salary at the Date of Termination plus an
amount equal to the average amount of Executive's bonus over the term of the
Agreement; and (ii) the amount equal to the annual contributions that would have
been made on Executive's behalf to any employee benefit plans of the Bank or the
Holding Company during the remaining term of this Agreement based on
contributions made (on an annualized basis) at the Date of Termination. In the
event the Bank is not in compliance with its minimum capital requirements or if
such payments pursuant to this Subsection would cause the Bank's capital to be
reduced below its minimum regulatory capital requirements, such payments shall
be deferred until such time as the Bank or successor thereto is in capital
compliance. At the election of Executive, such payments shall be made in a lump
sum as of the Executive's Date of Termination or on a monthly basis in
approximately equal installments during the remaining term of the Agreement.
Such payments shall not be reduced in the event the Executive obtains other
employment following termination of employment.

         c. Upon the occurrence of an Event of Termination, the Bank will cause
to be continued life, medical and dental coverage substantially equivalent to
the coverage maintained by the Bank or the Holding Company for Executive prior
to his termination at no premium cost to the Executive. Such coverage shall
cease upon the expiration of the remaining term of this Agreement.

         d. DEATH. Executive's employment under this Agreement shall terminate
upon his death during the term of this Agreement, in which event Executive's
estate shall be entitled to receive the compensation due to Executive through
the last day of the calendar month in which his death occurred.

         e. RETIREMENT. This Agreement shall be terminated upon Executive's
retirement under the retirement benefit plan or plans in which he participates.

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

         In the event of such Disability, Executive's obligation to perform
services under this Agreement will terminate. The Bank will pay Executive, as
Disability pay, an amount equal to one hundred percent (100%) of Executive's
bi-weekly rate of base salary in effect as of the date of his termination of
employment due to Disability. Disability payments will be made on a monthly
basis and will commence on the first day of the month following the effective

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date of Executive's termination of employment for Disability and end on the
earlier of: (A) the date he returns to full-time employment at the Bank in the
same capacity as he was employed prior to his termination for Disability; (B)
his death; or (C) upon his attainment of age 65. Such payments shall be reduced
by the amount of any short- or long-term disability benefits payable to
Executive under any other disability programs sponsored by the Holding Company
and the Bank. In addition, during any period of Executive's Disability,
Executive and his dependents shall, to the greatest extent possible, continue to
be covered under all benefit plans (including, without limitation, retirement
plans and medical, dental and life insurance plans) of the Holding Company and
the Bank, in which Executive participated prior to his Disability on the same
terms as if Executive were actively employed by the Holding Company and the
Bank.

5.       CHANGE IN CONTROL.

         a. For purposes of this Agreement, a "Change in Control" of the Bank or
Holding Company shall mean an event of a nature that: (i) would be required to
be reported in response to Item 1 of the Current Report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); or (ii) results in a
Change in Control of the Bank or the Holding Company within the meaning of the
Federal Deposit Insurance Act and the rules and regulations promulgated
thereunder, as in effect on the date hereof; or (iii) without limitation such a
Change in Control shall be deemed to have occurred at such time as (A) any
"person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of voting securities of the Bank or the
Holding Company representing 25% or more of the Bank `s or the Holding Company's
outstanding voting securities or right to acquire such securities except for any
voting securities of the Bank purchased by the Holding Company and any voting
securities purchased by any employee benefit plan of the Bank or the Holding
Company, or (B) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the Holding Company's stockholders was approved by a Nominating Committee solely
composed of members which are Incumbent Board members, shall be, for purposes of
this clause (B), considered as though he were a member of the Incumbent Board,
or (C) a plan of reorganization, merger, consolidation, sale of all or
substantially all the assets of the Bank or the Holding Company or similar
transaction occurs or is effectuated in which the Bank or Holding Company is not
the resulting entity; provided, however, that such an event listed above will be
deemed to have occurred or to have been effectuated upon the receipt of all
required regulatory approvals not including the lapse of any statutory waiting
periods.

