Document:

EXHIBIT 10.3
                                 EAST PENN BANK
                              EMPLOYMENT AGREEMENT
                                      WITH
                                 BRENT L. PETERS

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                              EMPLOYMENT AGREEMENT

      THIS AGREEMENT is made as of this 12th day of April, 2001, between EAST
PENN BANK ("Bank"), a Pennsylvania banking institution having a place of
business at 731 Chestnut Street, Emmaus, Pennsylvania 18049 and BRENT L. PETERS
("Executive"), an individual residing at 3837 East View Drive, Orefield,
Pennsylvania 18069.

                                   WITNESSETH:

      WHEREAS, Bank desires to continue to retain Executive to serve in the
capacity of President and Chief Executive Officer of Bank under the terms and
conditions set forth herein;

      WHEREAS, Executive desires to continue to serve the Bank in an executive
capacity under the terms and conditions set forth herein;

      WHEREAS, Bank and Executive desire to replace the prior employment
agreement into which they entered on December 14, 1990 ("Prior Agreement");

      WHEREAS, Bank and Executive have satisfied all of their obligations under
the Prior Agreement; and

      WHEREAS, this Agreement supersedes the Prior Agreement and the Prior
Agreement is null and void.

                                   AGREEMENT:

      NOW, THEREFORE, the parties hereto, intending to be legally bound, agree
as follows:

1)    Employment. Bank hereby employs Executive and Executive hereby accepts
      employment with Bank, under the terms and conditions set forth in this
      Agreement.

2)    Duties of Employee. Executive shall continue to serve as the President,
      Chief Executive Officer and member of the Board of Directors of Bank,
      reporting only to the Board of Directors and shall have supervision and
      control over, and responsibility for, the general management and operation
      of the Bank and/or any of its subsidiaries or affiliates. Executive shall
      have such other duties and hold such other titles as may be given to him
      from time to time by the Board of Directors of Bank provided that such
      duties are consistent with the Executive's position as President and Chief
      Executive Officer of Bank.

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3)    Engagement in Other Employment. Executive shall devote all his working
      time, ability and attention to the business of the Bank and/or any of its
      subsidiaries or affiliates, during the term of this Agreement. The
      Executive shall notify the Board of Directors of Bank in writing and
      receive written approval from Bank (which approval shall not be
      unreasonably withheld) before the Executive engages in any other business
      or commercial duties or pursuits, including but not limited to,
      directorships of other companies. Under no circumstances may the Executive
      engage in any business or commercial activities, duties or pursuits which
      compete with the business or commercial activities of the Bank and/or any
      of its subsidiaries or affiliates, nor may the Executive serve as a
      director or officer or in any other capacity in a company which competes
      with Bank. Executive shall not be precluded, however, upon written
      notification to the Board of Directors, from engaging in voluntary or
      philanthropic endeavors, from engaging in activities designed to maintain
      and improve his professional skills, or from engaging in activities
      incident or necessary to personal investments, so long as they are, in the
      Board's reasonable opinion, not in conflict with or detrimental to the
      Executive's rendition of services on behalf of the Bank.

4)    Term of Agreement.

      (a)   This Agreement shall be for a three (3) year period (the "Employment
            Period") beginning on the first day of January, 2001, and ending
            three (3) years later, subject, however, to prior termination of
            this Agreement as set forth in 4(b), (c), and (d) and 6 (a) and (b)
            below. Furthermore, subject to the subsequent provisions, upon the
            expiration of the first twelve (12) full calendar months after the
            date first above written, the term hereof shall be extended for
            another twelve (12) full calendar months, and upon expiration of
            each subsequent twelve (12) full calendar months thereafter, the
            term of this Agreement shall be likewise extended for an additional
            twelve (12) full calendar months. Such extension of this Agreement's
            term shall be automatic unless the Bank provides the Executive, or
            the Executive provides the Bank written notice of its or his
            intention not to extend this Agreement, which written notice shall
            be given by the Bank or the Executive not less than sixty (60) days
            before the expiration of the then current twelve (12) months.

      (b)   Notwithstanding the provisions of Section 4(a) of this Agreement,
            this Agreement shall terminate automatically for Cause (as defined
            herein) upon written notice from the Board of Directors of Bank to
            Executive. As used in this Agreement, "Cause" shall mean any of the
            following:

            (i)     Executive's conviction of or plea of guilty or nolo
                    contendere to a felony, a crime of falsehood or a crime
                    involving moral turpitude, or the actual incarceration of
                    Executive for a period of thirty (30) consecutive days or
                    more;

            (ii)    Executive's failure to follow the good faith lawful
                    instructions of the

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                    Board of Directors of Bank with respect to its operations,
                    after written notice from Bank and a failure to cure such
                    violation within sixty (60) days of said written notice;

            (iii)   Executive's willful failure to substantially perform
                    Executive's duties for Bank, other than a failure resulting
                    from Executive's incapacity because of physical or mental
                    illness, as provided in subsection (d) of this Section 4,
                    after written notice from Bank and a failure to cure such
                    violation within sixty (60) days of said written notice;

            (iv)    Executive's intentional violation of the provisions of this
                    Agreement, after written notice from Bank and a failure to
                    cure such violation within sixty (60) days of said written
                    notice;

            (v)     dishonesty of the Executive in the performance of his
                    duties;

            (vi)    gross misconduct on the part of the Executive as determined
                    by an affirmative vote of eighty percent (80%) of the
                    disinterested members of the Board of Directors which brings
                    public discredit to Bank;

            (vii)   Executive's breach of fiduciary duty involving personal
                    profit; or

            (viii)  Executive's willful violation of any law, rule or regulation
                    governing banks or bank officers or any final cease and
                    desist order issued by a bank regulatory authority, unless
                    the Executive's conduct that lead to the violation was
                    authorized by or occurred at the instruction of the Bank's
                    Board of Directors.

            If this Agreement is terminated for Cause, all of Executive's rights
            and benefits under this Agreement shall cease as of the effective
            date of such termination except for the rights under Paragraph 18
            hereof with respect to arbitration.

      (c)   Notwithstanding the provisions of Section 4(a) of this Agreement,
            the term of this Agreement shall end upon Executive's voluntary
            termination of employment (other than in accordance with Section 6
            of this Agreement) for Good Reason. The term "Good Reason" shall
            mean (i) the assignment of duties and responsibilities inconsistent
            with Executive's status as President and Chief Executive Officer of
            Bank, (ii) a reassignment which requires Executive to move his
            principal residence more than twenty (20) miles from the Bank's
            principal executive office immediately prior to this Agreement,
            (iii) any removal of the Executive from office or any adverse change
            in the terms and conditions of the Executive's employment, except
            for any termination of the Executive's employment under the
            provisions of Section 4(b) hereof, (iv) any reduction in the
            Executive's Annual Base Salary as in effect on the date hereof or as
            the same may be increased from time to time, except such reductions
            that are the result of a national financial depression or national
            or bank emergency when such reduction

