Document:

EXHIBIT 10.6
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                                   WAYNE BANK
                          SALARY CONTINUATION AGREEMENT

     THIS  AGREEMENT is made  effective  this First day of October  1999, by and
between  WAYNE  BANK,  a state bank  located  in  Honesdale,  Pennsylvania  (the
"Company") and William W. Davis, Jr. (the "Executive").

                                  INTRODUCTION

     To  encourage  the  Executive  to remain an  employee of the  Company,  the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.

                                    AGREEMENT

     The Executive and the Company agree as follows:

                                    Article 1
                                   Definitions

     1.1 Definitions.  Whenever used in this Agreement,  the following words and
phrases shall have the meanings specified:

              1.1.1  "Change of  Control"  shall  mean any one of the  following
       events:  (i) the acquisition of ownership,  holding or power to vote more
       than 25% of the Company's or the  Corporation's  voting  stock,  (ii) the
       acquisition  of the ability to control the  election of a majority of the
       Company's or the  Corporation's  directors,  (iii) the  acquisition  of a
       controlling  influence  over the management or policies of the Company or
       the  Corporation by any person or by persons acting as a "group"  (within
       the meaning of Section 13(d) of the Securities  Exchange Act of 1934), or
       (iv)  during  any  period  of two  consecutive  years,

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     individuals  (the  "Continuing  Directors")  who at the  beginning  of such
     period  constitute the Board of Directors of the Company or the Corporation
     (the  "Existing  Board")  cease  for any  reason  to  constitute  at  least
     two-thirds  thereof,   provided  that  any  individual  whose  election  or
     nomination for election as a member of the Existing Board was approved by a
     vote of at least  two-thirds  of the  Continuing  Directors  then in office
     shall be considered a Continuing  Director.  Notwithstanding the foregoing,
     in the case of (i),  (ii) and (iii)  hereof,  ownership  or  control of the
     Company by the Corporation itself shall not constitute a Change in Control.
     For  purposes  of this  paragraph  only,  the term  "person"  refers  to an
     individual  or  a  corporation,   partnership,  trust,  association,  joint
     venture, pool, syndicate, sole proprietorship,  unincorporated organization
     or any other form of entity not specifically listed herein.

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

          1.1.3 "Corporation" means Norwood Financial Corp.

          1.1.4  "Disability"  means the Executive  shall be deemed  totally and
     permanently  disabled if he becomes unable to perform a substantial portion
     of his  duties  under  this  agreement  and a  physician  selected  by Bank
     determines  such  inability will continue for a period of six (6) months or
     more and is likely to be permanent and the  Executive  qualifies to receive
     total disability benefits under Bank's disability insurance plan.

          1.1.5 "Early  Termination"  means the Termination of Employment before
     Normal Retirement Age for reasons other than death, Disability, Termination
     for Cause or following a Change of Control.

          1.1.6 "Early  Termination Date" means the month, day and year in which
     Early Termination occurs.

          1.1.7 "Normal Retirement Age" means the Executive's 62nd birthday.

          1.1.8  "Normal   Retirement  Date"  means  the  later  of  the  Normal
     Retirement Age or Termination of Employment.

          1.1.9 "Plan Year" means each  twelve-month  period commencing with the
     effective date of this Agreement.

          1.1.10 "Termination for Cause" See Section 5.2.

          1.1.11  "Termination of Employment" means that the Executive ceases to
     be employed by the Company for any reason  whatsoever  other than by reason
     of a leave of absence  which is approved by the  Company.  For  purposes of
     this  Agreement,  if there is a

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     dispute  over the  employment  status of the  Executive  or the date of the
     Executive's Termination of Employment,  the Company shall have the sole and
     absolute right to decide the dispute.

                                    Article 2
                                Lifetime Benefits

     2.1 Normal Retirement  Benefit.  Upon Termination of Employment on or after
the Normal Retirement Age for reasons other than death, the Company shall pay to
the  Executive  the benefit  described  in this Section 2.1 in lieu of any other
benefit under this Agreement.

          2.1.1 Amount of Benefit.  The annual Normal  Retirement  Benefit under
     this Section 2.1 is $61,000 (sixty-one  thousand dollars).  The Company may
     increase the annual benefit under this Section 2.1 at the sole and absolute
     discretion of the Company's Board of Directors.  Any increase in the annual
     benefit  shall require the  recalculation  of all the amounts on Schedule A
     attached hereto. The annual benefit amounts on Schedule A are calculated by
     amortizing the annual normal  retirement  benefit using the interest method
     of  accounting,  a 7.50%  discount rate,  monthly  compounding  and monthly
     payments.

          2.1.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the Executive in 12 equal monthly  installments payable on the first day of
     each month  commencing  with the month  following  the  Executive's  Normal
     Retirement Date and continuing for 179 additional months.

