Document:

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                                                                    EXHIBIT 10.3

May 22, 2003

Eugene T. Sobol, Executive Vice President & COO
Keystone Savings Bank
P.O. Box 25012
Lehigh Valley, PA 18002-5012

Dear Gene:

The purpose of this letter is to reaffirm several discussions we have had and to
state in writing the terms of your employment with Keystone Savings Bank
commencing March 1, 2003, and ending with the Closing of the acquisition through
merger of First Colonial Group, Inc., and Nazareth National Bank and Trust
Company by Keystone Savings Bank. At the time of the Closing, your employment
relationship with the new entity, Keystone Nazareth Bank and Trust Company
("KNBT") will be as stated in the Employment Agreement attached to this letter
(the "Employment Agreement").

Meanwhile, however, on behalf of the Board of Keystone Savings Bank, I hereby
reaffirm the following:

1. During the period between March 1, 2003, and the Closing of the KNBT
transaction (the "Interim Period"), you will continue to be employed by Keystone
Savings Bank as its Executive Vice President and Chief Operating Officer. During
this period you will have such authority and responsibilities as are customarily
incident to the positions of Executive Vice President and Chief Operating
Officer and consistent with all applicable laws and the corporate Charter and
Bylaws of Keystone Savings Bank. Your employment during the Interim Period will
be terminable only under the provisions of the Employment Agreement as if it
were in effect during the Interim Period.

2. Your annual base salary during the Interim Period will be $220,000.00, less
withholdings required by law and deductions authorized by you. Also, in
recognition of past services, on September 1, 2003, you shall receive a one-time
payment into your SERP account in the amount of $250,000.00.

3. During the Interim Period, you will also receive an auto allowance in the
amount of $900.00 per month, as well as all fringe and incidental benefits
currently enjoyed by the Senior Management of Keystone Savings Bank.

4. On or about September 1, 2003, you shall also receive a payment in the amount
of $104,300.00 into your SERP in full settlement of your entitlements under the
Keystone Savings Bank Performance Unit Plan.

In all other respects your employment with Keystone Savings Bank during the
interim Period shall be as it has been during your tenure with Keystone Savings
Bank in the Senior Management positions noted above.

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In the event that the KNBT transaction does not close, it is agreed that
Keystone Savings Bank shall enter into an employment agreement with you that is
identical to the KNBT contract signed March 5, 2003.

To acknowledge your agreement to the terms stated herein, I would ask that you
execute a copy of this letter which is attached where indicated and return it to
my attention at your earliest convenience.

Very truly yours,

/s/ Jeffrey P. Feather
Jeffrey P. Feather, Chairman
Board of Keystone Savings Bank

Accepted and agreed to this    6th    of June, 2003:
                            ---------

/s/ Eugene T. Sobol
----------------------------------------

Eugene T. Sobol, Executive Vice-President & COO<PAGE>

                                                                    EXHIBIT 10.4

                       RETIREMENT AND SEVERANCE AGREEMENT

     This Agreement made this 4th day of March, 2003, by and between FREDERICK
E. KUTTEROFF of 1126 Deer Run, Orefield, PA 18069 ("Executive") and KEYSTONE
SAVINGS BANK, a Pennsylvania Mutual Savings Bank with headquarters at 90
Highland Avenue, Bethlehem, Pennsylvania 18017 ("Keystone"), is based upon the
following:

                            Relevant Background Facts

     A. Executive currently serves as President and Chief Executive Officer of
Keystone and with respect to its affiliated and subsidiary corporations in other
capacities as listed on Schedule A.

     B. Keystone is a Pennsylvania chartered mutual savings bank operating in
the greater Lehigh Valley Region of Pennsylvania, the Board of Trustees
("Board") of which is presently considering a transaction with First Colonial
Group, Inc. the terms of which are known generally to Executive and the Board
and are not finalized (the "Proposed Transaction") as of the date of this
Agreement.

     C. Executive and Keystone have come to agreements in principle with respect
to Executive's retirement from Keystone, the resignation of his positions
therefrom and the terms and conditions under which he would retire and receive
certain severance benefits. It is the intention of Executive and Keystone (and
sometimes the "Parties") to memorialize the terms of that agreement in principle
in the following:

                                    Agreement

     1. Incorporation. The Relevant Background Facts stated above are
incorporated herein by reference as if fully stated herein.

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     2. Modification of Duties. Executive agrees and acknowledges that during
the period from the date of execution of this Agreement through his Retirement
Date (as defined below), Executive shall function in the role of President and
Chief Executive Officer of Keystone (and in other roles with respect to the
listed affiliated organizations on Schedule A) with his duties and
responsibilities being those outlined generally on Schedule B, attached.