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            has been implemented by the Board of Directors for Bank's senior
            management, (v) any failure of Bank to provide the Executive with
            benefits at least as favorable as those enjoyed by the Executive
            during the Employment Period under any of the pension, life
            insurance, medical, health and accident, disability or other
            employee plans of Bank, or the taking of any action that would
            materially reduce any of such benefits unless such reduction is part
            of a reduction applicable to all employees or limited by severe
            health reasons which precludes obtaining such insurance coverage at
            commercially reasonable rates, or (vi) a final adjudication, by a
            court of competent jurisdiction or a regulatory body governing Bank,
            that Bank's Board of Directors violated law, rule, regulation
            governing banks or bank officers, or any final cease and desist
            order issued by a bank regulatory authority when Bank's Board of
            Directors instructed or directed Executive to take certain action or
            engage in certain activity. If such termination occurs for Good
            Reason, then Bank shall pay Executive an amount equal to and no
            greater than 2.99 times the Executive's Agreed Compensation as
            defined in Section 4(e), payable in thirty-six (36) equal monthly
            installments and subject to federal, state, and local tax
            withholdings. In addition, for a period of three (3) years from the
            date of termination of employment, or until Executive secures
            substantially similar benefits through other employment, whichever
            shall first occur, Executive shall receive a continuation of all
            life, disability, medical insurance and other normal health and
            welfare benefits in effect with respect to Executive during the two
            (2) years prior to his termination of employment, or, if Bank cannot
            provide such benefits because Executive is no longer an employee, a
            dollar amount equal to the cost to Executive of obtaining such
            benefits (or substantially similar benefits). Additionally, if
            permitted under the terms of the plan, Executive shall receive the
            additional retirement benefits to which he would have been entitled
            had his employment continued through the then remaining term of the
            Agreement. However, in the event the payment described herein, when
            added to all other amounts or benefits provided to or on behalf of
            the Executive in connection with his termination of employment,
            would result in the imposition of an excise tax under Code Section
            4999, such payments shall be retroactively (if necessary) reduced to
            the extent necessary to avoid such excise tax imposition. Upon
            written notice to Executive, together with calculations of Bank's
            independent auditors, Executive shall remit to Bank the amount of
            the reduction plus such interest as may be necessary to avoid the
            imposition of such excise tax. Notwithstanding the foregoing or any
            other provision of this contract to the contrary, if any portion of
            the amount herein payable to the Executive is determined to be
            non-deductible pursuant to the regulations promulgated under Section
            280G of the Internal Revenue Code of 1986, as amended (the "Code"),
            the Bank shall be required only to pay to Executive the amount
            determined to be deductible under Section 280G.

            At the option of the Executive, exercisable by the Executive within
            ninety (90) days after the occurrence of the event constituting
            "Good Reason," the Executive may resign from employment under this
            Agreement by a notice in writing (the "Notice of Termination")
            delivered to Bank and the provisions of this Section 4(c) hereof
            shall thereupon apply.

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      (d)   Notwithstanding the provisions of Section 4(a) of this Agreement,
            the term of this Agreement shall end upon Executive's Disability and
            Executive's rights under this Agreement shall cease as of the date
            of such termination; provided, however, that Executive shall
            nevertheless be entitled to receive any benefits that may be
            available under any disability plan of Bank, until the earliest of
            (i) Executive's return to employment, (ii) his attainment of age 65,
            or (iii) his death. In addition, Executive shall receive for such
            period, a continuation of all life, disability, medical insurance
            and other normal health and welfare benefits in effect or, if Bank
            cannot provide such benefits because Executive is no longer an
            employee, a dollar amount equal to the cost to Executive of
            obtaining such benefits (or substantially similar benefits). For
            purposes of this Agreement, the Executive shall have a Disability
            if, as a result of physical or mental injury or impairment,
            Executive is unable to perform all of the essential job functions of
            his position on a full time basis with or without a reasonable
            accommodation and without posing a direct threat to himself and
            others, for a period of one hundred eighty (180) days. The Executive
            shall have no duty to mitigate any payment provided for in this
            Section 4(d) by seeking other employment.

      (e)   The term "Agreed Compensation" shall equal the sum of (A) the
            Executive's highest Annual Base Salary under the Agreement, and (B)
            the average of the Executive's annual bonuses with respect to the
            three (3) calendar years immediately preceding the Executive's
            termination.

5.    Employment Period Compensation.

      (a)   Annual Base Salary. For services performed by Executive under this
            Agreement, Bank shall pay Executive an Annual Base Salary during the
            Employment Period at the rate of $160,000 per year, minus applicable
            withholdings and deductions, payable at the same times as salaries
            are payable to other executive employees of Bank. Bank shall review
            Executive's performance on an annual basis for the purpose of
            determining annual salary and/or bonus payments. Bank may, after
            conducting said annual review, increase Executive's Annual Base
            Salary, and any and all such increases shall be deemed to constitute
            amendments to this Section 5(a) to reflect the increased amounts,
            effective as of the date established for such increases by the Board
            of Directors of Bank or any committee of such Board in the
            resolutions authorizing such increases.

      (b)   Bonus. Bank may, after conducting the annual review identified in
            Section 5(a), pay a bonus or bonuses in the form of cash and/or
            stock to Executive, if Bank, in its sole discretion, deems
            appropriate. The payment of any such bonuses shall not reduce or
            otherwise affect any other obligation of Bank to Executive provided
            for in this Agreement.

      (c)   Vacations. During the term of this Agreement, Executive shall be
            entitled to six (6) weeks paid annual vacation. Executive shall not
            be entitled to receive any

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            additional compensation from Bank for failure to take a vacation,
            however, Executive shall be able to carry over unused vacation time
            from one year to the next up to a maximum of twelve (12) weeks. Bank
            shall not reimburse Executive for any unused vacation.

      (d)   Automobile. During the term of this Agreement, Bank shall provide
            Executive with exclusive use of an automobile mutually agreed upon
            by Bank and Executive. Bank shall be responsible and shall pay for
            all costs of insurance coverage, repairs, maintenance and other
            operating and incidental expenses, including license, fuel and oil.
            Bank shall provide Executive with a replacement automobile at
            approximately the time Executive's automobile reaches three (3)
            years of age or sixty thousand (60,000) miles, whichever is first,
            and approximately every three (3) years or sixty thousand (60,000)
            miles thereafter, upon the same terms and conditions.

      (e)   Employee Benefit Plans. During the term of this Agreement, Executive
            shall be entitled to participate in or receive the benefits of any
            employee benefit plan currently in effect at Bank or that comes into
            effect at Bank during the term of this Agreement, subject to the
            terms of said plan, until such time that the Board of Directors of
            Bank authorizes a change in such benefits. Bank shall implement a
            deferred compensation plan no later than April 30, 2001 for which
            Executive shall be eligible. Bank shall not make any changes in any
            employee benefit plans that would adversely affect Executive's
            rights or benefits thereunder, unless such change occurs pursuant to
            a program applicable to all executive officers of Bank and does not
            result in a proportionately greater adverse change in the rights of
            or benefits to Executive as compared with any other executive
            officer of Bank. Nothing paid to Executive under any plan or
            arrangement presently in effect or made available in the future
            shall be deemed to be in lieu of the salary payable to Executive
            pursuant to Section 5(a) hereof.

      (f)   Business Expenses. During the term of this Agreement, Executive
            shall be entitled to receive prompt reimbursement for all reasonable
            expenses incurred by him, which are properly accounted for, in
            accordance with the policies and procedures established by the Board
            of Directors of Bank for its executive officers. Bank shall
            reimburse Executive for any and all dues and reasonable Bank related
            business expenses associated with the Executive's membership in a
            country club, social club, or service organization, including but
            not limited to, The Rotary Club, The Chamber of Commerce and
            Brookside Country Club.

