Unassociated Document


    EXHIBIT
      10.3

     

     

    RELEASE,
      CONSULTING AND NONCOMPETITION
      AGREEMENT

    


    This
      Release, Consulting and
      Noncompetition Agreement (this “Agreement”) is being entered into as of
      September 6, 2007, by and between National Penn Bancshares, Inc., a Pennsylvania
      corporation (“National Penn”), National Penn Bank, a national banking
      association and a wholly-owned subsidiary of National Penn (“NPBank”), KNBT
      Bancorp, Inc., a Pennsylvania corporation (“KNBT”), Keystone Nazareth Bank &
Trust Company, a wholly-owned subsidiary of KNBT and a Pennsylvania-chartered
      savings bank (the “Bank”), and Eugene T. Sobol (the “Consultant”).

    


    RECITALS:

    


    WHEREAS,
      the
      Consultant is currently the Senior Executive Vice President, Chief Financial
      Officer and Treasurer of KNBT and the Bank;

    


    WHEREAS,
      pursuant to
      an Agreement and Plan of Merger between National Penn and KNBT, dated as of
      September 6, 2007 (the “Merger Agreement”), KNBT will merge with and into
      National Penn, with National Penn being the surviving entity (the “Merger”), and
      thereafter the Bank will merge with and into NPBank with NPBank being the
      surviving entity;

    


    WHEREAS,
      the
      Consultant currently has an amended and restated employment agreement with
      KNBT
      and the Bank dated as of December 28, 2006 (the “Employment Agreement”), which
      entitles the Consultant to severance payments following a change in control
      of
      KNBT;

    


    WHEREAS,
      the parties
      hereto desire to terminate the Employment Agreement and the Consultant’s
      employment as of the Effective Time, as such term is defined in the Merger
      Agreement;

    


    WHEREAS,
      the parties
      hereto recognize and acknowledge the interest of National Penn and NPBank in
      protecting the business and goodwill associated with KNBT and the Bank following
      the Merger by having the Consultant enter into this Agreement; and

    


    WHEREAS,
      National Penn and NPBank desire to have the Consultant provide, and the
      Consultant is willing to provide National Penn and NPBank with, the Consulting
      Services (defined below) on the terms and conditions set forth
      herein.

    


    NOW
      THEREFORE, in
      consideration of the mutual covenants and agreements set forth herein and for
      other good and valuable consideration, the receipt and sufficiency of which
      is
      hereby acknowledged, the parties hereto, intending to be legally bound, hereby
      agree as follows:

    


    1.           Defined
      Terms.

    


    Any
      capitalized terms not defined in
      this Agreement shall have as their meanings the definitions contained in the
      Merger Agreement.

    


    2.           Consultancy.

    


    (a)           During
      the period beginning at the Effective Time and ending on the eighteen-month
      anniversary of the Effective Time (or such earlier date of termination pursuant
      to Section 2(d) below) (such period, the “Consulting Period”), the Consultant
      undertakes to provide his personal advice and counsel to National Penn and
      its
      subsidiaries and affiliates (including NPBank) in connection with the business
      of National Penn and its subsidiaries, including, but not limited
      to:

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
 

    (i)           consulting
      with National Penn regarding all financial and accounting functions related
      to
      National Penn and its subsidiaries, including, without limitation, tax
      transition and preparation, SEC reporting, Sarbanes-Oxley Act compliance and
      assisting with the accounting records and financial statements of National
      Penn
      and its subsidiaries;

    


    (ii)           consulting
      with National Penn regarding the operations and customer relationships of
      National Penn and its subsidiaries;

    


    (iii)           assisting
      National Penn with implementing its integration and transition plan following
      the Merger and the Bank Merger;

    


    (iv)           providing
      historical background and information regarding the October 2003 mutual-to-stock
      conversion of Keystone Savings Bank into the Bank; and

    


    (v)           providing
      introductions to customers and providing personal services similar to those
      the
      Consultant is currently providing KNBT and the Bank,

    


    (collectively
      the “Consulting Services”), subject to the terms and conditions which are set
      forth herein.  The Consultant shall provide such Consulting Services
      as may be requested from time to time by either the President and Chief
      Executive Officer or Senior Executive Vice President and Chief Operating
      Officer of National Penn.  During the Consulting Period, the
      Consultant shall be available to devote up to 30 hours per week of his business
      time, attention, skills and efforts (other than during holidays, vacations
      and
      periods of illness) to the business and affairs of National Penn and its
      subsidiaries and affiliates and shall use his reasonable best efforts to promote
      the interests of National Penn and its subsidiaries and
      affiliates.  Such Consulting Services may be provided in person,
      telephonically, electronically or by correspondence as reasonably determined
      by
      National Penn.  The Consultant shall be available for meetings at the
      principal executive offices of National Penn and NPBank at such times as
      National Penn shall reasonably require.