          2.1.3 Benefit  Increases.  Commencing on the first  anniversary of the
     first benefit payment, and continuing on each subsequent  anniversary,  the
     Company's  Board of  Directors,  in its sole  discretion,  may increase the
     benefit.

          2.2 Early Termination  Benefit.  Upon Early  Termination,  the Company
     shall pay to the  Executive  the benefit  described  in this Section 2.2 in
     lieu of any other benefit under this Agreement.

          2.2.1 Amount of Benefit.  The annual benefit under this Section 2.2 is
     the Early  Termination  Annual Benefit set forth in Schedule A for the Plan
     Year ending immediately prior to the Early Termination Date.

          2.2.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the Executive in 12 equal monthly  installments payable on the first day of
     each month  commencing  with the month  following  the  Executive's  Normal
     Retirement  Age and continuing  for 179  additional  months.

          2.2.3 Benefit Increases. Benefit payments may be increased as provided
     in Section 2.1.3.

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          2.3 Disability Benefit. If the Executive terminates  employment due to
     Disability  prior to Normal  Retirement  Age, the Company  shall pay to the
     Executive  the benefit  described  in this Section 2.3 in lieu of any other
     benefit under this Agreement.

          2.3.1 Amount of Benefit.  The annual benefit under this Section 2.3 is
     the  Disability  Benefit  amount set forth in  Schedule A for the Plan Year
     ending  immediately  prior to the date in which  Termination  of Employment
     occurs.

          2.3.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the Executive in 12 equal monthly  installments  commencing  within 90 days
     after the date of the Executive's  Termination of Employment and continuing
     for 179 additional months.

          2.3.3 Benefit Increases. Benefit payments may be increased as provided
     in Section 2.1.3.

          2.4  Change of  Control  Benefit.  If the  Executive  is in the active
     service of the  Company  at the time of a Change of  Control,  the  Company
     shall pay to the  Executive  the benefit  described  in this Section 2.4 in
     lieu of any other benefit under this Agreement.

          2.4.1 Amount of Benefit.  The annual benefit under this Section 2.4 is
     the Normal Retirement Benefit described in Section 2.1.1.

          2.4.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the Executive in 12 equal monthly  installments payable on the first day of
     each month  commencing with the month following  Normal  Retirement Age and
     continuing for 179 additional months.

          2.4.3 Benefit Increases. Benefit payments may be increased as provided
     in Section 2.1.3

          2.4.4  Rabbi  Trust.  Within 10 days of a Change of  Control,  a rabbi
     trust shall be established  and shall at all times be funded with assets at
     least  equal to the  present  value of the  unpaid  balance  of the  Normal
     Retirement  Benefit.  A discount rate no greater then the ten year Treasury
     note shall be used in calculating present value.

          2.4.5 Excise tax  Reimbursement.  The Company shall indemnify and hold
     the Executive  harmless from any and all loss, expense or liability that he
     may ever  incur  under  Code ss.  4999,  or a  successor,  as the result of
     benefits he collects pursuant to this Agreement.

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                                    Article 3
                                 Death Benefits

     3.1 Death During Active Service.  If the Executive dies while in the active
service of the Company, the Company shall pay to the Executive's beneficiary the
benefit described in this Section 3.1. This benefit shall be paid in lieu of the
Lifetime Benefits of Article 2.

          3.1.1 Amount of Benefit.  The annual benefit under this Section 3.1 is
     the Normal Retirement Benefit described in Section 2.1.1.

          3.1.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the beneficiary in 12 equal monthly  installments  payable on the first day
     of each month commencing with the month following the Executive's death and
     continuing for 179 additional months.

          3.2 Death  During  Benefit  Period.  If the  Executive  dies after the
     benefit  payments have commenced under this Agreement but before  receiving
     all such  payments,  the Company  shall pay the  remaining  benefits to the
     Executive's beneficiary at the same time and in the same amounts they would
     have been paid to the Executive had the Executive survived.

          3.3 Death  Following  Termination  of Employment  But Before  Benefits
     Commence.  If the Executive is entitled to benefits  under this  Agreement,
     but dies prior to receiving  said  benefits,  the Company  shall pay to the
     Executive's  beneficiary the same benefits,  in the same manner, they would
     have been paid to the Executive had the Executive survived;  however,  said
     benefit payments will commence upon the Executive's death.

                                    Article 4
                                  Beneficiaries

     4.1 Beneficiary  Designations.  The Executive shall designate a beneficiary
by filing a written  designation  with the Company.  The Executive may revoke or
modify  the  designation  at any  time by  filing  a new  designation.  However,
designations  will only be effective if signed by the  Executive and accepted by
the  Company  during  the  Executive's  lifetime.  The  Executive's  beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the  Executive,  or if the  Executive  names a  spouse  as  beneficiary  and the
marriage  is  subsequently  dissolved.  If the  Executive  dies  without a valid
beneficiary designation, all payments shall be made to the Executive's estate.