6.    Termination of Employment Following Change in Control.

      (a)   If a Change in Control (as defined in Section 6(b) of this
            Agreement) shall occur then, at the option of Executive, exercisable
            by Executive within one hundred twenty (120) days of the Change in
            Control, Executive may resign from employment with Bank (or, if
            involuntarily terminated, give notice of intention to collect
            benefits under this Agreement) by delivering a notice in writing
            (the

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            "Notice of Termination") to Bank and the provisions of Section 8 of
            this Agreement shall apply.

      (b)   As used in this Agreement, "Change in Control" shall mean the
            occurrence of any of the following:

            (i)   (A) a merger, consolidation or division involving Bank, (B) a
                  sale, exchange, transfer or other disposition of substantially
                  all of the assets of Bank, or (C) a purchase by Bank of
                  substantially all of the assets of another entity, unless (y)
                  such merger, consolidation, division, sale, exchange,
                  transfer, purchase or disposition is approved in advance by
                  seventy-five percent (75%) or more of the members of the Board
                  of Directors of Bank who are not interested in the transaction
                  and (z) a majority of the members of the Board of Directors of
                  the legal entity resulting from or existing after any such
                  transaction and of the Board of Directors of such entity's
                  parent corporation, if any, are former members of the Board of
                  Directors of Bank; or

            (ii)  any "person" (as such term is used in Sections 13(d) and 14(d)
                  of the Securities Exchange Act of 1934 (the "Exchange Act")),
                  other than Bank or any "person" who on the date hereof is a
                  director or officer of Bank, is or becomes the "beneficial
                  owner" (as defined in Rule 13d-3 under the Exchange Act),
                  directly or indirectly, of securities of Bank representing
                  twenty-five (25%) percent or more of the combined voting power
                  of Bank's then outstanding securities, or

            (iii) during any period of two (2) consecutive years during the term
                  of Executive's employment under this Agreement, individuals
                  who at the beginning of such period constitute the Board of
                  Directors of Bank cease for any reason to constitute at least
                  a majority thereof, unless the election of each director who
                  was not a director at the beginning of such period has been
                  approved in advance by directors representing at least
                  two-thirds of the directors then in office who were directors
                  at the beginning of the period; or

            (iv)  any other change in control of Bank similar in effect to any
                  of the foregoing.

7.    Definition of Date of Change of Control.

      For purposes of this Agreement, the Date of Change of Control shall mean:

      (h)   the first date on which a single person and/or entity, or group of
            affiliated persons and/or entities, acquire the beneficial ownership
            of twenty-five percent (25%) or more of the Bank's voting
            securities, or

      (i)   the date of the closing of a sale or the date of the transfer or
            exchange of substantially all the Bank's assets,

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            or

      (j)   the date on which a merger, consolidation or division is
            consummated, as applicable, or

      (k)   the ending date of a consecutive two (2) year period during which
            individuals who formerly constituted a majority of the Board of
            Directors of Bank ceased to be a majority thereof.

8.    Rights in the Event of Termination of Employment Following Change in
      Control.

      (a)   In the event that Executive delivers a Notice of Termination (as
            defined in Section 6(a) of this Agreement) to Bank, Executive shall
            be entitled to receive the compensation and benefits set forth
            below:

            If a "Change in Control" (as defined in Section 6(b) of this
            Agreement) has occurred, Bank shall pay Executive a lump sum amount
            equal to and no greater than 2.99 times the Executive's Agreed
            Compensation as defined in subsection (e) of Section 4, minus
            applicable taxes and withholdings. In addition, for a period of
            three (3) years from the date of termination of employment, or until
            Executive secures substantially similar benefits through other
            employment, whichever shall first occur, Executive shall receive a
            continuation of all life, disability, medical insurance and other
            normal health and welfare benefits in effect with respect to
            Executive during the two (2) years prior to his termination of
            employment, or, if Bank cannot provide such benefits because
            Executive is no longer an employee, a dollar amount equal to the
            cost to Executive of obtaining such benefits (or substantially
            similar benefits). If permitted under the terms of the plan,
            Executive shall receive additional retirement benefits to which he
            would have been entitled had his employment continued through the
            then remaining term of the Agreement.

      (b)   Executive shall not be required to mitigate the amount of any
            payment provided for in this Section 8 by seeking other employment
            or otherwise. Unless otherwise agreed to in writing, the amount of
            payment or the benefit provided for in this Section 8 shall not be
            reduced by any compensation earned by Executive as the result of
            employment by another employer or by reason of Executive's receipt
            of or right to receive any retirement or other benefits after the
            date of termination of employment or otherwise.

9.    Rights in the Event of Termination of Employment Absent Change in Control.

      (a)   In the event that Executive's employment is involuntarily terminated
            by Bank without Cause and no Change in Control shall have occurred
            at the date of such termination, Bank shall pay Executive an amount
            equal to and no greater than 2.99 times the Executive's Agreed
            Compensation as defined in subsection (e) of Section 4, payable in
            thirty-six (36) equal monthly installments and subject to federal,
            state and local tax withholdings. In addition, for a period of three
            (3) years from the date of termination of employment, or until
            Executive secures substantially similar benefits through other
            employment, whichever shall first

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            occur, Executive shall receive a continuation of all life,
            disability, medical insurance and other normal health and welfare
            benefits in effect with respect to Executive during the two (2)
            years prior to his termination of employment, or, if Bank cannot
            provide such benefits because Executive is no longer an employee, a
            dollar amount equal to the cost to Executive of obtaining such
            benefits (or substantially similar benefits). In addition, if
            permitted pursuant to the terms of the plan, Executive shall receive
            additional retirement benefits to which he would have been entitled
            had his employment continued through the then remaining term of the
            Agreement. However, in the event the payment described herein, when
            added to all other amounts or benefits provided to or on behalf of
            the Executive in connection with his termination of employment,
            would result in the imposition of an excise tax under Code Section
            4999, such payments shall be retroactively (if necessary) reduced to
            the extent necessary to avoid such excise tax imposition. Upon
            written notice to Executive, together with calculations of Bank's
            independent auditors, Executive shall remit to Bank the amount of
            the reduction plus such interest as may be necessary to avoid the
            imposition of such excise tax. Notwithstanding the foregoing or any
            other provision of this contract to the contrary, if any portion of
            the amount herein payable to the Executive is determined to be
            non-deductible pursuant to the regulations promulgated under Section
            280G of the Internal Revenue Code of 1986, as amended (the "Code"),
            the Corporation shall be required only to pay to Executive the
            amount determined to be deductible under Section 280G.

      (b)   Executive shall not be required to mitigate the amount of any
            payment provided for in this Section 9 by seeking other employment
            or otherwise. Unless otherwise agreed to in writing, the amount of
            payment or the benefit provided for in this Section 9 shall not be
            reduced by any compensation earned by Executive as the result of
            employment by another employer or by reason of Executive's receipt
            of or right to receive any retirement or other benefits after the
            date of termination of employment or otherwise.

