Document:

exhibit10-10.htm

    EXHIBIT 10.10

    
 

    KNBT
      BANCORP, INC.

    AMENDED
      AND RESTATED 

    2004
      STOCK OPTION PLAN

    

    

    ARTICLE
      I

    ESTABLISHMENT
      OF THE PLAN

    

               KNBT
      Bancorp, Inc. (the “Corporation”) hereby amends and restates its 2004 Stock
      Option Plan (as amended and restated, the “Plan”) upon the terms and conditions
      hereinafter stated., with the amendment and restatement
      effective as of November 15, 2007.

    

    ARTICLE
      II

    PURPOSE
      OF THE PLAN

    

               The
      purpose of this Plan is to improve the growth and profitability of the
      Corporation and its Subsidiary Companies by providing Employees and Non-Employee
      Directors with a proprietary interest in the Corporation as an incentive to
      contribute to the success of the Corporation and its Subsidiary Companies,
      and
      rewarding Employees and Non-Employee Directors for outstanding
      performance.  All Incentive Stock Options issued under this Plan are
      intended to comply with the requirements of Section 422 of the
      Code, and the regulations thereunder, and all provisions
      hereunder shall be read, interpreted and applied with that purpose in
      mind.  Each recipient of an Option hereunder is advised to consult
      with his or her personal tax advisor with respect to the tax consequences under
      federal, state, local and other tax laws of the receipt and/or exercise of
      an
      Option hereunder.

    

    ARTICLE
      III

    DEFINITIONS

    

               The
      following words and phrases when used in this Plan with an initial capital
      letter, unless the context clearly indicates otherwise, shall have the meanings
      set forth below.  Wherever appropriate, the masculine pronouns shall
      include the feminine pronouns and the singular shall include the
      plural.

    

               3.01           “Advisory
      Director” means a person appointed to serve in such capacity by the Board of
      either the Corporation or the Bank or the successors thereto.

    

               3.02           “Bank”
      means Keystone Nazareth Bank & Trust Company, the wholly owned subsidiary of
      the Corporation.

    

               3.03           “Beneficiary”
      means the person or persons designated by an Optionee to receive any benefits
      payable under the Plan in the event of such Optionee’s death.  Such
      person or persons shall be designated in writing on forms provided for this
      purpose by the Committee and may be changed from time to time by similar written
      notice to the Committee.  In the absence of a written designation, the
      Beneficiary shall be the Optionee’s surviving spouse, if any, or if none, his or
      her estate.

    

    
      
        
          
          

        

        
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               3.04           “Board”
      means the Board of Directors of the Corporation.

    

               3.05           “Change
      in Control” shall mean a change in the ownership of the
      Corporation or the Bank, a change in the effective control of the Corporation
      or
      the Bank or a change in the ownership of a substantial portion of the assets
      of
      the Corporation or the Bank, in each case as provided under Section 409A of
      the
      Code and the regulations thereunder.

    

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

    

               3.07           “Committee”
      means a committee of two or more directors appointed by the Board pursuant
      to
      Article IV hereof, each of whom shall be a Non-Employee Director (i) as defined
      in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor thereto, (ii) within
      the meaning of Section 162(m) of the Code or any successor thereto and (iii)
      shall be independent as defined by the Marketplace Rules of the Nasdaq Stock
      Market.

    

               3.08           “Common
      Stock” means shares of the common stock, $0.01 par value per share, of the
      Corporation.

    

               3.09           “Director”
      means a member of the Board of Directors of the Corporation or a Subsidiary
      Corporation or any successors thereto, including Non-Employee Directors as
      well
      as Officer and Employees serving as Directors.

    

               3.10           “Disability”
      means in the case of any Optionee that the Optionee: (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 Corporation or the Bank (or would have received such benefits
      for at least three months if he had been eligible to participate in such
      plan).

    

               3.11           “Effective
      Date” means the date upon which the Board originally adopted this
      Plan.

    

               3.12           “Employee”
      means any person who is employed by the Corporation or a Subsidiary Company,
      or
      is an Officer of the Corporation or a Subsidiary Company, but not including
      directors who are not also Officers of or otherwise employed by the Corporation
      or a Subsidiary Company.

    

               3.13           “Employer
      Group” means the Corporation and any Subsidiary Company which, with the consent
      of the Board, agrees to participate in the Plan.

    

               3.14           “Exchange
      Act” means the Securities Exchange Act of 1934, as amended.

    

    
      
        
          
          

        

        
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               3.15           “Exercise
      Price” means the price at which a share of Common Stock may be purchased by an
      Optionee pursuant to an Option.

    

               3.16           “Fair
      Market Value” shall be equal to the fair market value per share of the
      Corporation's Common Stock on the date an Option is granted.  For
      purposes hereof, the Fair Market Value of a share of Common Stock shall be
      the
      closing sale price of a share of Common Stock on the date in question (or,
      if
      such day is not a trading day in the U.S. markets, on the nearest preceding
      trading day), as reported with respect to the principal market (or the composite
      of the markets, if more than one) or national quotation system in which such
      shares are then traded, or if no such closing prices are reported, the mean
      between the high bid and low asked prices that day on the principal market
      or
      national quotation system then in use.  Notwithstanding the
      foregoing, if the Common Stock is not readily tradable on an
      established securities market for purposes of Section 409A of the Code, then
      the
      Fair Market Value shall be determined by means of a reasonable valuation method
      that takes into consideration all available information material to the value
      of
      the Corporation and that otherwise satisfies the requirements applicable under
      Section 409A of the Code and the regulations
      thereunder.

    

               3.17           “FDIC”
      means the Federal Deposit Insurance Corporation.

    

               3.18           “Incentive
      Stock Option” means any Option granted under this Plan which the Board intends
      (at the time it is granted) to be an incentive stock option within the meaning
      of Section 422 of the Code or any successor thereto.

    

               3.19           “Non-Employee
      Director” means a member of the Board (including advisory boards, if any) of the
      Corporation or any Subsidiary Company or any successor thereto,
including an Advisory Director of the Board of the Corporation
      and/or
      any Subsidiary Company, or a former Officer or Employee of the Corporation
      and/or any Subsidiary Company serving as a Director or Advisory Director, who
      is
      not an Officer or Employee of the Corporation or any Subsidiary
      Company.

    

               3.20           “Non-Qualified
      Option” means any Option granted under this Plan which is not an Incentive Stock
      Option.

    

               3.21           “Offering”
      means the offering of Common Stock to the public completed during 2003 in
      connection with the conversion of the Bank from the mutual to the stock form
      of
      organization and the issuance of the capital stock of the Bank to the
      Corporation.

    

               3.22           “Officer”
      means an Employee whose position in the Corporation or Subsidiary Company is
      that of a corporate officer, as determined by the Board.

    

               3.23           “Option”
      means a right granted under this Plan to purchase Common Stock.

    

               3.24           “Optionee”
      means an Employee or Non-Employee Director or former Employee or Non-Employee
      Director to whom an Option is granted under the Plan.

    

    
      
        
          
          

        

        
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               3.25           “Retirement”
      means:

    

               (a)
      A termination of employment which constitutes a “retirement” at the “normal
      retirement age” or later under the Keystone Nazareth Bank & Trust Company
      401(k) Plan or such other qualified pension benefit plan maintained by the
      Corporation or a Subsidiary Company as may be designated by the Board or the
      Committee, or, if no such plan is applicable, which would constitute
“retirement” under the Keystone Nazareth Bank & Trust Company 401(k) Plan,
      if such individual were a participant in that plan, provided, however, that
      the
      provisions of this subsection (a) will not apply as long as an Optionee
      continues to serve as a Non-Employee Director, including service as an Advisory
      Director.

    

               (b)  With
      respect to Non-Employee Directors, retirement means retirement from service
      on
      the Board of Directors of the Corporation or a Subsidiary Company or any
      successors thereto (including service as an Advisory Director to the Corporation
      or any Subsidiary Company) after reaching normal retirement age as established
      by the Company.

    

               3.26           “Stock
      Option Agreement” means the written agreement setting forth the number of shares
      subject to the Option, the exercise price thereof, designating the Option as
      an
      Incentive Stock Option or a Non-Qualified Option and such other terms of the
      Option as the Committee shall deem appropriate.

    

               3.27           “Subsidiary
      Companies” means those subsidiaries of the Corporation, including the Bank,
      which meet the definition of “subsidiary corporations” set forth in Section
      424(f) of the Code, at the time of granting of the Option in
      question.

