exhibi10-3.htm


    EXHBIT 10.3

    
 

    AMENDED
      AND RESTATED

    EMPLOYMENT
      AGREEMENT

    


    This
      AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered
      into as of November 15, 2007 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 Sandra L.
      Bodnyk  (the “Executive”).

    


    W
      I T N E
      S S E T H :

    


    WHEREAS,
      the Executive is currently employed as the Senior Executive Vice President
      and
      Chief Risk Officer of the Company and the Bank pursuant to an amended and
      restated employment agreement between the Company, the Bank and the Executive
      effective December 28, 2006 (the “Prior Agreement”);

    


    WHEREAS,
      the Company and the Bank
      desire to amend and restate the Prior Agreement in order to make changes to
      comply with Section 409A of the Internal Revenue Code of 1986, as amended
      (the “Code”);

    


    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, 2008 plus such extensions, if any, as are provided pursuant to
      Section 2(b) hereof (the "Employment Period").

    



    
      
        
        

      

      
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    (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 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 64.

    


    
      	
              SECTION
                3.

            	
              DUTIES.

            


    

    


    Throughout
      the Employment Period, the Executive shall serve as the Senior Executive Vice
      President and the Chief Risk Officer of each 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 her 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 her best efforts to advance the interests
      of the Employer.

    


    
      	
              SECTION
                4.

            	
              CASH
                AND OTHER COMPENSATION.

            


    

    


    (a)
      In
      consideration for the services to be rendered by the Executive hereunder, the
      Employer shall pay to her a salary of two hundred six thousand dollars
      ($206,000) 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.


    
      
        
        

      

      
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    (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.

    


    
      	
              SECTION
                5.

            	
              EMPLOYEE
                BENEFIT PLANS AND PROGRAMS.

            


    

    


    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.  The level of
      participation in any restricted stock plan shall be at a level which is deemed
      appropriate by 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.

    


    
      	
              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 her harmless from any costs, liabilities, losses
      and exposures that may be incurred by the Executive in her 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 her 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 her 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 her principal place of employment with a private office,
      secretarial services and other support services and facilities suitable to
      her
      position with the Employer and necessary or appropriate in connection with
      the
      performance of her assigned duties under this Agreement.  The Employer
      shall reimburse the Executive for her 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 her 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.  Such reimbursement
      shall be paid promptly by the Employer and in any event no later than March
      15
      of the year immediately following the year in which such expenses were
      incurred.

    


    
      	
              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)
      her
      employment with the Employer terminates during the Employment Period as a result
      of the Executive's termination for Good Reason (as defined in Section 9(a)(i)(A)
      and (B) of this Agreement), which shall mean a termination based on the
      following:


    
      
        
        

      

      
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    (A)
      any
      material breach of this Agreement by either Employer,
      including, without limitation any of the following: (1) a
      material diminution in the Executive’s base compensation, (2) a material
      diminution in the Executive’s authority, duties or responsibilities as
      prescribed in Section 3, or (3) a material diminution in the authority, duties
      or responsibilities of the officer to whom the Executive is required to report,
      or

    


    (B)
      any
      material change in the geographic location at which the Executive must perform
      her services under this Agreement;

    


    provided,
      however, that prior to any termination of employment for Good Reason, the
      Executive must first provide written notice to each Employer within ninety
      (90)
      days of the initial existence of the condition, describing the existence of
      such
      condition, and the Employer shall thereafter have the right to remedy the
      condition within thirty (30) days of the date the Employer received the written
      notice from the Executive.  If the Employer remedies the condition
      within such thirty (30) day cure period, then no Good Reason shall be deemed
      to
      exist with respect to such condition.  If the Employer does not remedy
      the condition within such thirty (30) day cure period, then the Executive may
      deliver a notice of termination for Good Reason at any time within sixty (60)
      days following the expiration of such cure period; or

    


    (ii)
      the
      Executive'’s
      employment with the Employer
      is terminated by the Employer during the Employment Period for any reason
      other than for “cause,”
      death or “Disability,” as
      provided in Section 10(a)

    


    (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 her subsequent death, to her
      estate):

    


    (i)
      her
      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 her
      employment, with 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 she 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 her employment;

    



    
      
        
        

      