     4.2  Facility of Payment.  If a benefit is payable to a minor,  to a person
declared incapacitated,  or to a person incapable of handling the disposition of
his or her  property,  the Company may pay such benefit to the  guardian,  legal
representative or person having the care or custody of such minor, incapacitated
person or  incapable  person.  The  Company  may  require  proof of  incapacity,
minority or guardianship as it may deem appropriate prior to distribution of

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the benefit.  Such distribution shall completely  discharge the Company from all
liability with respect to such benefit.

                                    Article 5
                               General Limitations

          5.1 Excess Parachute or Golden Parachute Payment.  Notwithstanding any
     provision of this Agreement to the contrary,  the Company shall not pay any
     benefit  under  this  Agreement  to  the  extent  the  benefit  would  be a
     prohibited golden parachute  payment pursuant to 12 C.F.R.ss.357.2  and for
     which the appropriate  federal banking agency has not given written consent
     to pay pursuant to 12 C.F.R.ss.359.4.

          5.2  Termination  for Cause.  Notwithstanding  any  provision  of this
     Agreement to the contrary, the Company shall not pay any benefit under this
     Agreement, if the Company terminates the Executives employment for:

               5.2.1 Gross negligence or gross neglect of duties;

               5.2.2 Commission of a felony or of a gross misdemeanor  involving
          moral turpitude; or

               5.2.3 Fraud,  disloyalty,  dishonesty or willful violation of any
          law or  significant  Company policy  committed in connection  with the
          Executive's  employment  and  resulting  in an  adverse  effect on the
          Company.

               5.2.4 Removal. Notwithstanding any provision of this Agreement to
          the  contrary,  the  Company  shall  not pay any  benefit  under  this
          Agreement  if  the   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.

          5.3 Competition After Termination of Employment.  No benefits shall be
     payable if the Executive, without the prior written consent of the Company,
     violates the following described restrictive covenants.

               5.3.1  Non-compete  Provision.  The Executive  shall not, for the
          term of this  Agreement and until all benefits have been  distributed,
          directly or  indirectly,  either as an  individual or as a proprietor,
          stockholder,  partner, officer, director,  employee, agent, consultant
          or independent contractor of any individual, partnership,  corporation
          or other entity  (excluding an ownership  interest of one percent (1%)
          or less in the stock of a publicly traded company):

               (i)  become  employed by,  participate in, or be connected in any
                    manner with the ownership,  management, operation or control
                    of any bank,  savings  and loan or

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                    other  similar  financial  institution  if  the  Executive's
                    responsibilities  will  include  providing  banking or other
                    financial services; or (ii) participate in any way in hiring
                    or  otherwise  engaging,  or  assisting  any other person or
                    entity in  hiring or  otherwise  engaging,  on a  temporary,
                    part-time  or  permanent   basis,  any  individual  who  was
                    employed  by the  Corporation  or  any  of its  subsidiaries
                    during the three (3) year  period  immediately  prior to the
                    termination of the Executive's employment; or

               (iii)assist, advise, or serve in any capacity,  representative or
                    otherwise,  any  third  party  in  any  action  against  the
                    Corporation  or  any  of  its  subsidiaries  or  transaction
                    involving the Corporation or any of its subsidiaries; or

               (iv) sell,  offer to sell,  provide  banking  or other  financial
                    services,  assist any other  person in selling or  providing
                    banking or other financial services, or solicit or otherwise
                    compete  for,  either  directly or  indirectly,  any orders,
                    contract,  or accounts for services of a kind or nature like
                    or  substantially  similar  to  the  services  performed  or
                    products sold by the Corporation or any of its  subsidiaries
                    (the preceding hereinafter referred to as "Services"), to or
                    from any  person or entity  from whom the  Executive  or the
                    Corporation or any of its  subsidiaries  provided banking or
                    other financial services, sold, offered to sell or solicited
                    orders,  contracts or accounts for Services during the three
                    (3) year period  immediately prior to the termination of the
                    Executive's employment; or

               (v)  divulge,  disclose,  or  communicate to others in any manner
                    whatsoever,  any confidential information of the Corporation
                    or any of its subsidiaries,  including,  but not limited to,
                    the names and addresses of customers of the  Corporation  or
                    any of its subsidiaries,  as they may have existed from time
                    to  time  or of  any  of  the  Corporation's  or  any of its
                    subsidiaries   prospective  customers,   work  performed  or
                    services  rendered  for  any  customer,  any  method  and/or
                    procedures  relating to projects or other work developed for
                    the  Corporation  or any of its  subsidiaries,  earnings  or
                    other  information  concerning the Corporation or any of its
                    subsidiaries.    The   restrictions    contained   in   this
                    subparagraph  (v)  apply to all  information  regarding  the
                    Corporation  or any of its  subsidiaries,  regardless of the
                    source  who   provided   or   compiled   such   information.
                    Notwithstanding  anything to the contrary,  all  information
                    referred to herein shall not be  disclosed  unless and until
                    it becomes  known to the general  public from sources  other
                    than the Executive.