    


    (b)           During
      the Consulting Period, National Penn or NPBank shall reimburse the Consultant
      or
      otherwise provide for or pay for all reasonable expenses incurred by the
      Consultant at the request of National Penn or NPBank, subject to such
      documentation and prior approval as may be required by National Penn or
      NPBank.  In addition, during the Consulting Period, NPBank shall
      provide the Consultant with an automobile allowance of $900 per month, payable
      monthly.  For the avoidance of doubt, except for (i) the automobile
      allowance payable to the Consultant pursuant to the immediately preceding
      sentence and (ii) tolls and parking expenses incurred in the ordinary course
      of
      business, the Consultant shall not be entitled to reimbursement under this
      Section 2(b) for any expenses incurred for automobile travel, including, without
      limitation, mileage expense.

    


    (c)           During
      the Consulting Period, the Consultant shall be treated as an independent
      contractor and shall not be deemed to be an employee of National Penn or any
      subsidiary or affiliate of National Penn.

    


     
      (d)           The
      Consulting Period may terminate before the eighteen-month anniversary of the
      Effective Time as follows:

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
 

    (i)           From
      and after the Effective Time, either National Penn and NPBank or the Consultant
      may terminate this Agreement for Cause (as hereinafter defined), in which event
      the Consulting Period will end as of the date of termination.  “Cause”
shall mean (x) where the Consultant is the terminating party, National Penn
      and
      NPBank shall have 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 Consultant gives written notice to National Penn of such material
      breach; or (y) where National Penn and NPBank are the terminating parties,
      the
      Consultant shall have (A) willfully failed to perform the Consulting
      Services, other than any failure resulting from his incapacity due to physical
      or mental injury or illness; (B) committed an act involving moral turpitude
      in
      connection with the Consulting Services; (C) engaged in willful misconduct;
      (D) willfully violated, in any material respect, any law, rule or
      regulation (other than traffic violations or similar offenses), written
      agreement or final cease-and-desist order with respect to his performance of
      the
      Consulting Services; or (E) materially breached the terms of this Agreement
      and failed to cure such material breach during a 15-day period following the
      date on which National Penn gives written notice to the Consultant of such
      material breach.

    


    (ii)           From
      and after the twelve-month anniversary of the Effective Time, either National
      Penn and NPBank or the Consultant may terminate the Consulting Period by
      providing sixty (60) days written notice to other party.

    


    (iii)           The
      Consulting Period shall automatically terminate by reason of the death of the
      Consultant and no notice of termination shall be required.

    


    (e)           The
      obligations of National Penn and NPBank under this Agreement are subject to
      and
      contingent upon the Consultant continuing to be employed by KNBT and the Bank
      from the date hereof until the Effective Time.

    


    
      	
               

            	
              3.

            	
              Non-Disclosure
                of Confidential
                Information.

            


    

    


    Except
      in
      the course of performing the Consulting Services hereunder, and in the pursuit
      of the business of National Penn or any of its subsidiaries or affiliates,
      the
      Consultant shall not, except as required by law, at any time during or following
      the Consulting Period, disclose or use any confidential information or
      proprietary data of National Penn or any of its subsidiaries or affiliates
      or
      predecessors, unless such confidential information or proprietary data become
      publicly known through no fault of the Consultant.  Without limiting
      the generality of the foregoing, the Consultant agrees that all information
      concerning the identity of the customers of National Penn and its subsidiaries
      and affiliates and the relations of such entities with their customers is
      confidential information.  This Section 3 shall survive the
      termination or expiration of the Consulting Period.