      
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    (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 her employment terminates and ending on the
      earlier of (A) the last day of the Employment Period (the “Remaining Employment
      Period”) or (B) 18 months from the date of termination (with such lesser period
      being the “Coverage Period”), coverage equivalent to the coverage to which she
      would have been entitled under such plans if she had continued to be employed
      during such period; provided that any insurance premiums payable by the Employer
      or any successors pursuant to this Section 9(b)(iii) shall be payable at such
      times and in such amounts as if the Executive was still an employee of the
      Employer, subject to any increases in such amounts imposed by the insurance
      company or COBRA, and the amount of insurance premiums required to be paid
      by
      the Employer in any taxable year shall not affect the amount of insurance
      premiums required to be paid by the Employer in any other taxable year; and
      provided further that if the participation of the Executive or other covered
      dependents in any group insurance plan is barred, the Employer shall either
      arrange to provide such persons with insurance benefits substantially similar
      to
      those which the Executive was entitled to receive under such group insurance
      plan or, if such coverage cannot be obtained, pay a lump sum cash equivalency
      amount within thirty (30) days following the Date of Termination based on the
      annualized rate of premiums being paid by the Employer as of the date of
      termination of employment.

    


    


    (iv)
      within 30 days following the date on which her 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 she had continued to be employed during the
      Coverage Period at the highest annual rate of Base Salary achieved during the
      Employment Period, with 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
      with 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 her 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 she 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
      she
      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 she is actually entitled under such
      defined benefit pension plans as of the date on which her employment
      terminates;, with 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");


    
      
        
        

      

      
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    (vi)           within
      30 days following the date on which her employment terminates, a lump sum
      payment in an amount equal to the present value of the additional employer
      contributions to which she 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 she 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, with 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, with the
      Executive to reimburse the Employer for any such payments previously made within
      30 days of the Executive’s receipt of a request for reimbursement from the
      Employer;

    


    (vii)           within
      30 days following the  date on which her 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 she 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;

    


    (viii)                      for
      the first year following the date on which her 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, with such expenses to
      be reimbursed promptly by the Employer and in any event no later than March
      15
      of the year immediately following the year in which such expenses were
      incurred; provided, however, that the amounts payable by the Employer
      pursuant to this subsection (viii) shall not exceed $25,000; and

    


    (ix)           within
      30 days following the date on
      which her employment terminates, 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:


    
      
        
        

      

      
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    (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 her 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 she 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 64 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 her subsequent death, to her
      estate):

    


    (i)  her
      earned but unpaid Base Salary  as of the date of the termination of
      her employment, with 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 she 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 her 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 her Base Salary as in effect immediately prior
      to
      her termination; provided that if the Executive is a “Specified Employee” (as
      defined in Section 409A of the Code and the regulations thereunder) as of the
      date of termination of her employment, then the monthly installments shall
      not
      commence until the first business day of the month following the lapse of six
      months from the date of termination of employment (the “Delayed Payment Date”),
      with the monthly installments that would have been paid prior to the Delayed
      Payment Date absent the six-month delay required by Section 409A of the Code
      to
      be aggregated and included in the payment made on the Delayed Payment Date
      and
      to be counted toward the total of eighteen (18) monthly
      installments;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 her employment terminates; provided that any insurance
      premiums payable by the Employer or any successors pursuant to this Section
      9(c)(iv) shall be payable at such times and in such amounts as if the Executive
      was still an employee of the Employer, subject to any increases in such amounts
      imposed by the insurance company or COBRA, and the amount of insurance premiums
      required to be paid by the Employer in any taxable year shall not affect the
      amount of insurance premiums required to be paid by the Employer in any other
      taxable year; and
      provided further that if the participation of the Executive or other covered
      dependents in any group insurance plan is barred, the Employer shall either
      arrange to provide such persons with insurance benefits substantially similar
      to
      those which the Executive was entitled to receive under such group insurance
      plan or, if such coverage cannot be obtained, pay a lump sum cash equivalency
      amount within thirty (30) days following the Date of Termination based on the
      annualized rate of premiums being paid by the Employer as of the date of
      termination of employment.


    
      
        
        

      

      
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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 her assigned
      duties under this Agreement, other than any failure resulting from the
      Executive’s incapacity due to physical or mental impairment; (B) committed an
      act involving moral turpitude in the course of her employment with the Employer
      and its subsidiaries; (C) engaged in willful misconduct; (D) breached her
      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
      her
      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 Good Reason as 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 her earned
      but unpaid Base Salary as of the date of the termination of her employment,
      (B)
      the payment to the Executive of the benefits to which she 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 she
      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.