               5.3.2 Judicial  Remedies.  In the event of a breach or threatened
          breach by the  Executive of any provision of these  restrictions,  the
          Executive  recognizes the substantial and immediate harm that a breach
          or threatened  breach will impose upon the  Corporation  or any of its
          subsidiaries,  and  further  recognizes  that in such  event  monetary
          damages may be inadequate to fully protect the  Corporation  or any of
          its subsidiaries.  Accordingly, in the

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          event  of a  breach  or  threatened  breach  of  this  Agreement,  the
          Executive  consents to the  Corporation's  or any of its  subsidiaries
          entitlement to such ex parte, preliminary, interlocutory, temporary or
          permanent  injunctive,  or any other equitable relief,  protecting and
          fully  enforcing the  Corporation' or any of its  subsidiaries  rights
          hereunder and preventing  the Executive from further  breaching any of
          his obligations set forth herein.  The Executive  expressly waives any
          requirement, based on any statute, rule of procedure, or other source,
          that  the  Corporation  or any of its  subsidiaries  post a bond  as a
          condition of obtaining any of the  above-described  remedies.  Nothing
          herein shall be construed as prohibiting the Corporation or any of its
          subsidiaries  from  pursuing  any  other  remedies  available  to  the
          Corporation  or any of its  subsidiaries  at law or in equity for such
          breach or  threatened  breach,  including the recovery of damages from
          the Executive.  The Executive expressly  acknowledges and agrees that:
          (i) the  restrictions  set forth in Section 5.3.1 are  reasonable,  in
          terms of scope,  duration,  geographic  area, and otherwise,  (ii) the
          protections  afforded the  Corporation or any of its  subsidiaries  in
          Section  5.3.1  are  necessary  to  protect  its  legitimate  business
          interest,  (iii) the  restrictions set forth in Section 5.3.1 will not
          be materially adverse to the Executive's  employment with the Company,
          and (iv) his agreement to observe such  restrictions  forms a material
          part of the consideration for this Agreement.

               5.3.3 Overbreadth of Restrictive Covenant. It is the intention of
          the parties  that if any  restrictive  covenant in this  Agreement  is
          determined  by a court of competent  jurisdiction  to be overly broad,
          then the court should enforce such restrictive covenant to the maximum
          extent permitted under the law as to area, breadth and duration.

               5.3.4 The non-compete  provision  detailed in Section 5.3.1 shall
          not be enforceable following a Change of Control.

          5.4  Suicide  or  Misstatement.  No  benefits  shall be payable if the
     Executive  commits  suicide  within  two  years  after  the  date  of  this
     Agreement,  or if  the  insurance  company  denies  coverage  for  material
     misstatements  of fact made by the  Executive on any  application  for life
     insurance purchased by the Company, or any other reason; provided,  however
     that the Company shall evaluate the reason for the denial,  and upon advice
     of  legal  counsel  and  in  its  sole  discretion,   consider   judicially
     challenging any denial.

                                    Article 6
                          Claims and Review Procedures

          6.1 Claims  Procedure.  The Company  shall notify any person or entity
     that makes a claim  against  the  Agreement  (the  "Claimant")  in writing,
     within ninety (90) days of Claimant's written application for benefits,  of
     his or her eligibility or noneligibility  for benefits under the Agreement.
     If the Company 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

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     reference to the  provisions of the 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 the 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 the Company determines that
     there  are  special  circumstances  requiring  additional  time  to  make a
     decision,   the  Company   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 ninety-day period.

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

                                    Article 7
                           Amendments and Termination

          This  Agreement  may  be  amended  or  terminated  only  by a  written
     agreement signed by the Company and the Executive.

                                    Article 8
                                  Miscellaneous

          8.1 Binding  Effect.  This Agreement  shall bind the Executive and the
     Company,  and  their  beneficiaries,   survivors,  executors,   successors,
     administrators and transferees.

          8.2 No Guarantee of  Employment.  This  Agreement is not an employment
     policy or contract.  It does not give the  Executive the right to remain an
     employee of the Company,  nor does it interfere with the Company's right to
     discharge the  Executive.  It also does not require the Executive to remain
     an employee nor interfere with the Executive's right to terminate

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     employment at any time.