    

    ARTICLE
      IV

    ADMINISTRATION
      OF THE PLAN

    

               4.01           Duties
      of the Committee.  The Plan shall be
      administered and interpreted by the Committee, as appointed from time to time
      by
      the Board pursuant to Section 4.02.  The Committee shall have the
      authority to adopt, amend and rescind such rules, regulations and procedures
      as,
      in its opinion, may be advisable in the administration of the Plan, including,
      without limitation, rules, regulations and procedures which (i) address matters
      regarding the satisfaction of an Optionee's tax withholding obligation pursuant
      to Section 12.02 hereof, (ii) to the extent permissible by applicable law and
      regulation, include arrangements to facilitate the Optionee's ability to borrow
      funds for payment of the exercise or purchase price of an Option, if applicable,
      from securities brokers and dealers, and (iii) subject to any legal or
      regulatory restrictions or limitations,  include arrangements which
      provide for the payment of some or all of such exercise or purchase price by
      delivery of previously owned shares of Common Stock or other property and/or
      by
      withholding some of the shares of Common Stock which are being
      acquired.  The interpretation and construction by the Committee of any
      provisions of the Plan, any rule, regulation or procedure adopted by it pursuant
      thereto or of any Option shall be final and binding in the absence of action
      by
      the Board.

    

    
      
        
          
          

        

        
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               4.02           Appointment
      and Operation of the Committee.  The
      members of the Committee shall be appointed by, and will serve at the pleasure
      of, the Board.  The Board from time to time may remove members from,
      or add members to, the Committee, provided the Committee shall continue to
      consist of two or more members of the Board, each of whom shall be a
      Non-Employee Director, as defined in Rule 16b-3(b)(3)(i) of the Exchange Act
      or
      any successor thereto.  In addition, each member of the Committee
      shall be an (i) “outside director” within the meaning of Section 162(m) of the
      Code and regulations thereunder at such times as is required under such
      regulations and (ii) an "independent director" as such term is defined in Rule
      4200(a)(15) of the Marketplace Rules of the Nasdaq Stock Market.  The
      Committee shall act by vote or written consent of a majority of its
      members.  Subject to the express provisions and limitations of the
      Plan, the Committee may adopt such rules, regulations and procedures as it
      deems
      appropriate for the conduct of its affairs.  It may appoint one of its
      members to be chairman and any person, whether or not a member, to be its
      secretary or agent.  The Committee shall report its actions and
      decisions to the Board at appropriate times but in no event less than one time
      per calendar year.

    

               4.03           Revocation
      for Misconduct.  The Board or the
      Committee may by resolution immediately revoke, rescind and terminate any
      Option, or portion thereof, to the extent not yet vested, previously granted
      or
      awarded under this Plan to an Employee who is discharged from the employ of
      the
      Corporation or a Subsidiary Company for cause, which, for purposes hereof,
      shall
      mean termination because of the Employee's personal dishonesty, incompetence,
      willful misconduct, breach of fiduciary duty involving personal profit,
      intentional failure to perform stated duties, willful violation of any law,
      rule, or regulation (other than traffic violations or similar offenses) or
      final
      cease-and-desist order.  Options granted to a Non-Employee Director
      who is removed for cause pursuant to the Corporation's Articles of Incorporation
      or Bylaws or the Bank’s Articles of Incorporation and Bylaws or the constituent
      documents of such other Subsidiary Company on whose board he serves shall
      terminate as of the effective date of such removal.

    

               4.04           Limitation
      on Liability.  Neither the members of
      the Board nor any member of the Committee shall be liable for any action or
      determination made in good faith with respect to the Plan, any rule, regulation
      or procedure adopted by it pursuant thereto or any Options granted under
      it.  If a member of the Board or the Committee is a party or is
      threatened to be made a party to any threatened, pending or completed action,
      suit or proceeding, whether civil, criminal, administrative or investigative,
      by
      reason of anything done or not done by him in such capacity under or with
      respect to the Plan, the Corporation shall, subject to the requirements of
      applicable laws and regulations, indemnify such member against all liabilities
      and expenses (including attorneys' fees), judgments, fines and amounts paid
      in
      settlement actually and reasonably incurred by him in connection with such
      action, suit or proceeding if he acted in good faith and in a manner he
      reasonably believed to be in the best interests of the Corporation and its
      Subsidiary Companies and, with respect to any criminal action or proceeding,
      had
      no reasonable cause to believe his conduct was unlawful.

    

    

    
      
        
          
          

        

        
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               4.05           Compliance
      with Law and Regulations.  All Options
      granted hereunder shall be subject to all applicable federal and state laws,
      rules and regulations and to such approvals by any government or regulatory
      agency as may be required.  The Corporation shall not be required to
      issue or deliver any certificates for shares of Common Stock prior to the
      completion of any registration or qualification of or obtaining of consents
      or
      approvals with respect to such shares under any federal or state law or any
      rule
      or regulation of any government body, which the Corporation shall, in its sole
      discretion, determine to be necessary or advisable.  Moreover, no
      Option may be exercised if such exercise would be contrary to applicable laws
      and regulations.

    

               4.06           Restrictions
      on Transfer.  The Corporation may place
      a legend upon any certificate representing shares acquired pursuant to an Option
      granted hereunder noting that the transfer of such shares may be restricted
      by
      applicable laws and regulations.

    

               4.07           No
      Deferral of Compensation Under Section 409A of the
      Code.  All Options granted under the Plan are
      designed to not constitute a deferral of compensation for purposes of Section
      409A of the Code.  Notwithstanding any other provision in this Plan to
      the contrary, all of the terms and conditions of any Options granted under
      this
      Plan shall be designed to satisfy the exemption for stock options set forth
      in
      the regulations issued under Section 409A of the Code.  Both this Plan
      and the terms of all Options granted hereunder shall be interpreted in a manner
      that requires compliance with all of the requirements of the exemption for
      stock
      options set forth in the regulations issued under Section 409A of the
      Code.  No Optionee shall be permitted to defer the recognition of
      income beyond the exercise date of a Non-Qualified Option or beyond the date
      that the Common Stock received upon the exercise of an Incentive Stock Option
      is
      sold.

    

    ARTICLE
      V

    ELIGIBILITY

    

               Options
      may be granted to such Employees or Non-Employee Directors of the Corporation
      and its Subsidiary Companies as may be designated from time to time by the
      Board
      or the Committee.  Options may not be granted to individuals who are
      not Employees or Non-Employee Directors of either the Corporation or its
      Subsidiary Companies.  Non-Employee Directors shall be eligible to
      receive only Non-Qualified Options.

    

    ARTICLE
      VI

    COMMON
      STOCK COVERED BY THE PLAN

    

               6.01           Option
      Shares.  The aggregate number of shares
      of Common Stock which may be issued pursuant to this Plan, subject to adjustment
      as provided in Article IX, shall be 2,020,118.  None of such shares
      shall be the subject of more than one Option at any time, but if an Option
      as to
      any shares is surrendered before exercise, or expires or terminates for any
      reason without having been exercised in full, or for any other reason ceases
      to
      be exercisable, the number of shares covered thereby shall again become
      available for grant under the Plan as if no Options had been previously granted
      with respect to such shares.  During the time this Plan remains in
      effect, the aggregate grants of Options to each Employee and each Non-Employee
      Director shall not exceed 25% and 5% of the shares of Common Stock available
      under the Plan, respectively.  Options granted to
      Non-Employee  Directors in the aggregate may not exceed 30% of the
      number of shares available under this Plan.

    

    
      
        
          
          

        

        
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               6.02           Source
      of Shares.  The shares of Common Stock
      issued under the Plan may be authorized but unissued shares, treasury shares
      or
      shares purchased by the Corporation on the open market or from private sources
      for use under the Plan.

    

    ARTICLE
      VII

    DETERMINATION
      OF

    OPTIONS,
      NUMBER OF SHARES, ETC.

    

               The
      Board or the Committee shall, in its discretion, determine from time to time
      which Employees or Non-Employee Directors will be granted Options under the
      Plan, the number of shares of Common Stock subject to each Option, and whether
      each Option will be an Incentive Stock Option or a Non-Qualified
      Option.  In making all such determinations there shall be taken into
      account the duties, responsibilities and performance of each respective Employee
      and Non-Employee Director, his or her present and potential contributions to
      the
      growth and success of the Corporation, his or her salary or other compensation
      and such other factors as the Board or the Committee shall deem relevant to
      accomplishing the purposes of the Plan.  The Board or the Committee
      may but shall not be required to request the written recommendation of the
      Chief
      Executive Officer of the Corporation other than with respect to Options to
      be
      granted to him or her.

