THE FIRST NATIONAL BANK OF BERWICK


 


SALARY CONTINUATION AGREEMENT


 


THIS AGREEMENT is made this 7th day of January, 1997,
by and between The First National Bank of Berwick, a Pennsylvania corporation (the “Company”), and David R. Saracino
(the “Executive”).


 


INTRODUCTION


 


To encourage the Executive to remain an employee of the Company,
the Company is willing to provide salary continuation benefits to the Executive. The Company will pay the benefits from its general
assets.


 


AGREEMENT


 


The Executive and the Company agree as follows:


 


Article 1


Definitions


 


1.1   Definitions. Whenever used in this
Agreement, the following words and phrases shall have the meanings specified:


 


1.1.1 “Change of Control” means the transfer
of 51% or more of the Company’s outstanding voting common stock (or more than 50% of the outstanding common stock of any
corporation which owns more than 50% of the Company's outstanding common stock) followed within twelve (12) months by replacement
of fifty percent (50%) or more of the members of the Company’s Board of Directors (for reasons other than death or disability).


 


1.1.2 “Code” means the Internal Revenue Code
of 1986, as amended.


 


1.1.3   “Disability” means
the Executive suffering a sickness, accident or injury which, in the judgment of a physician satisfactory to the Company, prevents
the Executive from performing substantially all of the Executive’s normal duties for the Company. As a condition to any benefits,
the Company may require the Executive to submit to such physical or mental evaluations and tests as the Company’s Compensation
Committee deems appropriate.


 




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1.1.4   “Involuntary Termination”
means the Executive, prior to attaining Normal Retirement Age, has been notified by the Company, in writing, that he is terminated
as an employee for reasons other than an approved leave of absence, Termination for Cause or Disability.


 


1.1.5    “Normal Retirement Age”
means the Executive’s 60th Birthday.


 


1.1.6    “Normal Retirement Date”
means the later of the Normal Retirement Age or Termination of Employment.


 


1.1.7    “Plan Year” means
a twelve-month period commencing on 1/7/1997 and ending 12 consecutive months later.


 


1.1.8    “Termination of Employment”
means the Executive ceases to be employed by the Company for any reason whatsoever, voluntary or involuntary, other than for
reason of an approved leave of absence.


 


1.1.9    “Termination for Cause”
See Section 5.2.


 


1.1.10   “Voluntary Termination”
means the Executive, prior to attaining Normal Retirement Age, ceases to be employed by the Company for any reason other than:


 


		a.	for reason of an approved leave of absence;



		b.	death;



		c.	Disability;



		d.	Termination for Cause; or



		e.	Involuntary Termination.



 


1.1.11    “Years of Service” means
the total number of Plan Years in which the Executive has been employed on a full time basis by the Company, inclusive of approved
leaves of absence.


 




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Article 2


Lifetime Benefits


 


2.1    Normal Retirement Benefit. If the
Executive terminates employment on or after the Normal Retirement Age for reasons other than death, the Company shall pay to the
Executive the benefit described in this Section 2.1.


 


2.1.1 Amount of Benefit. The benefit amount under this
Section 2.1 is $2,334 per month.


 


2.1.2 Payment of Benefit. The Company
shall pay the benefit amount to the Executive on the first day of each month commencing with the month following the Executive’s
Normal Retirement Date and continuing for 239 additional months.


 


2.2    Involuntary Termination Benefit. If
Involuntary Termination occurs, the Company shall pay to the Executive the benefit described in this Section 2.2.


 


2.2.1 Amount of Benefit. The Executive's benefit amount
under this Section 2.2 is the monthly benefit set forth in Schedule A, Column D, based on the number of Plan Years completed on
the date of the Executive’s termination of employment. Schedule A, Column D is calculated using the interest method of accounting,
a 7.5% discount rate, and assuming monthly compounding and monthly benefit payments.


 


2.2.2 Payment of Benefit. The Company shall pay the benefit
amount to the Executive on the first day of each month commencing with the month following the Executive's Normal Retirement Date
and continuing for 239 additional months.