    


    4.           Non-Competition
      Provisions.

    


    The
      Consultant agrees that during the
      eighteen-month period immediately following the Effective Time, the Consultant
      will not (i) without the prior written consent of National Penn (which consent
      may be given or withheld, in National Penn’s sole discretion), directly or
      indirectly, engage in, become interested in, or become associated with, in
      the
      capacity of employee, consultant, director, officer, owner, principal, agent,
      trustee or in any other capacity whatsoever, any proprietorship, partnership,
      corporation, enterprise or entity located in any county in which National Penn,
      NPBank or any of their subsidiaries maintains an office (collectively, the
      “Counties” and individually a “County”), which proprietorship, partnership,
      corporation, enterprise or other entity is, or may be deemed to be by NPBank,
      competitive with any business carried on by National Penn, NPBank or any of
      their subsidiaries, including but not limited to entities which lend money
      and
      take deposits (in each case, a “Competing Business”), provided, however, that
      this provision shall not prohibit the Consultant from owning bonds, non-voting
      preferred stock or up to five percent (5%) of the outstanding common stock
      of
      any Competing Business if such common stock is publicly traded, (ii) solicit
      or
      induce, or cause others to solicit or induce, any employee of National Penn
      or
      any of its subsidiaries to leave the employment of such entities, or (iii)
      solicit (whether by mail, telephone, personal meeting or any other means,
      excluding general solicitations of the public that are not based in whole or
      in
      part on any list of customers of National Penn or any of its subsidiaries)
      any
      customer of National Penn or any of its subsidiaries to transact business with
      any other entity, whether or not a Competing Business, or to reduce or refrain
      from doing any business with National Penn or its subsidiaries, or interfere
      with or damage (or attempt to interfere with or damage) any relationship between
      National Penn or its subsidiaries and any such customers.  This
      Section 4 shall survive the termination or expiration of the Consulting Period
      in accordance with its terms.

     

     

    
      
        
        

      

      
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    5.           Compensation.

    


    (a)           Immediately
      prior to the Effective Time, and in consideration for the termination of the
      Employment Agreement (other than Sections 12, 15 and 16 thereof, which shall
      remain in effect) and the Consultant’s employment thereunder as of the Effective
      Time, KNBT or the Bank shall pay to the Consultant a lump sum cash amount equal
      to three times the Consultant’s “base amount” (as defined in Section 280G(b)(3)
      of the Code), minus the sum of (i) the parachute amounts associated with the
      accelerated vesting of the Consultant’s stock options and restricted stock
      awards with respect to the common stock of KNBT, (ii) $1.00 and (iii) applicable
      tax withholding.

    


    (b)           In
      consideration of the obligations and commitments of the Consultant under this
      Agreement, including Sections 2, 3 and 4 hereof, National Penn or NPBank shall
      pay to the Consultant a lump sum cash amount of $100,000 promptly after the
      Effective Time, plus an amount equal to $16,000 per month on the last business
      day of each month during the Consulting Period.

    


    (c)           During
      the Consulting Period, National Penn or NPBank shall provide medical and dental
      coverage to the Consultant under the policies offered by National Penn and
      NPBank to their employees, on the same terms and conditions as if the Consultant
      was an employee of NPBank, with the Consultant responsible for paying the
      employee share of any premiums, copayments or deductibles.  For
      purposes of determining eligibility under such plans, the Consultant shall
      be
      credited with his service as a Bank employee and shall not be subject to any
      pre-existing condition limitation for conditions covered under such plans.
      In
      addition, each such plan which provides health insurance benefits shall honor
      any deductible and out-of-pocket expenses incurred by the Consultant under
      any
      comparable Bank plan for the plan year in which the Effective Time
      occurs.  The Consultant shall not be entitled to participate in any
      other employee benefit plans, programs or arrangements of National Penn or
      NPBank.

    


    6.           Successors
      and Assigns.

    


    (a)           During
      the first twelve months of the Consulting Period, each of National Penn and
      NPBank will require any successor or assign (whether direct or indirect, by
      purchase, merger, consolidation or otherwise) to all or substantially all of
      its
      business and/or assets, by agreement in form and substance satisfactory to
      the
      Consultant, expressly, absolutely and unconditionally to assume and agree to
      perform this Agreement in the same manner and to the same extent that National
      Penn or NPBank would be required to perform it if no such succession or
      assignment had taken place.  Any failure of National Penn or NPBank to
      obtain such agreement prior to the effectiveness of any such succession or
      assignment during this twelve-month period shall be a material breach of this
      Agreement.