    

    ARTICLE
      VIII

    OPTIONS

    

               Each
      Option granted hereunder shall be on the following terms and
      conditions:

    

               8.01         
      Stock Option Agreement.  The
      proper Officers on behalf of the Corporation and each Optionee shall execute
      a
      Stock Option Agreement which shall set forth the total number of shares of
      Common Stock to which it pertains, the exercise price, whether it is a
      Non-Qualified Option or an Incentive Stock Option, and such other terms,
      conditions, restrictions and privileges as the Board or the Committee in each
      instance shall deem appropriate, provided they are not inconsistent with the
      terms, conditions and provisions of this Plan.  Each Optionee shall
      receive a copy of his executed Stock Option Agreement.  Any Option
      granted with the intention that it will be an Incentive Stock Option but which
      fails to satisfy a requirement for Incentive Stock Options shall continue to
      be
      valid and shall be treated as a Non-Qualified Option.

    

               8.02         
       Option Exercise Price.

    

               (a)             
      Incentive Stock Options.  The
      per share price at which the subject Common Stock may be purchased upon exercise
      of an Incentive Stock Option shall be no less than one hundred percent (100%)
      of
      the Fair Market Value of a share of Common Stock at the time such Incentive
      Stock Option is granted, except as provided in Section 8.09(b).

    

               (b)            
       Non-Qualified
      Options.  The per share price at which
      the subject Common Stock may be purchased upon exercise of a Non-Qualified
      Option shall be no less than one hundred percent (100%) of the Fair Market
      Value
      of a share of Common Stock at the time such Non-Qualified Option is
      granted.

    

    
      
        
          
          

        

        
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               8.03         
       Vesting and Exercise of Options.

    

               (a)            
      General Rules.  Incentive
      Stock Options and Non-Qualified Options shall become vested and exercisable
      at a
      rate no more rapid than 20% per year, commencing one year from the date of
      grant
      as shall be determined by the Committee, and the right to exercise shall be
      cumulative.  Notwithstanding the foregoing, except as provided in
      Section 8.03(b) hereof, no vesting shall occur on or after an Employee's
      employment and/or service as a Non-Employee Director (which, for purposes
      hereof, shall include service as an Advisory Director) with the Corporation
      or
      any of the Subsidiary Companies is terminated.  In determining the
      number of shares of Common Stock with respect to which Options are vested and/or
      exercisable, fractional shares will be rounded down to the nearest whole number,
      provided that such fractional shares shall be aggregated and deemed vested
      on
      the final date of vesting.

    

               (b)             
      Accelerated Vesting.  Unless
      the Board or the Committee shall specifically state otherwise at the time an
      Option is granted, all Options granted under this Plan shall become vested
      and
      exercisable in full on the date an Optionee terminates his employment with
      the
      Corporation or a Subsidiary Company or service as a Non-Employee Director
      (including for purposes hereof service as an Advisory Director) because of
      his
      death or Disability (provided, however, no such accelerated vesting shall occur
      if an Optionee remains employed by or continues to serve as a Director
      (including for purposes hereof service as an Advisory Director) of at least
      one
      member of the Employer Group).  Furthermore, notwithstanding the
      general rule contained in Section 8.03(a), all Options granted under this Plan
      shall become vested and exercisable in full as of the effective date of a Change
      in Control.

    

               8.04          
      Duration of Options.

    

               (a)             
      General Rule.  Except as
      provided in Sections 8.04(b) and 8.09, each Option or portion thereof granted
      to
      Employees and Non-Employee Directors shall be exercisable at any time on or
      after it vests and becomes exercisable until the earlier of (i) ten (10) years
      after its date of grant or (ii) six (6) months after the date on which the
      Optionee ceases to be employed (or in the service of the Board of Directors)
      by
      the Corporation and all Subsidiary Companies, unless the Board of Directors
      or
      the Committee in its discretion decides at the time of grant or thereafter
      to
      extend such period of exercise to a period not exceeding three (3)
      years.  In the event an Incentive Stock Option is not exercised within
      90 days of the effective date of termination of Optionee's status as an
      Employee, the tax treatment accorded Incentive Stock Options by the Code may
      not
      be available.  In addition, the accelerated vesting of Incentive Stock
      Options provided by Section 8.03(b) may result in all or a portion of such
      Incentive Stock Options no longer qualifying as Incentive Stock
      Options.

    
 

               (b)             
      Exception for Termination Due to Disability, Retirement, Change
      in
      Control or Death.  Unless the Board or
      the Committee shall specifically state otherwise at the time an Option is
      granted: (i) if an Employee terminates his employment with the Corporation
      or a
      Subsidiary Company as a result of Disability or Retirement without having fully
      exercised his Options, the Employee shall have the right, during the three
      (3)
      year period following his termination due to Disability or Retirement, to
      exercise such Options, and (ii) if a Non-Employee Director terminates his
      service as a director (including service as an Advisory Director) with the
      Corporation or a Subsidiary Company as a result of Disability or Retirement
      without having fully exercised his Options, the Non-Employee Director shall
      have
      the right, during the three (3) year period following his termination due to
      Disability or Retirement, to exercise such Options.

    

    
      
        
          
          

        

        
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               Subject
      to the provisions of Article IX hereof, unless the Board or the Committee shall
      specifically state otherwise at the time an Option is granted, if an Employee
      or
      Non-Employee Director terminates his employment or service with the Corporation
      or a Subsidiary Company following a Change in Control without having fully
      exercised his Options, the Optionee shall have the right to exercise such
      Options during the remainder of the original ten (10) year term (or five (5)
      year term for Options subject to Section 8.09(b) hereof) of the Option from
      the
      date of grant.

    

               If
      an Optionee dies while in the employ or service of the Corporation or a
      Subsidiary Company or terminates employment or service with the Corporation
      or a
      Subsidiary Company as a result of Disability or Retirement and dies without
      having fully exercised his Options, the executors, administrators, legatees
      or
      distributees of his estate shall have the right, during the one (1) year period
      following his death, to exercise such Options.

    

               In
      no event, however, shall any Option be exercisable more than ten (10) years
      (five (5) years for Options subject to Section 8.09(b) hereof) from the date
      it
      was granted.

    

               8.05           Nonassignability.  Options
      shall not be transferable by an Optionee except by will or the laws of descent
      or distribution, and during an Optionee's lifetime shall be exercisable only
      by
      such Optionee or the Optionee's guardian or legal
      representative.  Notwithstanding the foregoing, or any other provision
      of this Plan, an Optionee who holds Non-Qualified Options may transfer such
      Options to his immediate family or to a duly established trust for the benefit
      of one or more of these individuals.   For purposes hereof,
“immediate family” includes but is not necessarily limited to, the Participant's
      spouse, children (including step children), parents, grandchildren and great
      grandchildren.  Options so transferred may thereafter be transferred
      only to the Optionee who originally received the grant or to an individual
      or
      trust to whom the Optionee could have initially transferred the Option pursuant
      to this Section 8.05.  Options which are transferred pursuant to this
      Section 8.05 shall be exercisable by the transferee according to the same terms
      and conditions as applied to the Optionee.

    

               8.06           Manner
      of Exercise.  Options may be exercised
      in part or in whole and at one time or from time to time.  The
      procedures for exercise shall be set forth in the written Stock Option Agreement
      provided for in Section 8.01 above.

    

               8.07           Payment
      for Shares.  Payment in full of the
      purchase price for shares of Common Stock purchased pursuant to the exercise
      of
      any Option shall be made to the Corporation upon exercise of the
      Option.  All shares sold under the Plan shall be fully paid and
      nonassessable.  Payment for shares may be made by the Optionee (i) in
      cash or by check, (ii) by delivery of a properly executed exercise notice,
      together with irrevocable instructions to a broker to sell the shares and then
      to properly deliver to the Corporation the amount of sale proceeds to pay the
      exercise price, all in accordance with applicable laws and regulations, or
      (iii)
      at the discretion of the Board or the Committee, by delivering shares of Common
      Stock (including shares acquired pursuant to the previous exercise of an Option)
      equal in fair market value to the purchase price of the shares to be acquired
      pursuant to the Option, by withholding some of the shares of Common Stock which
      are being purchased upon exercise of an Option, or any combination of the
      foregoing.  With respect to subclause (iii) hereof, the shares of
      Common Stock delivered to pay the purchase price must have either been (x)
      purchased in open market transactions or (y) issued by the Corporation pursuant
      to a plan thereof more than six months prior to the exercise date of the Option
      (or one year in the case of previously exercised Incentive Stock
      Options).