     3. Retirement Date. During the period from the date of execution of this
Agreement through the completion of the Proposed Transaction, but in no event
later than December 31, 2003, (the earlier of which dates shall be Executive's
retirement date) (the "Retirement Date"), Executive shall serve at the pleasure
and the sole discretion of the Board which may, in its sole discretion, request
Executive to resign some or all of his positions (including any and all Board
Positions) and/or duties prior to December 31, 2003. In the event such a request
is made by the Board, Executive shall comply with the same without condition or
delay. Notwithstanding the foregoing, the Board and Executive may agree that he
shall continue to hold a position with Keystone or its affiliated entities after
the Retirement Date.

     4. Compensation During Severance Period. Notwithstanding the option and
right of the Board to terminate some or all of Executive's positions and/or
duties earlier than the Retirement Date, Executive shall be entitled to receive
compensation for the period ending May 31, 2005 (the "Severance Period"),
payable in regularly scheduled bi-weekly installments through May 31, 2005, as
shown on Schedule C attached hereto (the "Severance Period Compensation"). In
the event of Executive's death during the Severance Period, Keystone shall
continue to pay the Severance Period Compensation shown on Schedule C to
Executive's personal representatives and/or his designated beneficiaries, as
designated by a separate signed notice or letter from Executive to the Board
hereunder.

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     5. Severance Period Benefits: In addition to the Severance Period
Compensation, Executive shall be entitled to certain fringe and other benefits
including, without limitation, participation in Keystone's Supplemental
Executive Retirement Plan, Keystone's Performance Unit Plan and Keystone's
Trustee and Executive Deferred Compensation Plan (together the "Non-Qualified
Plans") through May 31, 2005, each as defined or modified on Schedule D attached
hereto. In the event of Executive's death during the Severance Period, Keystone
shall continue to pay the Benefits shown on Schedule D [paragraph 5 and 8(c)] to
Executive's personal representatives and/or his designated beneficiaries, as
designated by a separate signed notice or letter by Executive to the Board
hereunder.

     6. Board's Powers and Liabilities: Without in any manner intending to
abrogate Keystone's financial obligations to Executive and its contractual
liabilities and undertakings pursuant to this Agreement, the Board shall have
the full power and authority to administer this Agreement. So long as they are
undertaken in good faith, the Board's actions taken under this Agreement
including any decisions made concerning the Non-Qualified Plans, shall be
binding and conclusive on all persons for all purposes. No member of the Board
shall be liable to any person for any action taken or omitted in connection with
the interpretation and administration of this Agreement unless attributable to
the member's willful misconduct or lack of good faith.

     7. Limited Release: In consideration of the compensation and benefits
described in this Agreement which are of greater value and/or duration than
those to which Executive would normally be entitled upon the termination of his
employment, Executive, on behalf of himself, his heirs, executors,
administrators, agents, representatives and assigns, hereby forever releases
Keystone Savings Bank, and its respective officers, directors, trustees,
shareholders, owners, employees, supervisors, agents, representatives,
predecessors, successors and assigns ("Released

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Parties"), from any and all claims, demands, suits or causes of action of any
nature whatsoever, whether known or unknown, relating in any way to his
employment with Keystone and the termination thereof, including without
limitation claims under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Older Workers Benefit Protection Act, the
Americans with Disabilities Act, the Family and Medical Leave Act, the Fair
Labor Standards Act, the National Labor Relations Act, the Pennsylvania Human
Relations Act, the Pennsylvania Wage Payment and Collection Law, and all other
federal, state or local laws, claims for breach of contract, claims for wrongful
discharge, claims for emotional distress, defamation, fraud, misrepresentation
or other personal injury, claims for unpaid compensation, claims relating to
benefits, claims for attorneys' fees and costs, and claims under any federal,
state, or local law or cause of action concerning employment, which have arisen
as of the date this Agreement is signed by him; provided, however, that this
release shall not, in any manner, be construed to be applicable to: (i) any
claims for breach of the terms of this Agreement; or (ii) any claims for breach
of the terms of any Qualified Plan of which Keystone is the sponsor.

     8. Non-Competition. In consideration of the compensation and benefits
described in this Agreement which are of greater value and/or duration than
those to which Executive would normally be entitled upon the termination of
employment, Executive shall not, during the Severance Period, engage in
competition with Keystone. For purposes of this Agreement, Executive shall be
deemed to "engage in competition" with Keystone if he shall directly or
indirectly become an employee, independent contractor or consultant of, or in
any other capacity contract with, a financial banking or similar institution or
organization or in any manner solicit accounts which were served by Keystone
during the twelve (12) month period immediately preceding the Retirement Date
for the same business engaged in by Keystone and/or assist any

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person or entity to acquire such accounts for the same business as engaged in by
Keystone. Such restrictions shall be effective within a radius of one hundred
(100) miles of Keystone's headquarters.