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
 

    (b)           This
      Agreement and all rights of the Consultant shall inure to the benefit of and
      be
      enforceable by the Consultant’s personal or legal representatives, estate,
      executors, administrators, heirs and beneficiaries.  In the event of
      the Consultant’s death, any amounts accrued and unpaid through the date of death
      shall be paid to the Consultant’s estate, heirs and
      representatives.  Except as provided in this Section 6, no party may
      assign this Agreement or any rights, interests, or obligations hereunder without
      the prior written approval of the other party; provided,
however, that after the twelve-month anniversary of the
      Effective Time, National Penn and NPBank may assign its rights, interest and
      obligations hereunder to any purchaser or other transferee (whether direct
      or
      indirect, by purchase, merger, consolidation or otherwise) of all or
      substantially all of its business and/or assets.  Subject to the
      preceding sentence, this Agreement shall be binding upon and shall inure to
      the
      benefit of the parties hereto and their respective successors and permitted
      assigns.

    


    7.           Enforcement.

    


    (a)           This
      Agreement shall be construed, enforced and interpreted in accordance with and
      governed by the laws of the Commonwealth of Pennsylvania, without reference
      to
      its principles of conflict of laws, except to the extent that federal law shall
      be deemed to preempt such state laws.

    


    (b)           It
      is the intention of the parties hereto that the provisions of this Agreement
      shall be enforced to the fullest extent permissible under all applicable laws
      and public policies, but that the unenforceability or the modification to
      conform with such laws or public policies of any provision hereof shall not
      render unenforceable or impair the remainder of the Agreement.  The
      covenants in Section 4 of this Agreement with respect to the Counties shall
      be
      deemed to be separate covenants with respect to each County, and should any
      court of competent jurisdiction conclude or find that this Agreement or any
      portion is not enforceable with respect to any of the Counties, such conclusion
      or finding shall in no way render invalid or unenforceable the covenants herein
      with respect to any other County.  Accordingly, if any provision shall
      be determined to be invalid or unenforceable either in whole or in part, this
      Agreement shall be deemed amended to delete or modify as necessary the invalid
      or unenforceable provisions to alter the balance of this Agreement in order
      to
      render the same valid and enforceable.

    


    (c)           The
      Consultant acknowledges that National Penn and NPBank would not have entered
      into the Merger Agreement or intend to consummate the Merger unless the
      Consultant had, among other things, entered into this Agreement.  Any
      breach of Sections 3 or 4 of this Agreement will result in irreparable damage
      to
      National Penn and NPBank for which National Penn and NPBank will not have an
      adequate remedy at law.  In addition to any other remedies and damages
      available to National Penn and NPBank, the Consultant further acknowledges
      that
      National Penn and NPBank shall be entitled to seek injunctive relief hereunder
      to enjoin any breach of Sections 3 or 4 of this Agreement, and the parties
      hereby consent to any injunction issued in favor of National Penn and NPBank
      by
      any court of competent jurisdiction, without prejudice to any other right or
      remedy to which National Penn and NPBank may be entitled.  The
      Consultant represents and acknowledges that, in light of his experience and
      capabilities, the Consultant can obtain employment with other than a Competing
      Business or in a business engaged in other lines and/or of a different nature
      than those engaged in by National Penn or its subsidiaries or affiliates, and
      that the enforcement of a remedy by way of injunction will not prevent the
      Consultant from earning a livelihood.  In the event of a breach of
      this Agreement by the Consultant, the Consultant acknowledges that in addition
      to or in lieu of National Penn or NPBank seeking injunctive relief, National
      Penn or NPBank may also seek to recoup any or all amounts paid by National
      Penn
      or NPBank to the Consultant pursuant to Section 5(b) hereof.  Each of
      the remedies available to National Penn and NPBank in the event of a breach
      by
      the Consultant shall be cumulative and not mutually exclusive.

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    
 

    8.           Amendment.

    


    This
      Agreement may be amended or
      modified at any time by a written instrument executed by the parties prior
      to
      the Effective Time and thereafter by National Penn, NPBank and the
      Consultant.