          8.3 Non-Transferability. Benefits under this Agreement cannot be sold,
     transferred, assigned, pledged, attached or encumbered in any manner.

          8.4 Tax  Withholding.  The Company  shall  withhold any taxes that are
     required to be withheld from the benefits provided under this Agreement.

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

          8.6 Unfunded  Arrangement.  The Executive and  beneficiary are general
     unsecured  creditors of the Company for the payment of benefits  under this
     Agreement.  The benefits  represent  the mere promise by the Company to pay
     such  benefits.  The rights to  benefits  are not  subject in any manner to
     anticipation,  alienation, sale, transfer, assignment, pledge, encumbrance,
     attachment,  or garnishment by creditors.  Any insurance on the Executive's
     life  is a  general  asset  of the  Company  to  which  the  Executive  and
     beneficiary have no preferred or secured claim.

          8.7  Recovery of Estate  Taxes.  If the  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 the
     Executive's  estate,  then the  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 the  Executive's
     estate,  exceeds the total  estate tax which would have been payable if the
     value  of such  benefit  had not been  included  in the  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 the Company for a
     lump sum  payment in an amount not to exceed  the  beneficiary's  liability
     hereunder.

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

          8.9 Administration.  The Company shall have powers which are necessary
     to administer this Agreement, including but not limited to:

               8.9.1 Interpreting the provisions of the Agreement;

               8.9.2  Establishing and revising the method of accounting for the
          Agreement;

               8.9.3  Maintaining  a  record  of  benefit  payments;  and  8.9.4
          Establishing rules and prescribing any forms necessary or desirable to
          administer the Agreement.

                                       10EXHIBIT 10.7
<PAGE>

                                   WAYNE BANK
                          SALARY CONTINUATION AGREEMENT

     THIS  AGREEMENT is made  effective  this First day of October  1999, by and
between  WAYNE  BANK,  a state bank  located  in  Honesdale,  Pennsylvania  (the
"Company") and Lewis J. Critelli (the "Executive").

                                  INTRODUCTION

     To  encourage  the  Executive  to remain an  employee of the  Company,  the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.

                                    AGREEMENT

     The Executive and the Company agree as follows:

                                    Article 1
                                   Definitions

     1.1 Definitions.  Whenever used in this Agreement,  the following words and
phrases shall have the meanings specified:

              1.1.1  "Change of  Control"  shall  mean any one of the  following
       events:  (i) the acquisition of ownership,  holding or power to vote more
       than 25% of the Company's or the  Corporation's  voting  stock,  (ii) the
       acquisition  of the ability to control the  election of a majority of the
       Company's or the  Corporation's  directors,  (iii) the  acquisition  of a
       controlling  influence  over the management or policies of the Company or
       the  Corporation by any person or by persons acting as a "group"  (within
       the meaning of Section 13(d) of the Securities  Exchange Act of 1934), or
       (iv)  during  any  period  of two  consecutive  years,

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     individuals  (the  "Continuing  Directors")  who at the  beginning  of such
     period  constitute the Board of Directors of the Company or the Corporation
     (the  "Existing  Board")  cease  for any  reason  to  constitute  at  least
     two-thirds  thereof,   provided  that  any  individual  whose  election  or
     nomination for election as a member of the Existing Board was approved by a
     vote of at least  two-thirds  of the  Continuing  Directors  then in office
     shall be considered a Continuing  Director.  Notwithstanding the foregoing,
     in the case of (i),  (ii) and (iii)  hereof,  ownership  or  control of the
     Company by the Corporation itself shall not constitute a Change in Control.
     For  purposes  of this  paragraph  only,  the term  "person"  refers  to an
     individual  or  a  corporation,   partnership,  trust,  association,  joint
     venture, pool, syndicate, sole proprietorship,  unincorporated organization
     or any other form of entity not specifically listed herein.

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

          1.1.3 "Corporation" means Norwood Financial Corp.

          1.1.4  "Disability"  means the Executive  shall be deemed  totally and
     permanently  disabled if he becomes unable to perform a substantial portion
     of his  duties  under  this  agreement  and a  physician  selected  by Bank
     determines  such  inability will continue for a period of six (6) months or
     more and is likely to be permanent and the  Executive  qualifies to receive
     total disability benefits under Bank's disability insurance plan.

          1.1.5 "Early  Termination"  means the Termination of Employment before
     Normal Retirement Age for reasons other than death, Disability, Termination
     for Cause or following a Change of Control.

          1.1.6 "Early  Termination Date" means the month, day and year in which
     Early Termination occurs.

          1.1.7 "Normal Retirement Age" means the Executive's 62nd birthday.

          1.1.8  "Normal   Retirement  Date"  means  the  later  of  the  Normal
     Retirement Age or Termination of Employment.