 


2.3    Voluntary Termination Benefit. If
Voluntary Termination occurs, prior to the Executive shall not be entitled to a benefit.


 


2.4   Disability Benefit. If Disability
occurs, prior to the Normal Retirement Age, the Company shall pay to the Executive the benefit described in this Section 2.4.


 


2. 4.1   Amount of Benefit. The benefit
amount under this Section 2.4 is the benefit set forth in Schedule A, Column B, based on the date of the Executive's termination
of employment by reason of disability. Schedule A is calculated using the interest method of accounting, a 7.5% discount rate,
and assuming monthly compounding and monthly benefit payments.


 




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2.4.2   Payment of Benefit. The Company
shall pay the benefit amount to the Executive in a lump sum within 60 days after the Executive’s Termination of Employment.


 


2.5    Change of Control Benefit. If Executive
is in active service at the time of a Change of Control, the Company shall pay to the executive the benefit described in this Section
2.5 in lieu of any other benefit under this agreement.


 


2.5.1   Amount of Benefit. The benefit
amount under this Section 2.5 is the Normal Retirement Benefit described in Section 2.1.


 


2.5.2   Payment of Benefit.
The Company shall pay the benefit amount to the Executive on the first day of each month commencing with the month following
the Executive’s Normal Retirement Date and continuing for 239 additional months.


 


Article 3


Death Benefits


 


3.1    Death During Active Service. If
the Executive dies while in the active service of the Company, the Company shall pay to the Executive's beneficiary the benefit
described in this Section 3.1.


 


3.1.1 Amount of Benefit. The benefit under Section 3.1
is the lifetime benefit that would have been paid to the Executive under Section 2.1 calculated as if the date of the Executive’s
death were the Normal Retirement Date.


 


3.1.2 Payment of Benefit. The Company shall pay the benefit
to the Beneficiary on the first day of each month commencing with the month following the Executive’s death and continuing
for 239 additional months.


 


3.2    Death During Benefit Period. If
the Executive dies after benefit payments have commenced under this Agreement but before receiving all such payments, the Company
shall pay the remaining benefits to the Executive’s beneficiary at the same time and in the same amounts they would have
been paid to the Executive had the Executive survived.


 




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3.3    Death Following Active Service Before
Benefits Commence.   If the Executive is entitled to benefit payments under this Agreement, but dies prior to
receiving said benefit payments, the Company shall pay the Executive's beneficiary the benefit described in this Section 3.3.


 


3.3.1 Amount of Benefit. The benefit under Section 3.3
is the vested benefit that would have been paid to the Executive set forth in Schedule A, Column C, based on the number of Years
of Service completed on the date of the Executive’s termination of employment. Schedule A, Column C is calculated using the
interest method of accounting, a 7.5% discount rate, and assuming monthly compounding and monthly benefit payments.


 


3.3.2   Payment of Benefit. The Company
shall pay the benefit to the Beneficiary on the first day of each month commencing with the month following the Executive’s
date of death and continuing for 239 additional months.


 


3.4   Death After the Payment of Disability
Benefits. If the Executive dies within ten years of the effective date of this Agreement and after receipt of his Disability
benefits under Section 2.4, the Company shall pay to the Executive the benefit described in this Section 3.4.


 


3.4.1   Amount of Benefit. The benefit
amount under Section 3.4 is the benefit determined by the following formula:


 


$300,000 - (the Disability Benefit paid under Section 2.4)


 


3.4.2    Payment
of Benefit. The Company shall pay the benefit to the Executive’s beneficiary in monthly installments on the first day
of each month commencing with the month following the Executive’s date of death and continuing for 239 additional months.
The monthly installment shall be calculated by amortizing the benefit under Section 3.4.1 using the interest method of accounting,
a 7.5% discount rate and assuming monthly compounding and monthly benefit payments.


 


3.5    Death After Change of Control. If
Executive dies following a Change of Control, but prior to the commencement of the benefit payments provided Executive was in active
service at the time of the Change of Control, the Company shall pay the Executive’s beneficiary the benefit described in
this Section 3.5.