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    (c)
      “Disability” shall be deemed to have occurred if the Executive: (i) is unable to
      engage in any substantial gainful activity by reason of any medically
      determinable physical or mental impairment which can be expected to result
      in
      death or can be expected to last for a continuous period of not less than 12
      months, or (ii) is, by reason of any medically determinable physical or mental
      impairment which can be expected to result in death or can be expected to last
      for a continuous period of not less than 12 months, receiving income replacement
      benefits for a period of not less than three months under an accident and health
      plan covering employees of the Employer.

    


    (d)
      During any period in which the Executive is absent due to physical or mental
      impairment, the Employer may, without breaching this Agreement, appoint another
      person or persons to act as Senior Executive Vice President and interim Chief
      Risk Officer pending the Executive’s return to her duties on a full-time basis
      hereunder or her 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 her full Base Salary,
      bonuses and other benefits to which she 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 it intends to
      terminate the Executive’s employment under this Agreement, with the termination
      date to be on or after the date that the Executive is deemed to have a
      Disability.  At the time her 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 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 in 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 30% 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 in Control;


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    (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 in 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 in 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, she shall receive a lump sum payment within 25 days
      after the effective time of such Change in Control in an amount equal to 1.0
      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, she shall receive a lump sum payment within 25 days after
      the
      effective time of such Change in Control in an amount equal to 2.0 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),
      then 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 1.0 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), then in addition to the payment made at or within 25 days
      of
      the Change in Control, she shall receive a lump sum payment upon termination
      from the Employer or its predecessor in an amount equal to 1.0 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 she receives payments pursuant to this Section
      11(c) unless her employment is terminated more than two years after a Change
      in
      Control.


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    


    
      	
              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 lump
      sum
      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, and in no event more than
      thirty (30) days 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.


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    


    (c)
      In
      each calendar year that the Executive receives payments of benefits that
      constitute a parachute payment, the Executive shall report on her 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, with
      such indemnification to be paid by the Company to the Executive as soon as
      practicable and in any event no later than March 15 of the year immediately
      following the year in which the amount subject to indemnification was
      determined.  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 eighteen months following the date
      of
      her termination of employment with the Employer (or, if less, for the Remaining
      Employment Period), she 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.


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    


    
      	
              SECTION
                15.

            	
              CONFIDENTIALITY.

            


    

    


    Unless
      she 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
      herself, 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 her 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 her 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 eighteen months
      following her termination of employment with the Employer for any reason, she
      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 her or her 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 her 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.


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    


    
      	
              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 without
      an assumption agreement 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:

    


    Sandra
      L.
      Bodnyk

    At
      the
      address last appearing

    on
      the
      personnel records of

    the
      Executive


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    


    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 her in
      connection with or arising out of any action, suit or proceeding in which she
      may be involved, as a result of her 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 (and in any event no later
      than March 15 of the year immediately following the year in which 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 her
      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.


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    


    
      	
              SECTION
                21.

            	
              PROVISIONS
                APPLICABLE FOLLOWING THE ACQUISITION BY NATIONAL
                PENN.

            


    

    


    The
      Company, the Bank, the Executive, National Penn Bancshares, Inc. (“NPB”) and
      National Penn Bank (“NPBank”) previously entered into a First Amendment dated
      September 6, 2007 (the “First Amendment”) to the Prior
      Agreement.  This amendment and restatement of the Prior Agreement does
      not alter or modify the First Amendment in any manner, except as follows: (a)
      the definition of “Employment Agreement” in paragraph No. 2 under Background in
      the First Amendment shall refer to this Amended and Restated Employment
      Agreement dated November 15, 2007, and (b) Section 5 of the First Amendment
      is
      deleted in its entirety.   All other provisions of the First
      Amendment shall continue in full force and effect.

    


    
      	
              SECTION
                22.

            	
              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.

    


    
      	
              SECTION
                23.

            	
              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
                24.

            	
              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
                25.

            	
              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
                26.

            	
              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.

    



    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    


    
      	
              SECTION
                27.

            	
              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 Prior 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
                28.

            	
              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.

    


    
      	
               

            	
              SECTION
                29.  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.

    



    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    


    (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.

    


    



    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the Employer has caused this Agreement to be executed and
      the
      Executive has hereunto set her 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.

    


    


    


    
      	 	 	 	 	 
	 	 	 	 	
              Sandra
                L. Bodnyk, 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

            


    

    



    
      
        
        

      

      
        20