10.   Covenant Not to Compete.

      (a)   Executive hereby acknowledges and recognizes the highly competitive
            nature of the business of Bank and accordingly agrees that, during
            and for the applicable period set forth in Section 10(c) hereof,
            Executive shall not, except as otherwise permitted in writing by the
            Bank:

            (i)   be engaged, directly or indirectly, either for his own account
                  or as agent, consultant, employee, partner, officer, director,
                  proprietor, investor (except as an investor owning less than
                  5% of the stock of a publicly owned company) or otherwise of
                  any person, firm, corporation or enterprise engaged in (1) the
                  banking (including bank or financial institution holding
                  company), insurance or financial services industry, or (2) any
                  other activity in which Bank is engaged during the Employment
                  Period, and remain so

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                  engaged at the end of the Employment Period, in any area in
                  which, at any time during the Employment Period or at the date
                  of termination of the Executive's employment, is within twenty
                  (20) miles of any branch location, office or other facility of
                  Bank, unless Executive exclusively performs all such activity
                  outside of said twenty (20) mile area (the "Non-Competition
                  Area"); or

            (ii)  provide financial or other assistance to any person, firm,
                  corporation, or enterprise engaged in (1) the banking
                  (including bank or financial institution holding company),
                  insurance or financial services industry, or (2) any other
                  activity in which Bank is engaged during the Employment
                  Period, in the Non-Competition Area; or

            (iii) if employed in a capacity provided in (i) and (ii), solicit
                  current customers, during the term of this Agreement, of Bank
                  in the Non-Competition Area; or

            (iv)  solicit employees of Bank who are employed during the term of
                  this Agreement.

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      (b)   It is expressly understood and agreed that, although Executive and
            Bank consider the restrictions contained in Section 10(a) hereof
            reasonable for the purpose of preserving for Bank its good will and
            other proprietary rights, if a final judicial determination is made
            by a court having jurisdiction that the time or territory or any
            other restriction contained in Section 10(a) hereof is an
            unreasonable or otherwise unenforceable restriction against
            Executive, the provisions of Section 10(a) hereof shall not be
            rendered void but shall be deemed amended to apply as to such
            maximum time and territory and to such other extent as such court
            may judicially determine or indicate to be reasonable.

      (c)   The provisions of this Section 10 shall be applicable commencing on
            the date of this Agreement and ending on one of the following dates,
            as applicable:

            (i)   if Executive's employment terminates as a result of nonrenewal
                  in accordance with the provisions of Section 4(a) or for Cause
                  in accordance with the provisions of Section 4(b) (ii), (v),
                  (vi) or (viii) the effective date of termination of
                  employment; or

            (ii)  if Executive's employment terminates in accordance with the
                  provisions of Section 4(b) (i), (iii), (iv) or (vii) of this
                  Agreement (relating to termination for Cause), the first
                  anniversary date of the effective date of termination of
                  employment; or

            (iii) if the Executive voluntarily terminates his employment in
                  accordance with the provisions of Section 6 of this Agreement
                  (relating to termination of Employment following a change in
                  control), the first anniversary date of the effective date of
                  termination of employment; or

            (iv)  if the Executive's employment is involuntarily terminated in
                  accordance with the provisions of Section 6 of this Agreement
                  (relating to Termination of Employment following a change in
                  control), the first anniversary date of the effective date of
                  termination of employment; or

            (v)   if Executive voluntarily terminates his employment and this
                  Agreement with or without Good Reason (as defined in Section 4
                  (c)), the first anniversary date of the effective date of
                  termination of employment.

11.   Unauthorized Disclosure. During the term of his employment hereunder, or
      at any later time, the Executive shall not, without the written consent of
      the Board of Directors of Bank or a person authorized thereby, knowingly
      disclose to any person, other than an employee of Bank or a person to whom
      disclosure is reasonably necessary or appropriate in connection with the
      performance by the Executive of his duties as an executive of Bank, any
      material confidential information obtained by him while in the employ of
      Bank

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      with respect to any of Bank's services, products, improvements, formulas,
      designs or styles, processes, customers, methods of business or any
      business practices the disclosure of which could be or will be damaging to
      Bank; provided, however, that confidential information shall not include
      any information known generally to the public (other than as a result of
      unauthorized disclosure by the Executive or any person with the
      assistance, consent or direction of the Executive) or any information of a
      type not otherwise considered confidential by persons engaged in the same
      business of a business similar to that conducted by Bank or any
      information that must be disclosed as required by law.

12.   Liability Insurance. Bank shall use its best efforts to obtain insurance
      coverage for the Executive under an insurance policy covering officers and
      directors of Bank against lawsuits, arbitrations or other legal or
      regulatory proceedings.

13.   Notices. Except as otherwise provided in this Agreement, any notice
      required or permitted to be given under this Agreement shall be deemed
      properly given if in writing and if mailed by registered or certified
      mail, postage prepaid with return receipt requested, to Executive's
      residence, in the case of notices to Executive, and to the principal
      executive offices of Bank, in the case of notices to Bank.

14.   Waiver. No provision of this Agreement may be modified, waived or
      discharged unless such waiver, modification or discharge is agreed to in
      writing and signed by Executive and an executive officer specifically
      designated by the Board of Directors of Bank. No waiver by either party
      hereto at any time of any breach by the other party hereto of, or
      compliance with, any condition or provision of this Agreement to be
      performed by such other party shall be deemed a waiver of similar or
      dissimilar provisions or conditions at the same or at any prior or
      subsequent time.

15.   Assignment. This Agreement shall not be assignable by any party, except by
      Bank to any successor in interest to its business.

16.   Entire Agreement. This Agreement supersedes any and all agreements, either
      oral or in writing, between the parties with respect to the employment of
      the Executive by the Bank and this Agreement contains all the covenants
      and agreements between the parties with respect to employment. This
      Agreement specifically releases all parties of any rights and obligations
      under the Executive Employment Agreement of Brent L. Peters dated December
      14, 1990, between East Penn Bank and Brent L. Peters and said agreement is
      hereafter null and void.

17.   Successors; Binding Agreement.

      (a)   Bank will require any successor (whether direct or indirect, by
            purchase, merger, consolidation, or otherwise) to all or
            substantially all of the businesses and/or assets of Bank to
            expressly assume and agree to perform this Agreement in the

<PAGE>

                                                                  EXECUTION COPY

            same manner and to the same extent that Bank would be required to
            perform it if no such succession had taken place. Failure by Bank to
            obtain such assumption and agreement prior to the effectiveness of
            any such succession shall constitute a breach of this Agreement and
            the provisions of Section 48 of this Agreement shall apply. As used
            in this Agreement, "Bank" shall mean East Penn Bank, as defined
            previously and any successor to its respective business and/or
            assets as aforesaid which assumes and agrees to perform this
            Agreement by operation of law or otherwise.

      (b)   This Agreement shall inure to the benefit of and be enforceable by
            Executive's personal or legal representatives, executors,
            administrators, heirs, distributees, devisees and legatees. If
            Executive should die after a notice of termination is delivered by
            Executive, or following termination of Executive's employment
            without Cause, and any amounts would be payable to Executive under
            this Agreement if Executive had continued to live, all such amounts
            shall be paid in accordance with the terms of this Agreement to
            Executive's devisee, legatee, or other designee, or, if there is no
            such designee, to Executive's estate.