    

    
      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

    

    

               8.08          
      Voting and Dividend
      Rights.  No Optionee shall have any
      voting or dividend rights or other rights of a shareholder in respect of any
      shares of Common Stock covered by an Option prior to the time that his name
      is
      recorded on the Corporation's shareholder ledger as the holder of record of
      such
      shares acquired pursuant to an exercise of an Option.

    

               8.09          
      Additional Terms Applicable to Incentive Stock
      Options.  All Options issued under the
      Plan which are designated as Incentive Stock Options will be subject, in
      addition to the terms detailed in Sections 8.01 to 8.08 above, to those
      contained in this Section 8.09.

    

               (a)             
      Amount
      Limitation.  Notwithstanding any
      contrary provisions contained elsewhere in this Plan and as long as required
      by
      Section 422 of the Code, the aggregate Fair Market Value, determined as of
      the
      time an Incentive Stock Option is granted, of the Common Stock with respect
      to
      which Incentive Stock Options are exercisable for the first time by the Optionee
      during any calendar year, under this Plan and stock options that satisfy the
      requirements of Section 422 of the Code under any other stock option plans
      maintained by the Corporation (or any parent or Subsidiary Company), shall
      not
      exceed $100,000.

    

               (b)             
      Limitation on Ten Percent
      Shareholders.  The price at which shares
      of Common Stock may be purchased upon exercise of an Incentive Stock Option
      granted to an individual who, at the time such Incentive Stock Option is
      granted, owns, directly or indirectly, more than ten percent (10%) of the total
      combined voting power of all classes of stock issued to shareholders of the
      Corporation or any Subsidiary Company, shall be no less than one hundred and
      ten
      percent (110%) of the Fair Market Value of a share of the Common Stock of the
      Corporation at the time of grant, and such Incentive Stock Option shall by
      its
      terms not be exercisable after the earlier of the date determined under Section
      8.04 or the expiration of five (5) years from the date such Incentive Stock
      Option is granted.

    

               (c)            
       Notice of Disposition; Withholding;
      Escrow.  An Optionee shall immediately
      notify the Corporation in writing of any sale, transfer, assignment or other
      disposition (or action constituting a disqualifying disposition within the
      meaning of Section 421 of the Code) of any shares of Common Stock acquired
      through exercise of an Incentive Stock Option, within two (2) years after the
      grant of such Incentive Stock Option or within one (1) year after the
      acquisition of such shares, setting forth the date and manner of disposition,
      the number of shares disposed of and the price at which such shares were
      disposed of.  The Corporation shall be entitled to withhold from any
      compensation or other payments then or thereafter due to the Optionee such
      amounts as may be necessary to satisfy any minimum withholding requirements
      of
      federal or state law or regulation and, further, to collect from the Optionee
      any additional amounts which may be required for such purpose.  The
      Committee may, in its discretion, require shares of Common Stock acquired by
      an
      Optionee upon exercise of an Incentive Stock Option to be held in an escrow
      arrangement for the purpose of enabling compliance with the provisions of this
      Section 8.09(c).

    

    

    
      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

    

    

    ARTICLE
      IX

    ADJUSTMENTS
      FOR CAPITAL CHANGES

    

     9.01     General
      Adjustments. The aggregate number of shares of Common Stock
      available for issuance under this Plan, the number of shares to which any Option
      relates, the maximum number of shares that can be covered by Options to each
      Employee, each Non-Employee Director and Non-Employee Directors as a group
      and
      the exercise price per share of Common Stock under any Option shall be
      proportionately adjusted for any increase or decrease in the total number of
      outstanding shares of Common Stock issued subsequent to theEffective Date of
      this Plan resulting from a split, subdivision or consolidation of shares or
      any
      other capital adjustment, the payment of a stock dividend, or other increase
      or
      decrease in such shares effected without receipt or payment of consideration
      by
      the Corporation.

    

    9.02      Adjustments
      for Mergers and Other Corporate Transactions. If, upon
      a merger, consolidation, reorganization, liquidation, recapitalization or the
      like of the Corporation, the shares of the Corporation'’s
      Common Stock shall be exchanged for other securities of the Corporation or
      of
      another corporation, each Option shall be converted, subject to the conditions
      herein stated, into the right to purchase or acquire such number of shares
      of
      Common Stock or amount of other securities of the Corporation or such other
      corporation as were exchangeable for the number of shares of Common Stock of
      the
      Corporation which such Optionees would have been entitled to purchase or acquire
      except for such action, and appropriate adjustments shall be made to the per
      share exercise price of outstanding Options, provided that in each case the
      number of shares or other securities subject to the substituted or assumed
      stock
      options and the exercise price thereof shall be determined in a manner that
      satisfies the requirements of Treasury Regulation §1.424-1 and the regulations
      issued under Section 409A of the Code so that the substituted or assumed option
      is not deemed to be a modification of the outstanding Options.

    

    ARTICLE
      X

    AMENDMENT
      AND TERMINATION OF THE PLAN

    

               The
      Board may, by resolution, at any time terminate or amend the Plan with respect
      to any shares of Common Stock as to which Options have not been granted, subject
      to regulations of the FDIC and any required shareholder approval or any
      shareholder approval which the Board may deem to be advisable for any reason,
      such as for the purpose of obtaining or retaining any statutory or regulatory
      benefits under tax, securities or other laws or satisfying any applicable stock
      exchange listing requirements.  The Board may not, without the consent
      of the holder of an Option, alter or impair any Option previously granted or
      awarded under this Plan except as provided by Article IX hereof or except as
      specifically authorized herein.

    

               Notwithstanding
      anything to the contrary herein, in no event shall the Board of Directors
      without shareholder approval amend the Plan or shall the Board of Directors
      or
      the Committee amend an Option in any manner that effectively allows the
      repricing of any Option previously granted under the Plan either through a
      reduction in the Exercise Price or through the cancellation and regrant of
      a new
      Option in exchange for the cancelled Option (except as permitted pursuant to
      Article IX in connection with a change in the Corporation’s
      capitalization).

    

    
      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

    

    

    ARTICLE
      XI

    EMPLOYMENT
      RIGHTS

    

               Neither
      the Plan nor the grant of any Options hereunder nor any action taken by the
      Committee or the Board in connection with the Plan shall create any right on
      the
      part of any Employee or Non-Employee Director of the Corporation or a Subsidiary
      Company to continue in such capacity.

    

    ARTICLE
      XII

    WITHHOLDING

    

               12.01         Tax
      Withholding.  The Corporation may
      withhold from any cash payment made under this Plan sufficient amounts to cover
      any applicable minimum withholding and employment taxes, and if the amount
      of
      such cash payment is insufficient, the Corporation may require the Optionee
      to
      pay to the Corporation the amount required to be withheld as a condition to
      delivering the shares acquired pursuant to an Option.  The Corporation
      also may withhold or collect amounts with respect to a disqualifying disposition
      of shares of Common Stock acquired pursuant to exercise of an Incentive Stock
      Option, as provided in Section 8.09(c).

    

               12.02       
       Methods of Tax
      Withholding.  The Board or the Committee
      is authorized to adopt rules, regulations or procedures which provide for the
      satisfaction of an Optionee's tax withholding obligation by the retention of
      shares of Common Stock to which the Employee would otherwise be entitled
      pursuant to an Option and/or by the Optionee's delivery of previously owned
      shares of Common Stock or other property.

    

    

    ARTICLE
      XIII

    EFFECTIVE
      DATE OF THE PLAN; TERM

    

               13.01       
       Effective Date of the
      Plan.  This Plan shall become effective
      on the Effective Date, and Options may be granted hereunder no earlier than
      the
      date this Plan is approved by shareholders and no later than the termination
      of
      the Plan, provided this Plan is approved by shareholders of the Corporation
      pursuant to Article XIV hereof.  The amendment and restatement of this
      Plan was adopted effective as of November 15, 2007.

    

               13.02         Term
      of Plan.  Unless sooner terminated, this
      Plan shall remain in effect for a period of ten (10) years ending on the tenth
      anniversary of the Effective Date.  Termination of the Plan shall not
      affect any Options previously granted and such Options shall remain valid and
      in
      effect until they have been fully exercised or earned, are surrendered or by
      their terms or the terms hereof expire or are forfeited.