 




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3.5.1 Amount of Benefit. The benefit under Section 3.5
is the lifetime benefit that would have been paid to the Executive under Section 2.1 calculated as if the date of the Executive’s
death were the Normal Retirement Date.


 


3.5.2    Payment of Benefit. The Company
shall pay the benefit to the Beneficiary on the first day of each month commencing with the month following the Executive’s
death and continuing for 239 additional months.


 


Article 4


Beneficiaries


 


4.1    Beneficiary Designations. The Executive
shall designate a beneficiary by filing a written designation with the Company. The Executive may revoke or modify the designation
at any time by filing a new designation. However, designations will only be effective if signed by the Executive and accepted by
the Company during the Executive's lifetime. The Executive’s beneficiary designation shall be deemed automatically revoked
if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently
dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive’s surviving
spouse, if any, and if none, to the Executive’s estate.


 


4.2    Facility of Payment. If a benefit
is payable to a minor, to a person declared incapacitated (prior Pennsylvania law referred to such a person as incompetent), or
to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incapacitated person or incapable person. The Company may require
proof of incapacity, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution
shall completely discharge the Company from all liability with respect to such benefit.


 




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Article 5


General Limitations


 


Notwithstanding any provision of this Agreement to the contrary,
the Company shall not pay any benefit under this Agreement:


 


5.1   Excess Parachute Payment. To the
extent the benefit would be an excess parachute payment under Section 280G of the Code.


 


5.2 Termination for Cause. If the Company terminates
the Executive’s employment for:


 


5 .2.1    Gross negligence or gross neglect
of duties;


 


5 .2.2    Commission of a felony or of
a gross misdemeanor involving moral turpitude; or


 


5.2.3    Fraud, disloyalty, dishonesty or willful
violation of any law or significant Company policy committed in conjunction with the Executive’s employment and resulting
in an adverse effect on the Company.


 


5.3   Competition After Termination of Employment.
No benefits shall be payable, except for benefits paid due to a Change of Control, if the Executive, without the prior written
consent of the Company, engages in, becomes interested in, directly or indirectly, as a sole proprietor, as a partner in a partnership,
or as a substantial shareholder in a corporation, or becomes associated with, in the capacity of employee, director, officer, principal,
agent, trustee or in any other capacity whatsoever, any enterprise conducted in the trading area of the business of the Company
which enterprise is, or may deemed to be, competitive with any business carried on by the Company as of the date of termination
of the Executive's employment or his retirement.


 


5.4   Suicide or Misstatement. No benefits
shall be payable if the Executive commits suicide within two years after the date of this Agreement, or if the Executive had made
any material misstatement of fact on any application for life insurance purchased by the Company.


 




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Article 6


Claims and Review Procedures


 


6.1   Claims Procedure. The Company shall
notify the Executive’s beneficiary in writing, within ninety (90) days of his or her written application for benefits, of
his or her eligibility or noneligibility for benefits under the Agreement. If the Company determines that the beneficiary is not
eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference
to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary
for the claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement’s
claims review procedure and other appropriate information as to the steps to be taken if the beneficiary wished to have the claim
reviewed. If the Company determines that there are special circumstances requiring additional time to make a decision, the Company
shall notify the beneficiary of the special circumstances and the date by which a decision is expected to be made, and may extend
the time for up to an additional ninety-day period.


 


6.2    Review Procedure. If the beneficiary
is determined by the Company not to be eligible for benefits, or if the beneficiary believes that he or she is entitled to greater
or different benefits, the beneficiary shall have the opportunity to have such claim reviewed by the Company by filing a petition
for review with the Company within sixty (60) days after receipt of the notice issued by the Company. Said petition shall state
the specific reasons which the beneficiary believes entitle him or her to benefits or to greater or different benefits. Within
sixty (60) days after receipt by the Company of the petition, the Company shall afford the beneficiary (and counsel, if any) an
opportunity to present his or her position to the Company orally or in writing, and the beneficiary (or counsel) shall have the
right to review the pertinent documents. The Company shall notify the beneficiary of its decision in writing within the sixty-day
period, stating specifically the basis of its decision, written in a manner calculated to be understood by the beneficiary and
the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the sixty-day period
is not sufficient, the decision may be deferred for up to another sixty-day period at the election of the Company, but notice of
this deferral shall be given to the beneficiary.