18.   Arbitration. Bank and Executive recognize that in the event a dispute
      should arise between them concerning the interpretation or implementation
      of this Agreement, lengthy and expensive litigation will not afford a
      practical resolution of the issues within a reasonable period of time.
      Consequently, each party agrees that all disputes, disagreements and
      questions of interpretation concerning this Agreement are to be submitted
      for resolution, in Philadelphia, Pennsylvania, to the American Arbitration
      Association (the "Association") in accordance with the Association's
      National Rules for the Resolution of Employment Disputes or other
      applicable rules then in effect ("Rules"). Bank or Executive may initiate
      an arbitration proceeding at any time by giving notice to the other in
      accordance with the Rules. Bank and Executive may, as a matter of right,
      mutually agree on the appointment of a particular arbitrator from the
      Association's pool. The arbitrator shall not be bound by the rules of
      evidence and procedure of the courts of the Commonwealth of Pennsylvania
      but shall be bound by the substantive law applicable to this Agreement.
      The decision of the arbitrator, absent fraud, duress, incompetence or
      gross and obvious error of fact, shall be final and binding upon the
      parties and shall be enforceable in courts of proper jurisdiction.
      Following written notice of a request for arbitration, Bank and Executive
      shall be entitled to an injunction restraining all further proceedings in
      any pending or subsequently filed litigation concerning this Agreement,
      except as otherwise provided herein.

19.   Validity. The invalidity or unenforceability of any provision of this
      Agreement shall not affect the validity or enforceability of any other
      provision of this Agreement, which shall remain in full force and effect.

20.   Applicable Law. This Agreement shall be governed by and construed in
      accordance

<PAGE>

                                                                  EXECUTION COPY

      with the domestic, internal laws of the Commonwealth of Pennsylvania,
      without regard to its conflicts of laws principles.

21.   Headings. The section headings of this Agreement are for convenience only
      and shall not control or affect the meaning or construction or limit the
      scope or intent of any of the provisions of this Agreement.

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                             EAST PENN BANK

_______________________________              By ________________________________
Dale A. Dries, Secretary                        Forrest A. Rohrbach,
                                                Chairman of theBoard

WITNESS:

_______________________________              ___________________________________
                                                 Brent L. Peters, Executive

130353EXHIBIT 10.4
                                 EAST PENN BANK
                SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
                                       FOR
                                 BRENT L. PETERS

<PAGE>

                                 EAST PENN BANK
                SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
                                       FOR
                                 BRENT L. PETERS

      THIS AGREEMENT is made and entered into this 31st day of May, 2001, by and
between EAST PENN BANK, a Pennsylvania banking institution having a place of
business at 731 Chestnut Street, Emmaus, Pennsylvania 18049 ("Bank"), and BRENT
L. PETERS ("Executive"), an individual residing at 3837 East View Drive,
Orefield, Pennsylvania 18069. This Agreement shall append the Split Dollar
Endorsement entered into on __________________, ______, or as subsequently
amended, by and between the aforementioned parties.

                                  INTRODUCTION

      To encourage Executive to remain an employee of Bank, Bank is willing to
provide to Executive with supplemental retirement benefits or to divide the
death proceeds of two life insurance policies on Executive's life. Bank will pay
the benefits and the life insurance premiums from its general assets.

                                    Article 1
                               General Definitions

      The following terms shall have the meanings specified:

      1.1 "Affiliate" means any company that controls, is controlled by, or is
under common control with Bank. For this Agreement, company includes any bank,
corporation, general or limited partnership, limited liability companies,
association or similar organization, business trust, or any other trust.

      1.2 "Change in Control" means any of the following:

            (A)   (A) a merger, consolidation or division involving Bank, (B) a
                  sale, exchange, transfer or other disposition of substantially
                  all of the assets of Bank, or (C) a purchase by Bank of
                  substantially all of the assets of another entity, unless (y)
                  such merger, consolidation, division, sale, exchange,
                  transfer, purchase or disposition is approved in advance by
                  seventy-five percent (75%) or more of the members of the Board
                  of Directors of Bank who are not interested in the transaction
                  and (z) a majority of the members of the Board of Directors of
                  the legal entity resulting from or existing after any such
                  transaction and of the Board of Directors of such entity's
                  parent corporation, if any, are former members of the Board of
                  Directors of Bank; or

<PAGE>

            (B)   any "person" (as such term is used in Sections 13(d) and 14(d)
                  of the Securities Exchange Act of 1934 (the "Exchange Act")),
                  other than Bank or any "person" who on the date hereof is a
                  director or officer of Bank, is or becomes the "beneficial
                  owner" (as defined in Rule 13d-3 under the Exchange Act),
                  directly or indirectly, of securities of Bank representing
                  twenty-five (25%) percent or more of the combined voting power
                  of Bank's then outstanding securities, or

            (C)   during any period of two (2) consecutive years during the term
                  of Executive's employment under this Agreement, individuals
                  who at the beginning of such period constitute the Board of
                  Directors of Bank cease for any reason to constitute at least
                  a majority thereof, unless the election of each director who
                  was not a director at the beginning of such period has been
                  approved in advance by directors representing at least
                  two-thirds of the directors then in office who were directors
                  at the beginning of the period; or

            (D)   any other change in control of Bank similar in effect to any
                  of the foregoing.

      Notwithstanding anything else to the contrary set forth in this Agreement,
if (i) an agreement is executed by Bank providing for any of the transactions or
events constituting a Change in Control as defined herein, and the agreement
subsequently expires or is terminated without the transaction or event being
consummated, and (ii) Executive's employment did not terminate during the period
after the agreement and prior to such expiration or termination, for purposes of
this Agreement it shall be as though such agreement was never executed and no
Change in Control event shall be deemed to have occurred as a result of the
execution of such agreement.

      1.3 "Disability" means Executive suffering a physical or mental
impairment, which, in the judgment of a physician satisfactory to Bank, prevents
Executive from performing all of the essential job functions of Executive's
position on a full time basis with or without reasonable accommodation and
without posing a direct threat to himself or others, for a period of one hundred
eighty days. As a condition to any benefits, Bank may require Executive to
submit to such physical or mental evaluations and tests as Bank's Board of
Directors deems appropriate.

      1.4 "Bank" or "Corporation" means East Penn Bank

      1.5 "Insured" means Executive.

      1.6 "Insurer" means The MONY Group and ING Southland.

      1.7 "Policy" means The MONY Group insurance policy no. B25014666 and ING
Southland insurance policy no. 06 009 3702.

<PAGE>

      1.8 "Net Death Proceeds" means the death proceeds of the Policy, in the
aggregate amount as provided in the attached endorsements.

      1.9 "Normal Retirement Age" means 62 years old.

      1.10 "Code" means the Internal Revenue Code of 1986, as amended.

      1.11 "Employment Agreement" means the Employment Agreement entered into
between Bank and Insured, dated April 12, 2001.

                                    Article 2
                                Lifetime Benefits

      2.1 Normal Retirement Benefit. If Executive terminates employment on or
after the Normal Retirement Age for reasons other than death, Bank shall pay to
Executive the benefit described in this Section 2.1

      2.1.1 Amount of Benefit. The benefit under this Section 2.1 is $60,000 per
year.

      2.1.2 Payment of Benefit. Bank shall pay the benefit to Executive on the
first day of the month following the Executive's birthday, commencing with the
month following the month in which Executive reaches Normal Retirement Age and
continuing for 15 years.

      2.2 Early Termination Benefit. If Executive's employment is terminated
before the Normal Retirement Age absent a change of control and for reasons of
Executive's voluntary termination of employment, non-renewal of the Employment
Agreement, Disability, or if Bank terminates Executive's employment for reasons
other than for Cause, Bank shall pay to Executive the benefit described in this
Section 2.2.

      2.2.1 Amount of Benefit. The Executive's benefit under this Section 2.2 is
the amount accrued for the benefit set forth in Section 2.1, as calculated in
accordance with GAAP and reflected in the accounting records of Bank, on the
date of termination of Executive's employment.