    

    

    
      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

    

    

    ARTICLE
      XIV

    SHAREHOLDER
      APPROVAL

    

               The
      stockholders of the Corporation approved this Plan as originally adopted at
      a
      meeting of stockholders of the Corporation held within twelve (12) months
      following the Effective Date in order to meet the requirements of (i) Section
      422 of the Code and regulations thereunder, (ii) Section 162(m) of the Code
      and
      regulations thereunder, and (iii) the Nasdaq Stock Market for continued
      quotation of the Common Stock on the Nasdaq Global Market.

    

    ARTICLE
      XV

    MISCELLANEOUS

    

               15.01         Governing
      Law.  To the extent not governed by
      federal law, this Plan shall be construed under the laws of the Commonwealth
      of
      Pennsylvania.

    

    
      
        
          
          

        

        
          13exhibit10-11.htm

    EXHIBIT 10.11

    

      KNBT
        BANCORP, INC.

      2004
        AMENDED AND RESTATED RECOGNITION

      AND
        RETENTION PLAN AND TRUST AGREEMENT

      

      

      ARTICLE
        I

      ESTABLISHMENT
        OF THE PLAN AND TRUST

      

                 1.01           KNBT
        Bancorp, Inc. (the “Corporation”) hereby amends and restates its 2004
        Recognition and Retention Plan (as amended and restated, the “Plan”) and Trust
        (the “Trust”) upon the terms and conditions hereinafter stated in this amended
        and restated 2004 Recognition and Retention Plan and Trust Agreement (the
        “Agreement”), with the amendment and restatement effective as of November 15,
        2007.  The Plan is being amended and restated in order to comply with
        Section 409A of the Code, as defined herein.

      

                 1.02           The
        Trustee hereby accepts this Trust and agrees to hold the Trust assets existing
        on the date of this Agreement and all additions and accretions thereto upon
        the
        terms and conditions hereinafter stated.

      

      ARTICLE
        II

      PURPOSE
        OF THE PLAN

      

                 The
        purpose of the Plan is to retain personnel of experience and ability in key
        positions by providing Employees and Non-Employee Directors with a proprietary
        interest in the Corporation and its Subsidiary Companies as compensation
        for
        their contributions to the Corporation and the Subsidiary Companies and as
        an
        incentive to make such contributions in the future.   Each
        Recipient of a Plan Share Award hereunder is advised to consult with his
        or her
        personal tax advisor with respect to the tax consequences under federal,
        state,
        local and other tax laws of the receipt of a Plan Share Award
        hereunder.

      

      ARTICLE
        III

      DEFINITIONS

      

                 The
        following words and phrases when used in this Agreement with an initial capital
        letter, unless the context clearly indicates otherwise, shall have the meanings
        set forth below.  Wherever appropriate, the masculine pronouns shall
        include the feminine pronouns and the singular shall include the
        plural.

      

                 3.01           “Advisory
        Director” means a person appointed to serve in such capacity by the Board of
        either the Corporation or the Bank or the successors thereto.

      

                 3.02           “Bank”
        means Keystone Nazareth Bank & Trust Company, the wholly owned subsidiary of
        the Corporation.

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

                 3.03           “Beneficiary”
        means the person or persons designated by a Recipient to receive any benefits
        payable under the Plan in the event of such Recipient's death.  Such
        person or persons shall be designated in writing on forms provided for this
        purpose by the Committee and may be changed from time to time by similar
        written
        notice to the Committee.  In the absence of a written designation, the
        Beneficiary shall be the Recipient's surviving spouse, if any, or if none,
        his
        or her estate.

      

                 3.04           “Board”
        means the Board of Directors of the Corporation.

      

                 3.05           “Change
        in Control” shall mean a change in the ownership of the Corporation or the Bank,
        a change in the effective control of the Corporation or the Bank or a change
        in
        the ownership of a substantial portion of the assets of the Corporation or
        the
        Bank, in each case as provided under Section 409A of the Code and the
        regulations thereunder.

      

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

      

                 3.07           “Committee”
        means the committee appointed by the Board pursuant to Article IV
        hereof.

      

                 3.08           “Common
        Stock” means shares of the common stock, $0.01 par value per share, of the
        Corporation.

      

                 3.09           “Director”
        means a member of the Board of Directors of the Corporation or a Subsidiary
        Corporation or any successors thereto, including Non-Employee Directors as
        well
        as Officers and Employees serving as Directors.

      

                 3.10           “Disability”
        means the Recipient (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
        Corporation or the Bank (or would have received such benefits for at least
        three
        months if he had been eligible to participate in such plan).

      

                 3.11           “Effective
        Date” means the day upon which the Board originally approved this
        Plan.

      

                 3.12           “Employee”
        means any person who is employed by the Corporation, the Bank or a Subsidiary
        Company or is an Officer of the Corporation or a Subsidiary Company, but
        not
        including directors who are not also Officers of or otherwise employed by
        the
        Corporation, the Bank or a Subsidiary Company.

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

                 3.13           “Employer
        Group” means the Corporation and any Subsidiary Company which, with the consent
        of the Board, agrees to participate in the Plan.

      

                 3.14           “Exchange
        Act” means the Securities Exchange Act of 1934, as amended.

      

                 3.15           “FDIC”
        means the Federal Deposit Insurance Corporation.

      

                 3.16           “Non-Employee
        Director” means a member of the Board (including advisory boards, if any) of the
        Corporation or any Subsidiary Company or any successor thereto, including
        an
        Advisory Director of the Board of the Corporation and/or any Subsidiary Company
        or a former Officer or Employee of the Corporation and/or any Subsidiary
        Company
        serving as a Director or Advisory Director who is not an Officer or Employee
        of
        the Corporation or any Subsidiary Company.

      

                 3.17           “Offering”
        means the offering of Common Stock to the public completed during 2003 in
        connection with the conversion of the Bank from the mutual to the stock form
        of
        organization and the issuance of the capital stock of the Bank to the
        Corporation.

      

                 3.18           “Officer”
        means an Employee whose position in the Corporation or a Subsidiary Company
        is
        that of a corporate officer, as determined by the Board.

      

                 3.19           “Performance
        Share Award” means a Plan Share Award granted to a Recipient pursuant to Section
        7.05 of the Plan.

      

                 3.20           “Performance
        Goal” means an objective for the Corporation or any Subsidiary Company or any
        unit thereof or any Employee of the foregoing that may be established by
        the
        Committee for a Performance Share Award to become vested, earned or
        exercisable.  The establishment of Performance Goals is intended to
        make the applicable Performance Share Awards “performance-based” compensation
        within the meaning of Section 162(m) of the Code, and the Performance Goals
        shall be based on one or more of the following criteria:

      
        

        
          	
                  (i)  

                	
                  net
                    income, as adjusted for non-recurring
                    items;

                

        

        
          	
                  (ii)  

                	
                  cash
                    earnings;

                

        

        
          	
                  (iii)  

                	
                  earnings
                    per share;

                

        

        
          	
                  (iv)  

                	
                  cash
                    earnings per share;

                

        

        
          	
                  (v)  

                	
                  return
                    on average equity;

                

        

        
          	
                  (vi)  

                	
                  return
                    on average assets;

                

        

        
          	
                  (vii)  

                	
                  assets;

                

        

        
          	
                  (viii)  

                	
                  stock
                    price;

                

        

        
          	
                  (ix)  

                	
                  total
                    shareholder return;

                

        

        
          	
                  (x)  

                	
                  capital;

                

        

        
          	
                  (xi)  

                	
                  net
                    interest income;

                

        

        
          	
                  (xii)  

                	
                  market
                    share;

                

        

        
          	
                  (xiii)  

                	
                  cost
                    control or efficiency ratio; and

                

        

        
          	
                  (xiv)  

                	
                  asset
                    growth.

                

        

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

      

       

                 3.21           “Plan
        Shares” or “Shares” means shares of Common Stock which may be distributed to a
        Recipient pursuant to the Plan.

      

                 3.22           “Plan
        Share Award” or “Award” means a right granted under this Plan to receive a
        distribution of Plan Shares upon completion of the service requirements
        described in Article VII hereof, and includes Performance Share
        Awards.

      

                 3.23           “Recipient”
        means an Employee or Non-Employee Director or former Employee or Non-Employee
        Director who receives a Plan Share Award or Performance Share Award under
        the
        Plan.