    


     

    9.           Withholding.

     

    


    National
      Penn and NPBank shall be
      entitled to withhold from amounts to be paid to the Consultant hereunder any
      federal, state or local withholding or other taxes, or charge which it is from
      time to time required to withhold.  National Penn and NPBank shall be
      entitled to rely on an opinion of counsel if any question as to the amount
      or
      requirement of any such withholding shall arise.

    


    10.           Notice.

    


    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:

     

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
 

    If
      to the
      Consultant:

    


    Gene
      T.
      Sobol

    At
      the
      address last appearing

    on
      the
      records of KNBT or National Penn

    


    If
      to
      KNBT and the Bank:

    


    KNBT
      Bancorp, Inc.

    Keystone
      Nazareth Bank & Trust Company

    Route
      512
      and Highland Avenue

    Bethlehem,
      Pennsylvania  18017

    


    Attention:
      Chairman of the Compensation Committee of the Board

    


    If
      to
      National Penn and NPBank:

    


    National
      Penn Bancshares,
      Inc.

    National
      Penn Bank

    Philadelphia
      and Reading Avenues

    P.O.
      Box
      547

    Boyertown,
      Pennsylvania  19512-0547

    


    Attention:
      President and Chief Executive Officer

    


    11.           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.

    


    
      	
               

            	
              12.

            	
              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.

    


    
      	
               

            	
              13.

            	
              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.

    


    
      	
               

            	
              14.

            	
              Entire
                Agreement.

            


    

    


    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
      Employment Agreement, except that Sections 12, 15 and 16 of the Employment
      Agreement shall remain in effect.

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
 

    15.           Effectiveness.

    


    Notwithstanding
      anything to the
      contrary contained in this Agreement, the effectiveness of this Agreement shall
      be subject to consummation of the Merger in accordance with the terms of the
      Merger Agreement, as the same may be amended by the parties thereto in
      accordance with its terms.  In the event the Merger Agreement is
      terminated for any reason, this Agreement shall be deemed null and
      void.

    


    


    [Signature
      Page Follows]

     

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF, each of National
      Penn, NPBank, KNBT and the Bank has caused this Agreement to be executed by
      its
      duly authorized officer, and the Consultant has signed this Agreement, all
      as of
      the date first written above.

    


    


    
      	
              WITNESS:

            	
              CONSULTANT:

            
	 	 
	 	 
	
              /s/
                Michele A. Linsky

            	
              /s/
                Eugene T. Sobol

            
	
              Name:
                Michele A. Linsky

            	
              Eugene
                T. Sobol

            
	
              Title:
                Corporate Secretary

            	 
	 	 
	 	 
	
              ATTEST:

            	
              NATIONAL
                PENN BANCSHARES, INC.

            
	 	 
	 	 
	
              /s/
                Sandra L. Spayd

            	
              By:
                /s/ Glenn E. Moyer

            
	
              Name:
                Sandra L. Spayd

            	
              Name:
                Glenn E. Moyer

            
	
              Title:
                Corporate Secretary

            	
              Title:
                President and CEO

            
	 	 
	 	 
	
              ATTEST:

            	
              NATIONAL
                PENN BANK

            
	 	 
	 	 
	
              /s/
                Sandra L. Spayd

            	
              By:
                /s/ Glenn E. Moyer

            
	
              Name:
                Sandra L. Spayd

            	
              Name:
                Glenn E. Moyer

            
	
              Title:
                Corporate Secretary

            	
              Title:
                President and CEO

            
	 	 
	 	 
	
              ATTEST:

            	
              KNBT
                BANCORP, INC.

            
	 	 
	 	 
	
              /s/
                Michele A. Linsky

            	
              By:
                /s/ Jeffrey P. Feather

            
	
              Name:
                Michele A. Linsky

            	
              Name:
                Jeffrey P. Feather

            
	
              Title:
                Corporate Secretary

            	
              Title:
                Chairman of the Board

            
	 	 
	 	 
	 	 
	
              ATTEST:

            	
              KEYSTONE
                NAZARETH BANK

            
	 	
                    &
                TRUST COMPANY

            
	 	 
	
              /s/
                Michele A. Linsky

            	
              By:
                /s/ Jeffrey P. Feather

            
	
              Name:
                Michele A. Linsky

            	
              Name:
                Jeffrey P. Feather

            
	
              Title:  Corporate
                Secretary

            	
              Title:
                Chairman of the Board

            


    

     

     9