      2.2.2 Payment of Benefit. Bank shall pay, pro rata, the benefit to
Executive on the first day of the month following Executive's birthday,
commencing with the month following the month in which Executive reaches Normal
Retirement Age and continuing for 15 years.

      2.3 Change of Control Benefit. If Executive is actively employed by Bank
at the time of a Change of Control, Section 10.4 shall not apply and Bank shall
pay to Executive the benefit described in this Section 2.1.

      2.3.1 Payment of Benefit. Bank shall pay the benefit to Executive on the
first day of the month following Executive's birthday, commencing with the month
following the month in

<PAGE>

which Executive reaches Normal Retirement Age and continuing for 15 years.

      2.4 Exclusive Benefits. Any Lifetime Benefits paid under this Agreement
are exclusive; if Lifetime Benefits are paid, no Death Benefits will be paid
under this Agreement or the appended Endorsements.

                                    Article 3
                                 Death Benefits

      3.1 Death Before Normal Retirement Age. If Executive dies while actively
employed by Bank before reaching the Normal Retirement Age, Executive's
beneficiary shall receive from the Insurer the benefit described in this Section
3.1.

      3.1.1 Amount of Benefit. The benefit under Section 3.1 is a death benefit
in the amount as reflected in Schedule 3.1.1. The benefit paid is determined by
the Plan Year in which Executive dies. For example, if Executive dies in Plan
Year 1, the benefit is $209,915. Plan Year 1 commences on the date this
Agreement is executed and ends one year later. Plan Year 2 commences at the end
of Plan Year 1 and ends one year later. Each subsequent Plan Year runs
similarly. If such death benefit is paid, no Lifetime Benefits under this
Agreement will be paid.

      3.1.2 Payment of Benefit. The benefit shall be paid to the beneficiary by
Insurer, as provided in the Policy.

      3.2 Death After Normal Retirement Age, But Before Receipt of Lifetime
Benefits. If Executive dies after reaching the Normal Retirement Age, but before
receiving any Lifetime Benefit payments under this Agreement, the death benefit
identified in Section 3.1 shall be paid in accordance with Section 3.1.2. If
such death benefit is paid, no Lifetime Benefits under this Agreement will be
paid.

      3.3 Death Following Normal Retirement Age, But After Receipt of Lifetime
Benefits. In the event Executive dies after Normal Retirement Age and after the
Executive has begun to receive any Lifetime Benefits from the Bank, the Bank
shall continue to pay those benefits, as provided in Article 2, and the
Executive, Executive's estate or beneficiaries shall have no right to receive a
death benefit and the rights under the endorsements are terminated.

      3.4 Death After Change of Control. If Executive dies following a Change of
Control, but prior to the commencement of the Lifetime Benefit payments,
provided Executive was actively employed at the time of the Change of Control,
Executive's beneficiary shall be paid the death benefit described in Section 3.1
in accordance with Section 3.1.2. If such death benefit is paid, no Lifetime
Benefits under this Agreement will be paid.

      3.4.1 Payment of Benefit. The benefit shall be paid to the beneficiary by
Insurer in accordance with Section 3.1.2.

<PAGE>

      3.5 Endorsement. All death benefits paid under this Agreement shall be in
accordance with and as designated by the appended endorsements.

                                    Article 4
                           Policy Ownership/Interests

      4.1 Bank Ownership. Bank is the sole owner of the Policy and shall have
the right to exercise all incidents of ownership. Bank shall be the beneficiary
of the death proceeds of the Policy remaining after Executive's interest is
determined according to Section 4.2 below.

      4.2 Executive's Interest. Subject to the provisions of Article 10,
Executive shall have the right to designate the beneficiary of the Net Death
Proceeds. Executive shall also have the right to elect and change settlement
options that may be permitted.

      4.3 Comparable Coverage. Upon execution of this Agreement, Bank shall
maintain the Policy in full force and effect and in no event shall Bank amend,
terminate or otherwise abrogate Executive's interest in the Policy, unless Bank
replaces the Policy with a comparable insurance policy to cover the benefit
provided under this Agreement. The Policy or any comparable policy shall be
subject to the claims of Bank's creditors.

      4.4 Option to Purchase. Bank shall not sell, surrender or transfer
ownership of the Policy while this Agreement is in effect without first giving
Executive or Executive's transferee the option to purchase the Policy for a
period of 60 days from written notice of such intention. The purchase price
shall be an amount equal to the cash surrender value of the Policy. This
provision shall not apply if the Agreement has terminated pursuant to Article 9.

                                    Article 5
                                    Premiums

      5.1 Premium Payment. Bank shall pay any premiums due on the Policy.

      5.2 Imputed Income. Bank shall impute income to Executive in an amount
equal to the current term rate for Executive's age multiplied by the aggregate
death benefit payable to Executive's beneficiary. The "current term rate" is the
minimum amount required to be imputed under Revenue Rulings 64-328 and 66-110,
or any subsequent applicable authority.

                                    Article 6
                                   Assignment

      Executive may assign without consideration all interests in the Policy and
in this Agreement to any person, entity or trust. In the event Executive
transfers all of Executive's interest in the Policy, then all of Executive's
interest in the Policy and in the Agreement shall be vested in Executive's
transferee, who shall be substituted as a party hereunder and Executive shall
have no further interest in the Policy or in this Agreement.

<PAGE>

                                    Article 7
                                     Insurer

      The Insurer shall be bound only by the terms of the Policy. Any payments
the Insurer makes or actions it takes in accordance with the Policy shall fully
discharge it from all claims, suits and demands of all entities or persons. The
Insurer shall not be bound by or be deemed to have notice of the provisions of
this Agreement.

                                    Article 8
                                Claims Procedure

      8.1 Claims Procedure. Bank shall notify any person or entity that makes a
claim under this Agreement (the "Claimant') in writing, within 90 days of
Claimant's written application for benefits, of his or her eligibility or
ineligibility for benefits under this Agreement. If Bank determines that the
Claimant is not eligible for benefits or full benefits, the notice shall set
forth (1) the specific reasons for such denial, (2) a specific reference to the
provisions of this Agreement on which the denial is based, (3) a description of
any additional information or material necessary for the Claimant to perfect his
or her claim, and a description of why it is needed, and (4) an explanation of
this Agreement's claims review procedure and other appropriate information as to
the steps to be taken if the Claimant wishes to have the claim reviewed. If Bank
determines that there are special circumstances requiring additional time to
make a decision, Bank shall notify the Claimant of the special circumstances and
the date by which a decision is expected to be made, and may extend the time for
up to an additional 90 days.

      8.2 Review Procedure. If the Claimant is determined by Bank not to be
eligible for benefits, or if the Claimant believes that he or she is entitled to
greater or different benefits, the Claimant shall have the opportunity to have
such claim reviewed by Bank by filing a petition for review with Bank within 60
days after receipt of the notice issued by Bank. Said petition shall state the
specific reasons which the Claimant believes entitle him or her to benefits or
to greater or different benefits. Within 60 days after receipt by Bank of the
petition, Bank shall afford the Claimant (and counsel, if any) an opportunity to
present his or her position to Bank verbally or in writing, and the Claimant (or
counsel) shall have the right to review the pertinent documents. Bank shall
notify the Claimant of its decision in writing within the sixty-day period,
stating specifically the basis of its decision, referencing the specific
provisions of this Agreement on which the decision is based. If, because of the
need for a hearing, the 60-day period is not sufficient, the decision may be
deferred for up to another 60-day period at the election of Bank, but notice of
this deferral shall be given to the Claimant.