      

                 3.24           “Retirement”
        means:

      

                 (a)
        A termination of employment which constitutes a “retirement” at the “normal
        retirement age” or later under the Keystone Nazareth Bank & Trust Company
        401(k) Plan or such other qualified pension benefit plan maintained by the
        Corporation or a Subsidiary Company as may be designated by the Board or
        the
        Committee, or, if no such plan is applicable, which would constitute
“retirement” under the Keystone Nazareth Bank & Trust Company 401(k) Plan,
        if such individual were a participant in that plan; provided, however, that
        the
        provisions of this subsection (a) will not apply as long as a Recipient
        continues to serve as a Non-Employee Director, including service as an Advisory
        Director; and (b) provided further that no “retirement” shall be deemed to have
        occurred prior to the one-year anniversary of the grant of a Plan Share
        Award.

      

                 (b)  With
        respect to Non-Employee Directors, retirement means retirement from service
        on
        the Board of Directors of the Corporation or a Subsidiary Company or any
        successors thereto (including service as an Advisory Director to the Corporation
        or any Subsidiary Company) after reaching normal retirement age as established
        by the Company.; and provided further that no “retirement”
shall be deemed to have occurred prior to the one-year
        anniversary of the grant
        of a Plan Share Award.  

      

                 3.25           “Subsidiary
        Companies” means those subsidiaries of the Corporation, including the Bank,
        which meet the definition of “subsidiary corporations” set forth in Section
        424(f) of the Code, at the time of the granting of the Plan Share Award in
        question.

      

                 3.26           “Trustee”
        means such firm, entity or persons approved by the Board to hold legal title
        to
        the Plan and the Plan assets for the purposes set forth herein.

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      ARTICLE
        IV

      ADMINISTRATION
        OF THE PLAN

      

                 4.01           Duties
        of the Committee.  The Plan shall be
        administered and interpreted by the Committee, which shall consist of two
        or
        more members of the Board, each of whom shall be a Non-Employee Director,
        as
        defined in Rule 16b-3(b)(3)(i) of the Exchange Act.  In addition, each
        member of the Committee shall be an (i) “outside director” within the meaning of
        Section 162(m) of the Code and the regulations thereunder at such times as
        is
        required under such regulations and (ii) an "independent director" as such
        term
        is defined in Rule 4200(a)(15) of the Marketplace Rules of the Nasdaq Stock
        Market.  The Committee shall have all of the powers allocated to it in
        this and other Sections of the Plan.  The interpretation and
        construction by the Committee of any provisions of the Plan or of any Plan
        Share
        Award granted hereunder shall be final and binding in the absence of action
        by
        the Board.  The Committee shall act by vote or written consent of a
        majority of its members.  Subject to the express provisions and
        limitations of the Plan, the Committee may adopt such rules, regulations
        and
        procedures as it deems appropriate for the conduct of its
        affairs.  The Committee shall report its actions and decisions with
        respect to the Plan to the Board at appropriate times, but in no event less
        than
        once per calendar year.

      

                 4.02           Role
        of the Board.  The members of the
        Committee and the Trustee shall be appointed or approved by, and will serve
        at
        the pleasure of, the Board.  The Board may in its discretion from time
        to time remove members from, or add members to, the Committee, and may remove
        or
        replace the Trustee, provided that any directors who are selected as members
        of
        the Committee shall be Non-Employee Directors.

      

                 4.03           Revocation
        for Misconduct.  Notwithstanding
        anything to the contrary herein, the Board or the Committee may by resolution
        immediately revoke, rescind and terminate any Plan Share Award, or portion
        thereof, to the extent not yet vested, previously granted or awarded under
        this
        Plan to an Employee who is discharged from the employ of the Corporation
        or a
        Subsidiary Company for cause, which, for purposes hereof, shall mean termination
        because of the Employee's personal dishonesty, incompetence, willful misconduct,
        breach of fiduciary duty involving personal profit, intentional failure to
        perform stated duties, willful violation of any law, rule, or regulation
        (other
        than traffic violations or similar offenses) or final cease-and-desist
        order.  Unvested Plan Share Awards to a Non-Employee Director who is
        removed for cause pursuant to the Corporation's Articles of Incorporation
        or
        Bylaws or the Bank’s Articles of Incorporation and Bylaws or the constituent
        documents of such other Subsidiary Company on whose board he or she serves
        shall
        terminate as of the effective date of such removal.

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

                 4.04           Limitation
        on Liability.  No member of the Board or
        the Committee shall be liable for any determination made in good faith with
        respect to the Plan or any Plan Shares or Plan Share Awards granted under
        it.  If a member of the Board or the Committee is a party or is
        threatened to be made a party to any threatened, pending or completed action,
        suit or proceeding, whether civil, criminal, administrative or investigative,
        by
        reason of anything done or not done by him in such capacity under or with
        respect to the Plan, the Corporation shall, subject to the requirements of
        applicable laws and regulations, indemnify such member against all liabilities
        and expenses (including attorneys' fees), judgments, fines and amounts paid
        in
        settlement actually and reasonably incurred by him in connection with such
        action, suit or proceeding if he or she acted in good faith and in a manner
        he
        reasonably believed to be in the best interests of  the Corporation
        and any Subsidiary Companies and, with respect to any criminal action or
        proceeding, had no reasonable cause to believe his or her conduct was
        unlawful.

      

                 4.05           Compliance
        with Laws and Regulations.  All Awards
        granted hereunder shall be subject to all applicable federal and state laws,
        rules and regulations and to such approvals by any government or regulatory
        agency or shareholders as may be required.   The Corporation
        shall not be required to issue or deliver any certificates for shares of
        Common
        Stock prior to the completion of any registration or qualification of or
        obtaining of consents or approvals with respect to such shares under anyfederal
        or state law or any rule or regulation of any government body, which the
        Corporation shall, in its sole discretion, determine to be necessary or
        advisable.

      

                 4.06           Restrictions
        on Transfer.  The Corporation may place
        a legend upon any certificate representing shares issued pursuant to a Plan
        Share Award noting that such shares may be restricted by applicable laws
        and
        regulations.

      

                 4.07           No
        Deferral of Compensation Under Section 409A of the
        Code.  All Awards granted under the Plan are
        designed to not constitute a deferral of compensation for purposes of Section
        409A of the Code.  No Recipient shall be permitted to defer the
        recognition of income beyond the date an Award shall be deemed earned pursuant
        to Article VII of this Plan.

      

      ARTICLE
        V

      CONTRIBUTIONS

      

                 5.01           Amount
        and Timing of Contributions.  The Board
        shall determine the amount (or the method of computing the amount) and timing
        of
        any contributions by the Corporation and any Subsidiary Companies to the
        Trust
        established under this Plan.  Such amounts may be paid in cash or in
        shares of Common Stock and shall be paid to the Trust at the designated time
        of
        contribution.  No contributions by Employees or Non-Employee Directors
        shall be permitted.

      

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

                 5.02           Investment
        of Trust Assets; Number of Plan
        Shares.  Subject to Section 8.02 hereof,
        the Trustee shall invest all of the Trust's assets primarily in Common
        Stock.  The aggregate number of Plan Shares available for distribution
        pursuant to this Plan shall be 808,047 shares of Common Stock, subject to
        adjustment as provided in Section 9.01 hereof, which shares shall be purchased
        (from the Corporation and/or, if permitted by applicable regulations, from
        shareholders thereof) by the Trust with funds contributed by the
        Corporation.  During the time this Plan remains in effect, Awards to
        each Employee and each Non-Employee Director shall not exceed 25% and 5%
        of the
        shares of Common Stock available under the Plan, respectively.  Plan
        Share Awards to Non-Employee Directors in the aggregate shall not exceed
        30% of
        the number of shares available under this Plan.

      

      ARTICLE
        VI

      ELIGIBILITY;
        ALLOCATIONS

      

                 6.01           Awards.  Plan
        Share Awards and Performance Share Awards may be made to such Employees and
        Non-Employee Directors as may be selected by the Board or the
        Committee.  In selecting those Employees to whom Plan Share Awards
        and/or Performance Share Awards may be granted and the number of Shares covered
        by such Awards, the Board or the Committee shall consider the duties,
        responsibilities and performance of each respective Employee and Non-Employee
        Director, his or her present and potential contributions to the growth and
        success of the Corporation, his or her salary or other compensation and such
        other factors as deemed relevant to accomplishing the purposes of the
        Plan.  The Board or the Committee may but shall not be required to
        request the written recommendation of the Chief Executive Officer of the
        Corporation other than with respect to Plan Share Awards and/or Performance
        Share Awards to be granted to him or her.

      

                 6.02           Form
        of Allocation.  As promptly as
        practicable after an allocation pursuant to Section 6.01 that a Plan Share
        Award
        or a Performance Share Award is to be issued, the Board or the Committee
        shall
        notify the Recipient in writing of the grant of the Award, the number of
        Plan
        Shares covered by the Award, and the terms upon which the Plan Shares subject
        to
        the Award shall be distributed to the Recipient.  The Board or the
        Committee shall maintain records as to all grants of Plan Share
        Awards  or Performance Share Awards under the Plan.