          1.1.9 "Plan Year" means each  twelve-month  period commencing with the
     effective date of this Agreement.

          1.1.10 "Termination for Cause" See Section 5.2.

          1.1.11  "Termination of Employment" means that the Executive ceases to
     be employed by the Company for any reason  whatsoever  other than by reason
     of a leave of absence  which is approved by the  Company.  For  purposes of
     this  Agreement,  if there is a

                                       2

<PAGE>

     dispute  over the  employment  status of the  Executive  or the date of the
     Executive's Termination of Employment,  the Company shall have the sole and
     absolute right to decide the dispute.

                                    Article 2
                                Lifetime Benefits

     2.1 Normal Retirement  Benefit.  Upon Termination of Employment on or after
the Normal Retirement Age for reasons other than death, the Company shall pay to
the  Executive  the benefit  described  in this Section 2.1 in lieu of any other
benefit under this Agreement.

          2.1.1 Amount of Benefit.  The annual Normal  Retirement  Benefit under
     this Section 2.1 is $61,000 (sixty-one  thousand dollars).  The Company may
     increase the annual benefit under this Section 2.1 at the sole and absolute
     discretion of the Company's Board of Directors.  Any increase in the annual
     benefit  shall require the  recalculation  of all the amounts on Schedule A
     attached hereto. The annual benefit amounts on Schedule A are calculated by
     amortizing the annual normal  retirement  benefit using the interest method
     of  accounting,  a 7.50%  discount rate,  monthly  compounding  and monthly
     payments.

          2.1.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the Executive in 12 equal monthly  installments payable on the first day of
     each month  commencing  with the month  following  the  Executive's  Normal
     Retirement Date and continuing for 179 additional months.

          2.1.3 Benefit  Increases.  Commencing on the first  anniversary of the
     first benefit payment, and continuing on each subsequent  anniversary,  the
     Company's  Board of  Directors,  in its sole  discretion,  may increase the
     benefit.

          2.2 Early Termination  Benefit.  Upon Early  Termination,  the Company
     shall pay to the  Executive  the benefit  described  in this Section 2.2 in
     lieu of any other benefit under this Agreement.

          2.2.1 Amount of Benefit.  The annual benefit under this Section 2.2 is
     the Early  Termination  Annual Benefit set forth in Schedule A for the Plan
     Year ending immediately prior to the Early Termination Date.

          2.2.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the Executive in 12 equal monthly  installments payable on the first day of
     each month  commencing  with the month  following  the  Executive's  Normal
     Retirement  Age and continuing  for 179  additional  months.

          2.2.3 Benefit Increases. Benefit payments may be increased as provided
     in Section 2.1.3.

                                       3
<PAGE>

          2.3 Disability Benefit. If the Executive terminates  employment due to
     Disability  prior to Normal  Retirement  Age, the Company  shall pay to the
     Executive  the benefit  described  in this Section 2.3 in lieu of any other
     benefit under this Agreement.

          2.3.1 Amount of Benefit.  The annual benefit under this Section 2.3 is
     the  Disability  Benefit  amount set forth in  Schedule A for the Plan Year
     ending  immediately  prior to the date in which  Termination  of Employment
     occurs.

          2.3.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the Executive in 12 equal monthly  installments  commencing  within 90 days
     after the date of the Executive's  Termination of Employment and continuing
     for 179 additional months.

          2.3.3 Benefit Increases. Benefit payments may be increased as provided
     in Section 2.1.3.

          2.4  Change of  Control  Benefit.  If the  Executive  is in the active
     service of the  Company  at the time of a Change of  Control,  the  Company
     shall pay to the  Executive  the benefit  described  in this Section 2.4 in
     lieu of any other benefit under this Agreement.

          2.4.1 Amount of Benefit.  The annual benefit under this Section 2.4 is
     the Normal Retirement Benefit described in Section 2.1.1.

          2.4.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the Executive in 12 equal monthly  installments payable on the first day of
     each month  commencing with the month following  Normal  Retirement Age and
     continuing for 179 additional months.

          2.4.3 Benefit Increases. Benefit payments may be increased as provided
     in Section 2.1.3

          2.4.4  Rabbi  Trust.  Within 10 days of a Change of  Control,  a rabbi
     trust shall be established  and shall at all times be funded with assets at
     least  equal to the  present  value of the  unpaid  balance  of the  Normal
     Retirement  Benefit.  A discount rate no greater then the ten year Treasury
     note shall be used in calculating present value.

          2.4.5 Excise tax  Reimbursement.  The Company shall indemnify and hold
     the Executive  harmless from any and all loss, expense or liability that he
     may ever  incur  under  Code ss.  4999,  or a  successor,  as the result of
     benefits he collects pursuant to this Agreement.