 




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Article 7


Amendments and Termination


 


This Agreement may be amended or terminated only by a written
agreement signed by the Company and the Executive.


 


Article 8


Miscellaneous


 


8.1   Binding Effect. This Agreement shall
bind the Executive and the Company, and their beneficiaries, survivors, executors, successors, administrators and transferees.


 


8.2   No Guaranty of Employment. This
Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Company,
nor does it interfere with the Company’s right to discharge the Executive. It also does not require the Executive to remain
an employee nor interfere with the Executive’s right to terminate employment at any time.


 


8.3    Non-Transferability. Benefits under
this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.


 


8.4    Tax Withholding. The Company shall
withhold any taxes that are required to be withheld from the benefits provided under this Agreement.


 


8.5   Applicable Law. The Agreement and
all rights hereunder shall be governed by the laws of the State of Pennsylvania, except to the extent preempted by the laws of
the United States of America.


 


8.6    Unfunded Arrangement. The Executive
and beneficiary are general unsecured creditors of the Company for the payment of benefits under this Agreement. The benefits represent
the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s
life is a general asset of the Company to which the Executive and beneficiary have no preferred or secured claim.


 




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8.7   Recovery of Estate Taxes.   
If the Executive’s gross estate for federal estate tax purposes includes any amount determined by reference to and on
account of this Agreement, and if the beneficiary is other than the Executive’s estate, then the Executive’s estate
shall be entitled to recover from the beneficiary receiving such benefit under the terms of the Agreement, an amount by which the
total estate tax due by Executive’s estate, exceeds the total estate tax which would have been payable if the value of such
benefit had not been included in the Executive’s gross estate. If there is more than one person receiving such benefit, the
right of recovery shall be against each such person. In the event the beneficiary has a liability hereunder, the beneficiary may
petition the Company for a lump sum payment in an amount not to exceed the beneficiary’s liability hereunder.


 


8.8   Entire Agreement. This Agreement
constitutes the entire agreement between the Company and the Executive as to the subject matter hereof. No rights are granted to
the Executive by virtue of this Agreement other than those specifically set forth herein.


 


8.9   Administration. The Company shall
have powers which are necessary to administer this Agreement, including but not limited to:


 


8.9.1 Interpreting the provisions of the Agreement;


 


8.9.2 Establishing and revising the method of accounting for
the Agreement;


 


8.9.3 Maintaining a record of benefit payments; and


 


8.9.4 Establishing rules and prescribing any forms necessary
or desirable to administer the Agreement.


 


IN WITNESS WHEREOF, the Executive and a duly authorized Company
officer have signed this Agreement.


 


	EXECUTIVE:	 	COMPANY:
	 	 	The First National Bank of Berwick
	 	 	 	 
	/s/ David R. Saracino	 	By:	/s/ John L. Coates
	 	 	Title:	Secretary


 




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The First National Bank of Berwick


 


Schedule A


 


	Column A	 	 	Column B	 	 	Column C	 	 	Column D	 
	 	 	 	 	 	 	Annual Payment Due	 	 	Monthly	 
	Plan Year	 	 	Accrued Liability	 	 	at Retirement	 	 	Amounts	 
	 	 	 	 	 	 	 	 	 	 	 
	1	 	 	 	27,464	 	 	 	4,481	 	 	 	373	 
	2	 	 	 	57,061	 	 	 	8,639	 	 	 	720	 
	3	 	 	 	88,955	 	 	 	12,497	 	 	 	1,041	 
	4	 	 	 	123,325	 	 	 	16,078	 	 	 	1,340	 
	5	 	 	 	160,363	 	 	 	19,401	 	 	 	1,617	 
	6	 	 	 	200,277	 	 	 	22,484	 	 	 	1,874	 
	7	 	 	 	243,289	 	 	 	25,345	 	 	 	2,112	 
	8	 	 	 	289,641	 	 	 	28,000	 	 	 	2,333	 



 




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