      

                 6.03           Allocations
        Not Required to any Specific Employee or Non-Employee
        Director.  No Employee or Non-Employee
        Director shall have any right or entitlement to receive a Plan Share Award
        hereunder, with such Awards being at the total discretion of the Board or
        the
        Committee.

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      ARTICLE
        VII

      EARNING
        AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS

       

      
                   7.01           Earning
          Plan Shares; Forfeitures.

         

                   (a)           General
          Rules.  Subject to the terms hereof,
          Plan Share Awards shall be earned by a Recipient at a rate no more rapid
          than
          twenty percent (20%) of the aggregate number of Shares covered by the Award
          as
          of each annual anniversary of the date of grant of the Award, with such
          vesting
          rate to be determined by the Committee.  If the employment of an
          Employee or service as a Non-Employee Director (including for purposes
          hereof
          service as an Advisory Director) is terminated before the Plan Share Award
          has
          been completely earned for any reason (except as specifically provided
          in
          subsection (b) below), the Recipient shall forfeit the right to any Shares
          subject to the Award which have not theretofore been earned.  In the
          event of a forfeiture of the right to any Shares subject to an Award, such
          forfeited Shares shall become available for allocation pursuant to Section
          6.01
          hereof as if no Award had been previously granted with respect to such
          Shares.  No fractional shares shall be distributed pursuant to this
          Plan.

        

                   (b)           Exception
          for Terminations Due to Death, Disability or Change in
          Control.  Notwithstanding the general
          rule contained in Section 7.01(a), all Plan Shares subject to a Plan Share
          Award
          held by a Recipient whose employment with the Corporation or any Subsidiary
          Company or service as a Non-Employee Director (including for purposes hereof
          service as an Advisory Director) terminates due to death or Disability
          shall be
          deemed earned as of the Recipient's last day of employment with or service
          to
          the Corporation or any Subsidiary Company (provided, however, no such
          accelerated vesting shall occur if a Recipient remains employed by or continues
          to serve as a Director (including for purposes hereof service as an Advisory
          Director) of at least one member of the Employer Group) and shall be distributed
          as soon as practicable thereafter.  Furthermore, notwithstanding the
          general rule contained in Section 7.01(a), all Plan Shares subject to a
          Plan
          Share Award held by a Recipient shall be deemed earned as of the effective
          date
          of a Change in Control.

      

      

                 7.02           Distribution
        of Dividends.  Any cash dividends or
        stock dividends declared in respect of each unvested Plan Share Award (excluding
        any unearned Performance Share Awards) then held by the Trust will be paid
        out
        proportionately by the Trust to the Recipient thereof as soon as practicable
        (and in any event no later than 30 days) after the Trust’s receipt thereof
        to the Recipient on whose behalf such Plan Share is then held by the
        Trust.  Any cash dividends, stock dividends or returns of capital
        declared in respect of each unvested Performance Share Award will be held
        by the
        Trust for the benefit of the Recipient on whose behalf such Performance Share
        Award is then held by the Trust, and such dividends or returns of capital,
        including any interest thereon, will be paid out proportionately by the Trust
        to
        the Recipient thereof as soon as practicable (and in any event no later than
        30
        days) after the Performance Share Awards become earned.

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

                 7.03           Distribution
        of Plan Shares.

      

                 (a)           Timing
        of Distributions.  General
        Rule.  Subject to the provisions of Section 7.05 hereof, Plan Shares
        shall be distributed to the Recipient or his or her Beneficiary, as the case
        may
        be, as soon as practicable (and in any event no later than 30 days) after
        they have been earned.

      

                 (b)           Form
        of Distributions.  All Plan Shares,
        together with any Shares representing stock dividends, shall be distributed
        in
        the form of Common Stock.  One share of Common Stock shall be given
        for each Plan Share earned and distributable. Payments representing cash
        dividends shall be made in cash.

       

          (c)           Withholding.  The
        Trustee may withhold from any cash payment or Common Stock distribution made
        under this Plan sufficient amounts to cover any applicable withholding and
        employment taxes, and if the amount of a cash payment is insufficient, the
        Trustee may require the Recipient or Beneficiary to pay to the Trustee the
        amount required to be withheld as a condition of delivering the Plan
        Shares.  The Trustee shall pay over to the Corporation or any
        Subsidiary Company which employs or employed such Recipient any such amount
        withheld from or paid by the Recipient or Beneficiary.

       

          (d)           Restrictions
        on Selling of Plan Shares.  Plan Share
        Awards may not be sold, assigned, pledged or otherwise disposed of prior
        to the
        time that they are earned and distributed pursuant to the terms of this
        Plan.  Upon distribution, the Board or the Committee may require the
        Recipient or his or her Beneficiary, as the case may be, to agree not to
        sell or
        otherwise dispose of his distributed Plan Shares except in accordance with
        all
        then applicable federal and state securities laws, and the Board or the
        Committee may cause a legend to be placed on the stock certificate(s)
        representing the distributed Plan Shares in order to restrict the transfer
        of
        the distributed Plan Shares for such period of time or under such circumstances
        as the Board or the Committee, upon the advice of counsel, may deem
        appropriate.

      

                 7.04           Voting
        of Plan Shares.  After a Plan Share
        Award (other than a  Performance Share Award) has been made, the
        Recipient shall be entitled to direct the Trustee as to the voting of the
        Plan
        Shares which are covered by the Plan Share Award and which have not yet been
        earned and distributed to him pursuant to Section 7.03, subject to rules
        and
        procedures adopted by the Committee for this purpose.  All shares of
        Common Stock held by the Trust which have not been awarded under a Plan Share
        Award and shares subject to Performance Share Awards which have not yet vested
        and shares which have been awarded as to which Recipients have not directed
        the
        voting shall be voted by the Trustee in its discretion.

      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

                 7.05           Performance
        Awards

      

                 (a)           Designation
        of Performance Share Awards.  The
        Committee may determine to make any Plan Share Award a Performance Share
        Award
        by making such Plan Share Award contingent upon the achievement of a Performance
        Goal or any combination of Performance Goals.  Each Performance Share
        Award shall be evidenced by a written agreement (“Performance Award Agreement”),
        which shall set forth the Performance Goals applicable to the Performance
        Share
        Award, the maximum amounts payable and such other terms and conditions as
        are
        applicable to the Performance Share Award.  Each Performance Share
        Award shall be granted and administered to comply with the requirements of
        Section 162(m) of the Code or any successor thereto.

      

                 (b)           Timing
        of Grants.  Any Performance Share Award
        shall be made not later than 90 days after the start of the period for which
        the
        Performance Share Award relates and shall be made prior to the completion
        of 25%
        of such period.  All determinations regarding the achievement of any
        Performance Goals will be made by the Committee.  The Committee may
        not increase during a year the amount of a Performance Share Award that would
        otherwise be payable upon achievement of the Performance Goals but may reduce
        or
        eliminate the payments as provided for in the Award Agreement.

      

                 (c)           Restrictions
        on Grants.  Nothing contained in the
        Plan will be deemed in any way to limit or restrict the Committee from making
        any Award or payment to any person under any other plan, arrangement or
        understanding, whether now existing or hereafter in effect.

      

                 (d)           Rights
        of Recipients.  Notwithstanding anything
        to the contrary herein, a Participant who receives a Performance Share Award
        payable in Common Stock shall have no rights as a shareholder until the Common
        Stock is issued pursuant to the terms of the Performance Award
        Agreement.

      

                 (e)           Distribution.  No
        Performance Share Award or portion thereof that is subject to the attainment
        or
        satisfaction of a condition of a Performance Goal shall be distributed or
        considered to be earned or vested until the Committee certifies in writing
        that
        the conditions or Performance Goal to which the distribution, earning or
        vesting
        of such Award is subject have been achieved.

      

                 7.06           Nontransferable.  Plan
        Share Awards and Performance Share Awards and rights to Plan Shares shall
        not be
        transferable by a Recipient, and during the lifetime of the Recipient, Plan
        Shares may only be earned by and paid to a Recipient who was notified in
        writing
        of an Award by the Committee pursuant to Section 6.02 and/or 7.05(a), as
        the
        case may be.  No Recipient or Beneficiary shall have any right in or
        claim to any assets of the Plan or Trust, nor shall the Corporation or any
        Subsidiary Company be subject to any claim for benefits hereunder.