     9. Non-Solicitation Covenant. In consideration of the compensation and
benefits described in this Agreement which are of greater value and/or duration
than those to which Executive would normally be entitled upon the termination of
employment, Executive agrees that during the Severance Period and thereafter he
will not solicit for employment any then-current employee of Keystone Savings
Bank or any of its then affiliated entities, nor will he attempt, in any manner,
to encourage or cause any then-current employee of Keystone Savings Bank or its
then affiliated entities to terminate his or her employment relationship with
Keystone Savings Bank or its then affiliated entities. Executive understands and
agrees that any violation of this section shall constitute and be treated as a
material breach of this Agreement.

     10. Non-Disparagement. The Parties agree that they shall not communicate,
either orally or in writing, or by conduct, any negative, adverse or derogatory
information, facts, opinions or beliefs concerning each other. Executive further
agrees that he will not engage in any activities that will serve to undermine
the management and/or disrupt the operation of Keystone Savings Bank or its
affiliated entities. Executive understands and agrees that any violation of this
section shall constitute and be treated as a material breach of this Agreement.

     11. Confidentiality.

          A. Executive shall not, directly or indirectly, use or divulge to any
third party any of Keystone's confidential information or materials disclosed or
made available to Executive by reason of his employment with Keystone and not
generally known to the public industry in which Keystone is engaged
(collectively "Confidential Information"). The Confidential

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Information includes, without limitation: trade secrets and other information
related to Keystone's practices in personnel, accounting, marketing,
advertising, promotion, selling; customer know-how; and research.

          B. All of the Confidential Information is a valuable asset of Keystone
and is, will be and shall, at all times, remain the sole and exclusive property
of Keystone.

          C. Executive shall, at all times, hold the Confidential Information
secret.

          D. Executive shall immediately upon the Retirement Date (or sooner
pursuant to paragraph 3) deliver or cause to be delivered to Keystone all of the
Confidential Information in Executive's possession or control, as well as all
other materials furnished to or acquired by Executive as a result of, or during
the course of, Executive's employment by Keystone.

          E. The Parties agree that this Agreement, the discussions leading to
this Agreement, the facts and circumstances underlying this Agreement and the
terms and conditions of this Agreement are confidential and may not be disclosed
in any manner to any third party, except in a proceeding to enforce the terms
hereof or as required by law. Notwithstanding the foregoing, Keystone recognizes
that Executive may disclose the terms of this Agreement to his attorney, tax
accountant and/or the Internal Revenue Service, the Pennsylvania Department of
Revenue, and any local taxing authority and that either party may disclose this
Agreement in response to a subpoena from a state or federal regulatory body.
Further, Executive recognizes that Keystone may disclose the terms of this
Agreement to the appropriate parties in the Proposed Transaction as well as
regulatory authorities, and as may be required by applicable law with respect to
the Proposed Transaction. The Parties understand and agree that any violation of
this section shall constitute and be treated as a material breach of this
Agreement, unless such disclosure is compelled by Court Order, subpoena, or
other legal process.

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     12. Binding Effect. The Agreement shall be binding upon and inure to the
benefit of Keystone, its successors and assigns, and to the Executive and his
heirs, executors, administrators, and legal representatives.

     13. Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania. Venue for any action
brought under this Agreement shall lie only in the Northampton County Court of
Common Pleas.

     14. Compliance with Code, Etc. The Parties intend that this Agreement
comply with the provisions of the Internal Revenue Code, as amended, and
Regulations in effect interpreting the Code. If, at a later date, the laws of
the United States or the Commonwealth of Pennsylvania are construed in such a
way as to make this Agreement or a provision thereof null and void, the
Agreement or provision in question shall be construed in a manner that best
carries out the Parties' purposes and intentions.

     15. Severability. If the Internal Revenue Service shall at any time
interpret this Agreement to be ineffective to defer the Executive's income, and
that interpretation becomes final and unappealable, then only those amounts
which would be treated as taxable income by the Service at the time of such
final interpretation, shall be paid over to the Executive.

     16. Entire Agreement. This Agreement supersedes all other agreements
previously made between the Parties relating to its subject matter. There are no
other understandings or agreements.

     17. Assignment. This Agreement (including all rights to enforce the
non-competition, non-solicitation, non-disparagement and confidentiality
provisions hereof) may be assigned only by Keystone, and Keystone may delegate
any duties hereunder to any affiliated or subsidiary corporation.

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     18. Notice. Any notice to be delivered under this Agreement shall be given
in writing and delivered, personally or by certified mail, return receipt
requested, postage prepaid, addressed to Keystone or Executive at their last
known addresses.

     19. Non-waiver. No delay or failure by either party to exercise any right
under this Agreement, and no partial or single exercise of that right, shall
constitute a waiver of that or any other right.

     20. Headings. Headings in this Agreement are for convenience only and shall
not be used to interpret or construe its provisions.