                                       4
<PAGE>

                                    Article 3
                                 Death Benefits

     3.1 Death During Active Service.  If the Executive dies while in the active
service of the Company, the Company shall pay to the Executive's beneficiary the
benefit described in this Section 3.1. This benefit shall be paid in lieu of the
Lifetime Benefits of Article 2.

          3.1.1 Amount of Benefit.  The annual benefit under this Section 3.1 is
     the Normal Retirement Benefit described in Section 2.1.1.

          3.1.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the beneficiary in 12 equal monthly  installments  payable on the first day
     of each month commencing with the month following the Executive's death and
     continuing for 179 additional months.

          3.2 Death  During  Benefit  Period.  If the  Executive  dies after the
     benefit  payments have commenced under this Agreement but before  receiving
     all such  payments,  the Company  shall pay the  remaining  benefits to the
     Executive's beneficiary at the same time and in the same amounts they would
     have been paid to the Executive had the Executive survived.

          3.3 Death  Following  Termination  of Employment  But Before  Benefits
     Commence.  If the Executive is entitled to benefits  under this  Agreement,
     but dies prior to receiving  said  benefits,  the Company  shall pay to the
     Executive's  beneficiary the same benefits,  in the same manner, they would
     have been paid to the Executive had the Executive survived;  however,  said
     benefit payments will commence upon the Executive's death.

                                    Article 4
                                  Beneficiaries

     4.1 Beneficiary  Designations.  The Executive shall designate a beneficiary
by filing a written  designation  with the Company.  The Executive may revoke or
modify  the  designation  at any  time by  filing  a new  designation.  However,
designations  will only be effective if signed by the  Executive and accepted by
the  Company  during  the  Executive's  lifetime.  The  Executive's  beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the  Executive,  or if the  Executive  names a  spouse  as  beneficiary  and the
marriage  is  subsequently  dissolved.  If the  Executive  dies  without a valid
beneficiary designation, all payments shall be made to the Executive's estate.

     4.2  Facility of Payment.  If a benefit is payable to a minor,  to a person
declared incapacitated,  or to a person incapable of handling the disposition of
his or her  property,  the Company may pay such benefit to the  guardian,  legal
representative or person having the care or custody of such minor, incapacitated
person or  incapable  person.  The  Company  may  require  proof of  incapacity,
minority or guardianship as it may deem appropriate prior to distribution of

                                        5

<PAGE>

the benefit.  Such distribution shall completely  discharge the Company from all
liability with respect to such benefit.

                                    Article 5
                               General Limitations

          5.1 Excess Parachute or Golden Parachute Payment.  Notwithstanding any
     provision of this Agreement to the contrary,  the Company shall not pay any
     benefit  under  this  Agreement  to  the  extent  the  benefit  would  be a
     prohibited golden parachute  payment pursuant to 12 C.F.R.ss.357.2  and for
     which the appropriate  federal banking agency has not given written consent
     to pay pursuant to 12 C.F.R.ss.359.4.

          5.2  Termination  for Cause.  Notwithstanding  any  provision  of this
     Agreement to the contrary, the Company shall not pay any benefit under this
     Agreement, if the Company terminates the Executives employment for:

               5.2.1 Gross negligence or gross neglect of duties;

               5.2.2 Commission of a felony or of a gross misdemeanor  involving
          moral turpitude; or

               5.2.3 Fraud,  disloyalty,  dishonesty or willful violation of any
          law or  significant  Company policy  committed in connection  with the
          Executive's  employment  and  resulting  in an  adverse  effect on the
          Company.

               5.2.4 Removal. Notwithstanding any provision of this Agreement to
          the  contrary,  the  Company  shall  not pay any  benefit  under  this
          Agreement  if  the   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.

          5.3 Competition After Termination of Employment.  No benefits shall be
     payable if the Executive, without the prior written consent of the Company,
     violates the following described restrictive covenants.

               5.3.1  Non-compete  Provision.  The Executive  shall not, for the
          term of this  Agreement and until all benefits have been  distributed,
          directly or  indirectly,  either as an  individual or as a proprietor,
          stockholder,  partner, officer, director,  employee, agent, consultant
          or independent contractor of any individual, partnership,  corporation
          or other entity  (excluding an ownership  interest of one percent (1%)
          or less in the stock of a publicly traded company):

               (i)  become  employed by,  participate in, or be connected in any
                    manner with the ownership,  management, operation or control
                    of any bank,  savings  and loan or

                                       6
<PAGE>

                    other  similar  financial  institution  if  the  Executive's
                    responsibilities  will  include  providing  banking or other
                    financial services; or (ii) participate in any way in hiring
                    or  otherwise  engaging,  or  assisting  any other person or
                    entity in  hiring or  otherwise  engaging,  on a  temporary,
                    part-time  or  permanent   basis,  any  individual  who  was
                    employed  by the  Corporation  or  any  of its  subsidiaries
                    during the three (3) year  period  immediately  prior to the
                    termination of the Executive's employment; or

