May 13, 2005



Karen D. Walter
95 Mexico Road
Oley, PA 19547

Dear Karen:

I am pleased to offer you the full-time position of Executive Vice President of
Personal Banking at an annualized base salary of $129,000.00 pending
satisfactory reference and fingerprinting checks. Per our conversation, your
start date will be May 31, 2005.

Our current practice is to pay Executive Vice Presidents a discretionary bonus
of $5,000.00 -$10,000.00 at the end of each year depending upon the financial
performance of the bank. This bonus program could include cash and/or restricted
stock.

In addition to your salary, we will also pay you $15,000.00 net as a sign-on
bonus within 30 days of your start date. Should you leave the employment of
First National Bank of Chester County for any reason within 12 months of your
start date, you will be required to refund this payment.

Below is a chart summarizing employee benefits as a full-time employee and
associated eligibility dates:


                            EMPLOYEE BENEFIT SUMMARY

NOTE: This information is based on our current benefit package, which is subject
to change at any time.
<TABLE>
<CAPTION>

                                             ELIGIBILITY
                 BENEFIT                        DATE                         DESCRIPTION
                 -------                        ----                         -----------
<S>                                       <C>                    <C>

SAVINGS
-------
401(k) Match                               September 1, 2005      o  75% match on every dollar contributed into plan up
                                                                     to 5% of annual compensation



401(k) Fixed Contribution                  1st Quarter 2007       o  Discretionary Bank contribution made after the
                                                                     fourth quarter of each year to employee's 401(k)
                                                                     account
                                                                  o  3% of base salary on first $30,000; 6% on remainder
                                                                  o  Must have 12 months of service, 1000 hours worked
                                                                     and be an employee on 12/31 to be eligible

Medical Spending Account                   September 1, 2005      o  Employee may contribute $3,500 annual maximum

Dependent Care Spending Account            September 1, 2005      o  Employee may contribute $5,000 annual maximum
<PAGE>

INSURANCE
---------

Medical Insurance                          September 1, 2005      o  Choice of 3 Plans under Independence Blue Cross
                                                                     Keystone HMO, Keystone POS and Personal Choice
                                                                  o  Bank contributes same dollar amount for each tier of
                                                                     coverage for all three plans
Dental Insurance                           September 1, 2005      o  Delta Dental
                                                                  o  Bank pays 70% of premium

Group Term Life Insurance                  Immediately            o  3x base salary up to a maximum of $345,000
                                                                  o  Bank pays 100% of premium
Accidental Death and                       Immediately            o  3x base salary up to a maximum of $345,000
Dismemberment Insurance                                           o  Bank pays 100% of premium

Voluntary Life Insurance                   September 1, 2005      o  Elective benefit paid for by employee

Short Term Disability (STD)                August 31, 2005        o  Self-insured program paid for by Bank

Long Term Disability (LTD)                 Immediately            o  Bank pays 100% of premium



EDUCATION
---------

Professional Development Network           Immediately            o  100% of cost paid for by Bank
Tuition Reimbursement                      November 31, 2005      o  75-90% reimbursement (up to $4,500 annually for
                                                                     graduate courses)
                                                                  o  Reimbursement percent based on final grade
OTHER
-----

Bank Paid Holidays                         As each occurs         o  10 days (2005 Holiday Schedule attached.)

As an Executive Vice President, you will also be entitled to the additional
benefits listed below:

                                             ELIGIBILITY
                 BENEFIT                        DATE                         DESCRIPTION
                 -------                        ----                         -----------
OFFICER
-------

Vacation                                   August 31, 2005        o  Prorated for 2005 - 117.25 hours
                                                                     5 weeks (200 hours) annually

Auto Allowance                             Immediately            o  $700/month over 26 pays or $323.08 bi-weekly

Supplemental Benefit Retirement Plan       Immediately            o  Non-qualified Plan
(SBRP)                                                            o  Bank contributes 3% of annual salary plus
                                                                     interest
                                                                  o  Officer may also defer part of salary and/or
                                                                     bonus

Cell Phone                                 Immediately            o  Bank pays for phone and minutes

<FN>

*First  National Bank of Chester  County policy states there is no paid time off
in the first 90 days of employment.
</FN>
</TABLE>

As an employee of First National Bank of Chester County, you are entitled to one
free bank account.  If you do not  currently  bank with us, you will be given an
opportunity  to open an account by the end of your  first day of  employment  so
that you may take advantage of our direct deposit payroll program.
<PAGE>

On your first day,  please  report at 8:00 a.m.  to the  Administrative  Center,
located at 887 South Matlack Street,  West Chester,  PA. Jackie Trotta will meet
with you to complete the required forms and documents for your employment.  When
you report to the Administrative  Center,  please bring with you either one form
of identification  from List A, or two forms of identification,  one from List B
and one from List C, as required by the Immigration Act. Please see the attached
I-9 form for more information.

If the  arrangements  outlined above are  satisfactory  to you, please sign both
copies of the letter, and return one original to me.

John  Featherman,  Kevin Quinn,  and the  executive  team of EVPs very much look
forward to your joining First National.  If you have any questions,  please feel
free to contact me at (484)-881-4404.

Sincerely,


/s/ Deborah R. Pierce
-----------------------
Deborah R. Pierce
Executive Vice President Human Resources

cc:      John A. Featherman III, CEO

         Kevin C. Quinn, President




Your  employment is for no set term and may be  terminated at any time,  for any
reason by either you or First National Bank. This letter, along with your signed
Application  for  Employment,  and Change of  Control/Non-compete  Nondisclosure
Agreement constitutes our entire agreement regarding the terms and conditions of
employment.  There are no other agreements,  oral or written, between us. If you
agree to the above terms and conditions,  please sign this letter and return it.
The attached copy may be retained for your files.

Accepted:  /s/ Karen D. Walter                              Date:
         -----------------------------                            --------------