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      ARTICLE
        VIII

      TRUST

      

                 8.01           Trust.  The
        Trustee shall receive, hold, administer, invest and make distributions and
        disbursements from the Trust in accordance with the provisions of the Plan
        and
        Trust and the applicable directions, rules, regulations, procedures and policies
        established by the Committee pursuant to the Plan.

      

                 8.02           Management
        of Trust. It is the intent of this Plan and
        Trust that the Trustees shall have complete authority and discretion with
        respect to the arrangement, control and investment of the Trust, and that
        the
        Trustees shall invest all assets of the Trust in Common Stock to the fullest
        extent practicable, except to the extent that the Trustees determine that
        the
        holding of monies in cash or cash equivalents is necessary to meet the
        obligations of the Trust.  In performing their duties, the Trustees
        shall have the power to do all things and execute such instruments as may
        be
        deemed necessary or proper, including the following powers:

      

                 (a)           To
        invest up to one hundred percent (100%) of all Trust assets in Common Stock
        without regard to any law now or hereafter in force limiting investments
        for
        trustees or other fiduciaries.  The investment authorized herein may
        constitute the only investment of the Trust, and in making such investment,
        the
        Trustees are authorized to purchase Common Stock from the Corporation or
        from
        any other source, and such Common Stock so purchased may be outstanding,
        newly
        issued, or treasury shares.

      

                 (b)           To
        invest any Trust assets not otherwise invested in accordance with (a) above,
        in
        such deposit accounts, and certificates of deposit, obligations of the United
        States Government or its agencies or such other investments as shall be
        considered the equivalent of cash.

      

                 (c)           To
        sell, exchange or otherwise dispose of any property at any time held or acquired
        by the Trust.

      

                 (d)           To
        cause stocks, bonds or other securities to be registered in the name of a
        nominee, without the addition of words indicating that such security is an
        asset
        of the Trust (but accurate records shall be maintained showing that such
        security is an asset of the Trust).

      

                 (e)           To
        hold cash without interest in such amounts as may in the opinion of the Trustees
        be reasonable for the proper operation of the Plan and Trust.

      

                 (f)           To
        employ brokers, agents, custodians, consultants and accountants.

      

                 (g)           To
        hire counsel to render advice with respect to their rights, duties and
        obligations hereunder, and such other legal services or representation as
        they
        may deem desirable.

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

                 (h)           To
        hold funds and securities representing the amounts to be distributed to a
        Recipient or his Beneficiary as a consequence of a dispute as to the disposition
        thereof, whether in a segregated account or held in common with other assets
        of
        the Trust.

      

                 Notwithstanding
        anything herein contained to the contrary, the Trustees shall not be required
        to
        make any inventory, appraisal or settlement or report to any court, or to
        secure
        any order of court for the exercise of any power herein contained, or give
        bond.

      

                 8.03           Records
        and Accounts.  The Trustees shall
        maintain accurate and detailed records and accounts of all transactions of
        the
        Trust, which shall be available at all reasonable times for inspection by
        any
        legally entitled person or entity to the extent required by applicable law,
        or
        any other person determined by the Board or the Committee.

      

                 8.04           Expenses.  All
        costs and expenses incurred in the operation and administration of this Plan
        shall be borne by the Corporation or, in the discretion of the Corporation,
        the
        Trust.

      

                 8.05           Indemnification.  Subject
        to the requirements of applicable laws and regulations, the Corporation shall
        indemnify, defend and hold theTrustees harmless against all claims, expenses
        and
        liabilities arising out of or related to the exercise of the Trustees’ powers
        and the discharge of their duties hereunder, unless the same shall be due
        to
        their gross negligence or willful misconduct.

      

      ARTICLE
        IX

      MISCELLANEOUS

      

                 9.01           Adjustments
        for Capital Changes.  The aggregate number of Plan Shares
        available for distribution pursuant to the Plan Share Awards and the number
        of
        Shares to which any unvested Plan Share Award relates shall be proportionately
        adjusted for any increase or decrease in the total number of outstanding
        shares
        of Common Stock issued subsequent to the Effective Date of the Plan resulting
        from any split, subdivision or consolidation of shares or other capital
        adjustment, the payment of a stock dividend or other increase or decrease
        in
        such shares effected without receipt or payment of consideration by the
        Corporation.  If, upon a merger, consolidation, reorganization,
        liquidation, recapitalization or the like of the Corporation or of another
        corporation, the shares of the Corporation's Common Stock shall be exchanged
        for
        other securities of the Corporation or of another corporation, each Recipient
        of
        a Plan Share Award shall be entitled, subject to the conditions herein stated,
        to receive such number of shares of Common Stock or amount of other securities
        of the Corporation or such other corporation as were exchangeable for the
        number
        of shares of Common Stock of the Corporation which such Recipients would
        have
        been entitled to receive except for such action.

      

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

                 9.02           Amendment
        and Termination of Plan.  The Board may, by resolution,
        at any time amend or terminate the Plan, subject to any required shareholder
        approval or any shareholder approval which the Board may deem to be advisable
        for any reason, such as for the purpose of obtaining or retaining any statutory
        or regulatory benefits under tax, securities or other laws or satisfying
        any
        applicable stock exchange listing requirements.  The Board may not,
        without the consent of the Recipient, alter or impair his or her Plan Share
        Award except as specifically authorized herein.  Notwithstanding any
        other provision of the Plan, this Plan may not be terminated until such time
        as
        all Plan Shares held by the Trust have been awarded to Plan Recipients and
        shall
        be deemed to be earned prior to the time of termination.

      

                 9.03           Employment
        or Service Rights.  Neither the Plan nor any grant of a
        Plan Share Award, Performance Share Award or Plan Shares hereunder nor any
        action taken by the Trustee, the Committee or the Board in connection with
        the
        Plan shall create any right on the part of any Employee or Non-Employee Director
        to continue in such capacity.

      

                 9.04           Voting
        and Dividend Rights.  No Recipient shall have any voting
        or dividend rights or other rights of a shareholder in respect of any Plan
        Shares covered by a Plan Share Award or Performance Share Award, except as
        expressly provided in Sections 7.02, 7.04 and 7.05 above, prior to the time
        said
        Plan Shares are actually earned and distributed to him.

      

                 9.05           Governing
        Law.  To the extent not governed by federal law, the Plan
        and Trust shall be governed by the laws of the Commonwealth of
        Pennsylvania.

      

                 9.06           Effective
        Date.  This Plan as originally adopted was effective as
        of the Effective Date, and Awards may be granted hereunder no earlier than
        the
        date this Plan was approved by the shareholders of the Corporation and prior
        to
        the termination of the Plan.  Notwithstanding the foregoing or
        anything to the contrary in this Plan, the implementation of this Plan was
        subject to the approval of the Corporation's shareholders.  The
        amendment and restatement of this Plan shall be effective as of November
        15,
        2007.

      

                 9.07           Term
        of Plan.  This Plan shall remain in effect until the
        earlier of (i) ten (10) years from the Effective Date, (ii) termination by
        the
        Board, or (iii) the distribution to Recipients and Beneficiaries of all the
        assets of the Trust.

      

                 9.08           Tax
        Status of Trust.  It is intended that the trust
        established hereby be treated as a Grantor Trust of the Corporation under
        the
        provisions of Section 671 et seq. of the Code, as the same may be amended
        from
        time to time.

      

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

                 IN
        WITNESS WHEREOF, the Corporation has caused this amended and restated
        Agreement to be executed by its duly authorized officers and the corporate
        seal
        to be affixed and duly attested, and the initial Trustees of the Trust
        established pursuant hereto have duly and validly executed this Agreement,
        all
        on this 15th day of November 2007.

      

      

      
        	 	 	 	 	 
	
                KNBT
                  BANCORP, INC.

              	 	
                TRUSTEES:

              
	 	 	 	 
	 	 	 	 
	
                By:

              	
                Scott
                  V.Fainor

              	 	
                Jeffrey
                  P. Feather

              
	 	
                President
                  and CEO

              	 	 	 
	 	 	 	 
	 	 	 	
                R.
                  Chadwick Paul, Jr.

              
	 	 	 	 	 
	 	 	 	 
	 	 	 	
                Kenneth
                  R. Smith

              
	 	 	 	 	 
	 	 	 	 
	 	 	 	
                R.
                  Charles Stehly

              
	 	 	 	 	 
	 	 	 	 
	 	 	 	
                Richard
                  Stevens, III

              

      

      

      
        
          
          

        

        
          14

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