                                    Article 9
                           Amendments and Termination

      This Agreement may be amended or terminated only by a written agreement
signed by

<PAGE>

Bank and Executive, except as provided in Article 10.

                                   Article 10
                               General Limitations

      10.1 Excess Parachute or Golden Parachute Payment. Notwithstanding any
provision of this Agreement to the contrary, any benefit provided under this
Agreement, when added to all other amounts or benefits provided to or on behalf
of Executive in connection with his termination of employment, would result in
the imposition of an excise tax under Code Section 4999, such payments shall be
retroactively (if necessary) reduced to the extent necessary to avoid such
excise tax imposition or shall be forfeited to the extent the benefit would be a
prohibited golden parachute payment pursuant to 12 C.F.R. ss.359.2 and for which
the appropriate federal banking agency has not given written consent to pay
pursuant to 12 C.F.R. ss.359.4. Upon written notice to Executive, together with
calculations of Bank's independent auditors, Executive shall remit to Bank the
amount of the reduction plus such interest as may be necessary to avoid the
imposition of such excise tax. Notwithstanding the foregoing or any other
provision of this contract to the contrary, if any portion of the amount herein
payable to the Executive is determined to be non-deductible pursuant to the
regulations promulgated under Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), the Corporation shall be required only to pay to
Executive the amount determined to be deductible under Section 280G.

      10.2 Termination for Cause. Notwithstanding any provision of this
Agreement to the contrary, the benefit provided under this Agreement shall be
forfeited if Bank terminates Executive's employment for:

            (A)   Executive's conviction of or plea of guilty or nolo contendere
                  to a felony, a crime of falsehood or a crime involving moral
                  turpitude, or the actual incarceration of Executive for a
                  period of thirty (30) consecutive days or more;

            (B)   Executive's failure to follow the good faith lawful
                  instructions of the Board of Directors of Bank with respect to
                  its operations, after written notice from Bank and a failure
                  to cure such violation within sixty (60) days of said written
                  notice;

            (C)   Executive's willful failure to substantially perform
                  Executive's duties for Bank, other than a failure resulting
                  from Executive's incapacity because of physical or mental
                  illness, as provided in subsection (d) of this Section 4,
                  after written notice from Bank and a failure to cure such
                  violation within sixty (60) days of said written notice;

            (D)   Executive's intentional violation of the provisions of this
                  Agreement, after written notice from Bank and a failure to
                  cure such violation within sixty

<PAGE>

                  (60) days of said written notice;

            (E)   dishonesty of Executive in the performance of his duties;

            (F)   gross misconduct on the part of Executive as determined by an
                  affirmative vote of eighty percent (80%) of the disinterested
                  members of the Board of Directors which brings public
                  discredit to Bank;

            (G)   Executive's breach of fiduciary duty involving personal
                  profit; or

            (H)   Executive's willful violation of any law, rule or regulation
                  governing banks or bank officers or any final cease and desist
                  order issued by a bank regulatory authority, unless
                  Executive's conduct that lead to the violation was authorized
                  by or occurred at the instruction of Bank's Board of
                  Directors.

      10.3 Removal. Notwithstanding any provision of this Agreement to the
contrary, Bank shall not pay any benefit under this Agreement if Executive is
subject to a final removal or prohibition order issued by an appropriate federal
banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.

      10.4 Competition After Termination of Employment. Executive shall forfeit
his right to any further benefits if Executive, without the prior written
consent of Bank, violates the following described restrictive covenants.

            10.4.1  Covenant Not to Compete. Executive hereby acknowledges and
                    recognizes the highly competitive nature of the business of
                    Bank and accordingly agrees that, during, for and after the
                    term of his employment with Bank and until Executive reaches
                    the age of sixty-five (65), Executive shall not, except as
                    otherwise permitted in writing by Bank:

                    (i)   be engaged, directly or indirectly, either for his own
                          account or as agent, consultant, employee, partner,
                          officer, director, proprietor, investor (except as an
                          investor owning less than 5% of the stock of a
                          publicly owned company) or otherwise of any person,
                          firm, corporation or enterprise engaged in (1) the
                          banking (including bank or financial institution
                          holding company), insurance or financial services
                          industry, or (2) any other activity in which Bank is
                          engaged during the Employment Period, and remain so
                          engaged at the end of the Employment Period, in any
                          area in which, at any time during the Employment
                          Period or at the date of termination of Executive's
                          employment, is within twenty (20) miles of any branch
                          location, office or other facility of Bank, unless
                          Executive

<PAGE>

                          exclusively performs all such activity outside of said
                          twenty (20) mile area (the "Non-Competition Area"); or

                    (ii)  provide financial or other assistance to any person,
                          firm, corporation, or enterprise engaged in (1) the
                          banking (including bank or financial institution
                          holding company), insurance or financial services
                          industry, or (2) any other activity in which Bank is
                          engaged during the Employment Period, in the
                          Non-Competition Area; or

                    (iii) if employed in a capacity provided in (i) and (ii),
                          solicit current customers, during the term of this
                          Agreement, of Bank in the Non-Competition Area; or

                    (iv)  solicit employees of Bank who are employed during the
                          term of this Agreement.

            10.4.2  Judicial Remedies. In the event of a breach or threatened
                    breach by Executive of any provision of these restrictions,
                    Executive recognizes the substantial and immediate harm that
                    a breach or threatened breach will impose upon Bank or any
                    of its subsidiaries or Affiliates, and further recognizes
                    that in such event monetary damages may be inadequate to
                    fully protect Bank or any of its subsidiaries or Affiliates.
                    Accordingly, in the event of a breach or threatened breach
                    of this Agreement, Executive consents to Bank's or any of
                    its subsidiaries or Affiliates' entitlement to such
                    preliminary, interlocutory, temporary or permanent
                    injunctive, or any other equitable relief, protecting and
                    fully enforcing Bank's or any of its subsidiaries or
                    Affiliates' rights hereunder and preventing Executive from
                    further breaching any of his obligations set forth herein.
                    Executive expressly waives any requirement, based on any
                    statute, rule of procedure, or other source, that Bank or
                    any of its subsidiaries or Affiliates post a bond as a
                    condition of obtaining any of the above-described remedies.
                    Nothing herein shall be construed as prohibiting Bank or any
                    of its subsidiaries or Affiliates from pursuing any other
                    remedies available to Bank or any of its subsidiaries or
                    Affiliates at law or in equity for such breach or threatened
                    breach, including the recovery of damages from Executive.
                    Executive expressly acknowledges and agrees that: (i) the
                    restrictions set forth in Section 10.4.1 are reasonable, in
                    terms of scope, duration, geographic area, and otherwise,
                    (ii) the protections afforded Bank or any of its
                    subsidiaries or Affiliates in Section 10.4.1 are necessary
                    to protect its legitimate business interest, (iii) the
                    restrictions set forth in Section 10.4.1 will not be
                    materially adverse to Executive's employment with Bank, and
                    (iv) his agreement to observe such restrictions

<PAGE>

                    forms a material part of the consideration for this
                    Agreement.