     21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

     22. Advice of Legal Counsel. Keystone recommends to Executive that he
consult with legal counsel prior to executing this Agreement.

     23. Voluntary Agreement. Executive acknowledges that he has been given at
least twenty-one (21) days from his receipt of this Agreement to consider
whether or not to sign this Agreement. Executive agrees that if he signed this
Agreement before the expiration of this twenty-one (21) day period, he has done
so voluntarily after consulting with counsel regarding this Agreement.

     24. Revocation. Executive is aware that he may change his mind and revoke
this Agreement at any time during the seven (7) day period immediately after the
date upon which this Agreement is signed, in which case none of the provisions
of this Agreement will have effect.

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     IN WITNESS WHEREOF, Keystone has caused this Agreement to be executed by
its duly authorized officers, and Executive hereunder has set his had and seal
as of the date first above written.

ATTEST:                                     KEYSTONE SAVINGS BANK

 /s/ R. C. Paul, Jr.                        By /s/ Jeffrey P. Feather
---------------------------------             ----------------------------------

WITNESS:

 /s/ Michele A. Linsky                      /s/ Frederick E. Kutteroff
---------------------------------           ------------------------------------
                                            Frederick E. Kutteroff

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                                   SCHEDULE A

        Positions with Affiliated or Subsidiary Corporations and Entities

Keystone Lehigh Valley, Inc. - Vice President and Treasurer
Keystone Lehigh Valley - Secretary and Director
Keystone Savings Foundation - Trustee and Secretary/Treasurer

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<PAGE>

                                   SCHEDULE B

                              Pre-Retirement Duties

Interface with regulators, both in the normal course of business and in
connection with the Proposed Transaction.

Prepare for and conduct the various board and committee meetings in the normal
course of KSB business.

Be available to render advice and counsel to a new CEO.

Be a positive part of meetings with employees, customers, etc. to introduce the
new CEO.

Continue to represent Keystone in the community in a positive manner at
appropriate meetings, functions, etc.

Be a positive force in conveying the corporate message regarding the Proposed
Transaction to all constituencies.

Continue to oversee, direct and control current direct reports (Higgins,
Goldsmith, Feola, Billard, Linsky & Madura).

Function as CEO as directed by the board.

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                                   SCHEDULE C

                          Severance Period Compensation

2003                          $326,000
2004                          $326,000
2005 (through May 31, 2005)   $135,833

On or before December 31, 2003, in the event that Keystone successfully
completes the acquisition by merger of Nazareth National Bank/ First Colonial
Group (the Proposed Transaction), and provided that Keystone's Board is
satisfied, in its sole discretion, with Executive's discharge of his duties
hereunder, Keystone (or its successor) will make a payment to Executive's SERP
in the amount of $250,000.00.

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<PAGE>

                                   SCHEDULE D

                  Executive's Severance Period Fringe Benefits

1.   Health Insurance pursuant to Keystone's Group Health Plan through May 31,
     2005 (thereafter, through May 31, 2008, Executive may continue health
     insurance coverage through Keystone's Group Health Plan at his sole cost
     and expense which shall be fixed at the then current COBRA benchmark charge
     used by Keystone for former employees for like coverage).

2.   Group Disability Insurance through May 31, 2005.

3.   Group Life Insurance through May 31, 2005.

4.   401(k) Participation with Keystone match through May 31, 2005. If, for any
     reason, Executive is determined not to be eligible for participation in
     this plan, Executive will be permitted to make his 401(k) contribution &
     the employer match will be made to the Trustee & Executive Deferred
     Compensation Plan.

5.   Qualified Plan Participation through May 31, 2005; provided, however, if it
     is determined that Executive is no longer qualified to participate under
     the Plan prior to May 31, 2005, or if said Plan is eliminated or modified
     to Executive's detriment prior to May 31, 2005, Keystone shall make an
     actuarially determined payment to Executive's SERP which shall yield the
     equivalent of qualified plan participation through May 31, 2005.

6.   Payment of $10,000 for legal and accounting expense.

7.   Payment of an automobile allowance of $800.00 per month through May 31,
     2005.

8.   Non-qualified Plans:

     (a)  Supplemental Executive Retirement Plan ("SERP"): On December 31, 2002,
          Keystone contributed Three Hundred Fifty Thousand ($350,000.00)
          Dollars to the SERP for Executive's benefit and no additional payments
          shall be made except as provided herein.

     (b)  Trustee and Executive Deferred Compensation Plan: Participation
          through May 31, 2005.

     (c)  Performance Unit Plan: In full and final settlement of any and all of
          Executive's rights under the Performance Unit Plan, he shall receive a
          payment on or before December 31, 2003 in the amount of One Hundred
          Ninety-One Thousand Eight Hundred ($191,800.00) Dollars.

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