         b. If a Change in Control has occurred pursuant to Section 5(a) or the
Board has determined that a Change in Control has occurred, Executive shall be
entitled to the benefits provided in paragraphs (c) and (d) of this Section upon
his subsequent termination of employment within two years following the Change
in Control due to (1) Executive's dismissal or (2) Executive's voluntary
resignation following any material demotion, loss of title, office or
significant authority or responsibility, material reduction in annual
compensation or benefits or relocation of his principal place of employment by
more than 50 miles from its location immediately prior to the Change in Control,
unless such termination is because of his death, disability, retirement or
Termination for Cause.

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         c. Upon Executive's entitlement to benefits pursuant to Section 5(b),
the Bank shall pay Executive, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be, as severance
pay or liquidated damages, or both, a sum of two times Executive's average
annual compensation for the five (5) most recent taxable years that Executive
has been employed by the Bank or such lesser number of years in the event that
Executive shall have been employed by the Bank for less than five (5) years.
Such annual compensation shall include Base Salary, commissions, bonuses, any
other cash compensation, contributions or accruals on Executive's behalf to any
pension and/or profit sharing plan, severance payments, retirement payments,
directors or committee fees and fringe benefits paid or to be paid to the
Executive in any such year and payment of any expense items without
accountability or business purpose or that do not meet the Internal Revenue
Service requirements for deductibility by the Bank; provided, however, that any
payment under this provision and Subsection 5(d) below shall not exceed the
Executive's average annual compensation. In the event the Bank is not in
compliance with its minimum capital requirements or if such payments would cause
the Bank `s capital to be reduced below its minimum regulatory capital
requirements, such payments shall be deferred until such time as the Bank or
successor thereto is in capital compliance. At the election of the Executive,
which election is to be made on or before the Date of Termination, such payment
shall be made in a lump sum as of the Executive's Date of Termination. In the
event that no election is made, payment to the Executive will be made in
approximately equal installments on a monthly basis over a period of thirty-six
(36) months following the Executive's termination. Such payments shall not be
reduced in the event Executive obtains other employment following termination of
employment.

         d. Upon the Executive's entitlement to benefits pursuant to Section
5(b), the Bank will cause to be continued life, medical and dental coverage
substantially equivalent to the coverage maintained by the Bank for Executive
prior to his severance at no premium cost to the Executive. Such coverage and
payments shall cease upon the expiration of thirty-six (36) months following the
Date of Termination.

e. Notwithstanding anything in this Agreement to the contrary, in no event shall
the conversion of the Bank from mutual to stock form (including without
limitation, through the formation of a stock holding company) or the
reorganization of the Bank into the mutual holding company form of organization
constitute a "Change in Control" for purposes of this Agreement.

6.       CHANGE OF CONTROL RELATED PROVISIONS.

         Notwithstanding the provisions of Section 5, in no event shall the
aggregate payments or benefits to be made or afforded to Executive under said
paragraphs (the "Termination Benefits") constitute an "excess parachute payment"
under Section 280G of the Internal Revenue Code of 1986, as amended, or any
successor thereto, and in order to avoid such a result, Termination Benefits
will be reduced, if necessary, to an amount (the "Non-Triggering Amount"), the
value of which is one dollar ($1.00) less than an amount equal to three (3)
times Executive's "base amount", as determined in accordance with said Section
280G. The allocation of the reduction required hereby among the Termination
Benefits provided by Section 5 shall be determined by Executive.

7.       TERMINATION FOR CAUSE.

         The term "Termination for Cause" shall mean termination because of
Executive's personal dishonesty, incompetence, willful misconduct, conduct
damaging the reputation of the Bank or the Holding Company, any breach of


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

8.       NOTICE.

         a. Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

         b. "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given);
provided, however, that if a dispute regarding the Executive's termination
exists, the "Date of Termination" shall be determined in accordance with Section
8(c) of this Agreement.

         c. (c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and, provided further, that the Date of Termination shall be extended by a
notice of dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, in the event the
Executive is terminated for reasons other than Termination for Cause, the Bank
will continue to pay Executive his full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue him as a participant in all compensation, benefit and

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insurance plans in which he was participating when the notice of dispute was
given until the earlier of: (1) the resolution of the dispute in accordance with
this Agreement or (2) the expiration of the remaining term of this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.