            10.4.3  Overbreadth of Restrictive Covenant. It is expressly
                    understood and agreedthat, although Executive and Bank
                    consider the restrictions contained in Section 10.4.1 hereof
                    reasonable for the purpose of preserving for Bank its good
                    will and other proprietary rights, if a final judicial
                    determination is made by a court having jurisdiction that
                    the time or territory or any other restriction contained in
                    Section 10.4.1 hereof is an unreasonable or otherwise
                    unenforceable restriction against Executive, the provisions
                    of Section 10.4.1 hereof shall not be rendered void but
                    shall be deemed amended to apply as to such maximum time and
                    territory and to such other extent as such court may
                    judicially determine or indicate to be reasonable.

            10.4.4  Change of Control. This Section 10.4 shall not apply if
                    there is a Change of Control.

      10.5 Suicide or Misstatement. If Executive commits suicide within two (2)
years after the date of this Agreement, or if the Insurer denies coverage for
material misstatements of fact made by Executive on any application for life
insurance purchased by Bank, or any other reason, provided however that Bank
shall evaluate the reason for the denial, and upon advice of Counsel and in its
sole discretion, consider judicially challenging any denial.

                                   Article 11
                                  Miscellaneous

      11.1 Binding Effect. This Agreement shall bind Executive and Bank and
their beneficiaries, survivors, executors, administrators and transferees, and
any Policy beneficiary.

      11.2 No Guarantee of Employment. This Agreement is not an employment
policy or contract and does not affect nor is affected by the Employment
Agreement executed by Executive and Bank on or about April 12, 2001 or any other
employment agreement that Executive and Bank have executed or may execute in the
future, except as specifically stated in this Agreement. It does not give
Executive the right to remain an employee of Bank, nor does it interfere with
Bank's right to discharge Executive. It also does not require Executive to
remain an employee nor interfere with Executive's right to terminate employment
at any time.

      11.3 Applicable Law. The Agreement and all rights hereunder shall be
governed by and construed according to the laws of the Commonwealth of
Pennsylvania, except to the extent preempted by the laws of the United States of
America.

      11.4 Successors. Bank shall not merge or consolidate into or with another
company, or reorganize, or sell substantially all of its assets to another
company, firm or person unless such

<PAGE>

succeeding or continuing company, firm or person agrees to assume and discharge
the obligations of Bank.

      11.5 Notice. Any notice, consent or demand required or permitted to be
given under the provisions of this Supplemental Executive Retirement Plan
Agreement by one party to another shall be in writing, shall be signed by the
party giving or making the same, and may be given either by delivering the same
to such other party personally, or by mailing the same, by United States
certified mail, postage prepaid, to such party, addressed to his or her last
known address as shown on the records of Bank. The date of such mailing shall be
deemed the date of such mailed notice, consent or demand.

      11.6 Recovery of Estate Taxes. If Executive's gross estate for federal
estate tax purposes includes any amount determined by reference to and on
account of this Agreement, and if the beneficiary is other than Executive's
estate, then Executive's estate shall be entitled to recover from the
beneficiary receiving such benefit under the terms of the Agreement, an amount
by which the total estate tax due by Executive's estate, exceeds the total
estate tax which would have been payable if the value of such benefit had not
been included in Executive's gross estate. If there is more than one person
receiving such benefit, the right of recovery shall be against each such person.
In the event the beneficiary has a liability hereunder, the beneficiary may
petition Bank for a lump sum payment in an amount not to exceed the
beneficiary's liability hereunder.

      11.7 Entire Agreement. This Agreement constitutes the entire agreement
between Bank and Executive as to the subject matter hereof. No rights are
granted to Executive by virtue of this Agreement other than those specifically
set forth herein.

      11.8 Administration. Bank shall have powers which are necessary to
administer this Agreement, including but not limited to:

            (a)   Interpreting the provisions of the Agreement;

            (b)   Establishing and revising the method of accounting for the
                  Agreement;

            (c)   Maintaining a record of benefit payments; and

            (d)   Establishing rules and prescribing any forms necessary or
                  desirable to administer the Agreement.

      11.9 Named Fiduciary. Bank shall be the named fiduciary and plan
administrator under the Agreement. The named fiduciary may delegate to others
certain aspects of the management and operation responsibilities of the plan
including the employment of advisors and the delegation of ministerial duties to
qualified individuals.

      IN WITNESS WHEREOF, Executive and a duly authorized Bank officer have
signed this

<PAGE>

Agreement.

ATTEST:                               EAST PENN BANK ("BANK")

____________________________       By __________________________________________
Dale A. Dries, Secretary              Forrest A. Rohrbach, Chairman of the Board

WITNESS:

____________________________          __________________________________________
                                      Brent L. Peters ("Executive")
:130359

<PAGE>

                            SPLIT DOLLAR POLICY FOR

                SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT

Policy No. _________________                            Insured: Brent L. Peters

Supplementing and amending the application for insurance to____________________
("Insurer") on _______________, the applicant requests and directs that:

                                 BENEFICIARIES

      1.    EAST PENN BANK, a Pennsylvania Banking institution located in
            Emmaus, Pennsylvania ("Bank") shall be the direct beneficiary of
            death proceeds of the Policy remaining after the Insured's interest
            is determined according to paragraph (2) below.

      2.    The Insured shall have the right to designate the beneficiary of
            Brent L. Peters the death proceeds in the amounts for representative
            years enumerated on Schedule 3.1.1 attached hereto and incorporated
            by reference.

                                    OWNERSHIP

      3.    The Owner of the policy shall be Bank. The Owner shall have all
            ownership rights in the Policy except as may be specifically granted
            to the Insured or the Insured's transferee in paragraph (4) of this
            endorsement.

      4.    The Insured or the Insured's transferee shall have the right to
            assign his or her rights and interests in the Policy with respect to
            that portion of the death proceeds designated in paragraph (2) of
            this endorsement, and to exercise all settlement options with
            respect to such death proceeds.

      5.    Notwithstanding the provisions of paragraph (4) above, the Insured
            or the Insured's transferee shall have no rights or interests in the
            Policy with respect to that portion of the death proceeds designated
            in paragraph (2) of this endorsement if the Insured does not comply
            with the General Limitations specified in Article 10 of East Penn
            Bank Supplemental Executive Retirement Plan Agreement for Brent L.
            Peters, unless agreed to in writing by Bank and the Insured.

               MODIFICATION OF ASSIGNMENT PROVISIONS OF THE POLICY

Upon the death of the Insured, the interest of any collateral assignee of the
Owner of the Policy designated in (3) above shall be limited to the portion of
the proceeds described in paragraph (1) above.

<PAGE>

                                OWNER'S AUTHORITY

The Insurer is hereby authorized to recognize the Owner's claim to rights
hereunder without investigating the reason for any action taken by the Owner,
including its statement of the amount of premiums it has paid on the Policy. The
signature of the Owner shall be sufficient for the exercise of any rights under
this Endorsement and the receipt of the Owner for any sums received by it shall
be a full discharge and release therefore to the Insurer.

Any transferee's rights shall be subject to this Endorsement.

The Owner accepts and agrees to this split dollar endorsement.

Signed at __________________, Pennsylvania, this _______ day of _________, 2001.

EAST PENN BANK

___________________________________________
Forrest A. Rohrbach, Chairman of the Board

The Insured accepts and agrees to the foregoing and, subject to the rights of
the Owner as stated above, designates _______________________________________ as
primary beneficiary and _____________________________________________________ as
secondary beneficiary of the portion of the proceeds described in (1) above.

Signed at __________________, Pennsylvania, this _______ day of _________, 2001.

THE INSURED:

___________________________________________
Brent L. Peters

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