9.       POST-TERMINATION OBLIGATIONS.

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

10.      NON-COMPETITION AND NON-DISCLOSURE OF BANK BUSINESS.

         a. Upon any termination of Executive's employment hereunder pursuant to
Section 4 hereof, Executive agrees not to compete with the Bank for a period of
one (1) year following such termination in any city, town or county in which the
Executive's normal business office is located and the Bank has an office or has
filed an application for regulatory approval to establish an office, determined
as of the effective date of such termination, except as agreed to pursuant to a
resolution duly adopted by the Board. Executive agrees that during such period
and within said cities, towns and counties, Executive shall not work for or
advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the Bank. The parties hereto, recognizing that
irreparable injury will result to the Bank, its business and property in the
event of Executive's breach of this Subsection agree that in the event of any
such breach by Executive, the Bank will be entitled, in addition to any other
remedies and damages available, to an injunction to restrain the violation
hereof by Executive, Executive's partners, agents, servants, employees and all
persons acting for or under the direction of Executive. Executive represents and
admits that in the event of the termination of his employment pursuant to
Section 7 hereof, Executive's experience and capabilities are such that
Executive can obtain employment in a business engaged in other lines and/or of a
different nature than the Bank, and that the enforcement of a remedy by way of
injunction will not prevent Executive from earning a livelihood. Nothing herein
will be construed as prohibiting the Bank from pursuing any other remedies
available to the Bank for such breach or threatened breach, including the
recovery of damages from Executive.

         b. Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever unless
expressly authorized by the Board as required by law. Notwithstanding the
foregoing, Executive may disclose any knowledge of banking, financial and/or
economic principles, concepts or ideas which are not solely and exclusively
derived from the business plans and activities of the Bank. Further, Executive
may disclose information regarding the business activities of the Bank to the
Department and the Federal Deposit Insurance Corporation ("FDIC") pursuant to a

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formal regulatory request. In the event of a breach or threatened breach by
Executive of the provisions of this Section, the Bank will be entitled to an
injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Bank or affiliates thereof, or from rendering any services to any person, firm,
corporation, or other entity to whom such knowledge, in whole or in part, has
been disclosed or is threatened to be disclosed. Nothing herein will be
construed as prohibiting the Bank from pursuing any other remedies available to
the Bank for such breach or threatened breach, including the recovery of damages
from Executive.

11.      SOURCE OF PAYMENTS.

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

         b. Notwithstanding any provision herein to the contrary, to the extent
that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under the Employment Agreement made effective June 1,
2005, between Executive and the Holding Company, such compensation payments and
benefits paid by the Holding Company will be subtracted from any amounts due
simultaneously to Executive under similar provisions of this Agreement. Payments
pursuant to this Agreement and the Holding Company Agreement shall be allocated
in proportion to the services rendered and time expended on such activities by
Executive as determined by the Holding Company and the Bank on a quarterly
basis.

12.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

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

13.      NO ATTACHMENT.

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

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

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14.      MODIFICATION AND WAIVER.

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

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

15.      REQUIRED PROVISIONS.

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

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

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

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

         e. All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution: (i) by the Secretary of Banking
(or his designee), or the FDIC, at the time the FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. ss.1823(c); or
(ii) by the Secretary of Banking (or his designee) at the time the Secretary of
Banking (or his designee) approves a supervisory merger to resolve problems
related to the operations of the Bank or when the Bank is determined by the
Secretary of Banking to be in an unsafe or unsound condition. Any rights of the
parties that have already vested, however, shall not be affected by such action.

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<PAGE>

         f. Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C. ss.
1828(k), 12 C.F.R. Part 359 and any rules and regulations promulgated
thereunder.

16.      REINSTATEMENT OF BENEFITS UNDER SECTION 15(B).

         In the event Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank `s affairs by a notice described in
Section 15(b) hereof (the "Notice") during the term of this Agreement and a
Change in Control, as defined herein, occurs, the Bank will assume its
obligation to pay and Executive will be entitled to receive all of the
termination benefits provided for under Section 5 of this Agreement upon the
Bank `s receipt of a dismissal of charges in the Notice.

17.      SEVERABILITY.

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

18.      HEADINGS FOR REFERENCE ONLY.

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

19.      GOVERNING LAW.

         The validity, interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the Commonwealth of Pennsylvania, but
only to the extent not superseded by federal law.

20.      ARBITRATION.

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

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

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<PAGE>

21.      NO MITIGATION.

         Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise and no
such payment shall be offset or reduced by the amount of any compensation or
benefits provided to Executive in any subsequent employment.

22.      PAYMENT OF COSTS AND LEGAL FEES.

         All reasonable costs and legal fees paid or incurred by Executive
pursuant to any dispute or question of interpretation relating to this Agreement
shall be paid or reimbursed by the Bank (which payments are guaranteed by the
Holding Company pursuant to Section 11 hereof) if Executive is successful on the
merits pursuant to a legal judgment, arbitration or settlement.

23.      INDEMNIFICATION AND INSURANCE.

         a. INDEMNIFICATION. The Holding Company and the Bank agree to indemnify
Executive (and his heirs, executors, and administrators), and to advance
expenses related thereto, to the fullest extent permitted under applicable law
and regulations against any and all expenses and liabilities reasonably incurred
by him in connection with or arising out of any action, suit, or proceeding in
which he may be involved by reason of his having been a director or Executive of
the Holding Company, the Bank or any of their subsidiaries (whether or not he
continues to be a director or Executive at the time of incurring any such
expenses or liabilities) such expenses and liabilities to include, but not be
limited to, judgments, court cost, and attorney's fees and the costs of
reasonable settlements, such settlements to be approved by the Board, if such
action is brought against Executive in his capacity as an Executive or director
of the Holding Company and the Bank or any of their subsidiaries.
Indemnification for expenses shall not extend to matters for which Executive has
been terminated for Cause. Nothing contained herein shall be deemed to provide
indemnification prohibited by applicable law or regulation. Notwithstanding
anything herein to the contrary, the obligations of this Subsection shall
survive the term of this Agreement by a period of six (6) years.

         b. INSURANCE. During the period in which indemnification of Executive
is required under this Subsection, the Holding Company and the Bank shall
provide Executive (and his heirs, executors, and administrators) with coverage
under a directors' and officers' liability policy at the expense of the Holding
Company and the Bank, at least equivalent to such coverage provided to directors
and senior executives of the Holding Company and the Bank.

24.      SUCCESSOR TO THE BANK.

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


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<PAGE>

                                   SIGNATURES


         IN WITNESS WHEREOF, North Penn Bank and North Penn Bancorp, Inc. have
caused this Agreement to be executed and their seals to be affixed hereunto by
their duly authorized officers and directors, and Executive has signed this
Agreement, on the 1st day of June, 2005.



ATTEST:                                       NORTH PENN BANK


/s/ Frank H. Mechler                          By: /s/ John Schumacher
------------------------------                    ------------------------------
Frank H. Mechler                                  John Schumacher
Secretary                                         Chairman of the Board



ATTEST:                                       NORTH PENN BANCORP, INC.
                                                       (Guarantor)


/s/ Frank H. Mechler                          By: /s/ John Schumacher
------------------------------                    ------------------------------
Frank H. Mechler                                  John Schumacher
Secretary                                         Chairman of the Board


WITNESS:


/s/ Frank H. Mechler                              /s/ Thomas A. Byrne
------------------------------                    ------------------------------
Frank H. Mechler                                  Thomas A. Byrne
Secretary                                         Executive




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