               (iii)assist, advise, or serve in any capacity,  representative or
                    otherwise,  any  third  party  in  any  action  against  the
                    Corporation  or  any  of  its  subsidiaries  or  transaction
                    involving the Corporation or any of its subsidiaries; or

               (iv) sell,  offer to sell,  provide  banking  or other  financial
                    services,  assist any other  person in selling or  providing
                    banking or other financial services, or solicit or otherwise
                    compete  for,  either  directly or  indirectly,  any orders,
                    contract,  or accounts for services of a kind or nature like
                    or  substantially  similar  to  the  services  performed  or
                    products sold by the Corporation or any of its  subsidiaries
                    (the preceding hereinafter referred to as "Services"), to or
                    from any  person or entity  from whom the  Executive  or the
                    Corporation or any of its  subsidiaries  provided banking or
                    other financial services, sold, offered to sell or solicited
                    orders,  contracts or accounts for Services during the three
                    (3) year period  immediately prior to the termination of the
                    Executive's employment; or

               (v)  divulge,  disclose,  or  communicate to others in any manner
                    whatsoever,  any confidential information of the Corporation
                    or any of its subsidiaries,  including,  but not limited to,
                    the names and addresses of customers of the  Corporation  or
                    any of its subsidiaries,  as they may have existed from time
                    to  time  or of  any  of  the  Corporation's  or  any of its
                    subsidiaries   prospective  customers,   work  performed  or
                    services  rendered  for  any  customer,  any  method  and/or
                    procedures  relating to projects or other work developed for
                    the  Corporation  or any of its  subsidiaries,  earnings  or
                    other  information  concerning the Corporation or any of its
                    subsidiaries.    The   restrictions    contained   in   this
                    subparagraph  (v)  apply to all  information  regarding  the
                    Corporation  or any of its  subsidiaries,  regardless of the
                    source  who   provided   or   compiled   such   information.
                    Notwithstanding  anything to the contrary,  all  information
                    referred to herein shall not be  disclosed  unless and until
                    it becomes  known to the general  public from sources  other
                    than the Executive.

               5.3.2 Judicial  Remedies.  In the event of a breach or threatened
          breach by the  Executive of any provision of these  restrictions,  the
          Executive  recognizes the substantial and immediate harm that a breach
          or threatened  breach will impose upon the  Corporation  or any of its
          subsidiaries,  and  further  recognizes  that in such  event  monetary
          damages may be inadequate to fully protect the  Corporation  or any of
          its subsidiaries.  Accordingly, in the

                                       7
<PAGE>

          event  of a  breach  or  threatened  breach  of  this  Agreement,  the
          Executive  consents to the  Corporation's  or any of its  subsidiaries
          entitlement to such ex parte, preliminary, interlocutory, temporary or
          permanent  injunctive,  or any other equitable relief,  protecting and
          fully  enforcing the  Corporation' or any of its  subsidiaries  rights
          hereunder and preventing  the Executive from further  breaching any of
          his obligations set forth herein.  The Executive  expressly waives any
          requirement, based on any statute, rule of procedure, or other source,
          that  the  Corporation  or any of its  subsidiaries  post a bond  as a
          condition of obtaining any of the  above-described  remedies.  Nothing
          herein shall be construed as prohibiting the Corporation or any of its
          subsidiaries  from  pursuing  any  other  remedies  available  to  the
          Corporation  or any of its  subsidiaries  at law or in equity for such
          breach or  threatened  breach,  including the recovery of damages from
          the Executive.  The Executive expressly  acknowledges and agrees that:
          (i) the  restrictions  set forth in Section 5.3.1 are  reasonable,  in
          terms of scope,  duration,  geographic  area, and otherwise,  (ii) the
          protections  afforded the  Corporation or any of its  subsidiaries  in
          Section  5.3.1  are  necessary  to  protect  its  legitimate  business
          interest,  (iii) the  restrictions set forth in Section 5.3.1 will not
          be materially adverse to the Executive's  employment with the Company,
          and (iv) his agreement to observe such  restrictions  forms a material
          part of the consideration for this Agreement.

               5.3.3 Overbreadth of Restrictive Covenant. It is the intention of
          the parties  that if any  restrictive  covenant in this  Agreement  is
          determined  by a court of competent  jurisdiction  to be overly broad,
          then the court should enforce such restrictive covenant to the maximum
          extent permitted under the law as to area, breadth and duration.

               5.3.4 The non-compete  provision  detailed in Section 5.3.1 shall
          not be enforceable following a Change of Control.

          5.4  Suicide  or  Misstatement.  No  benefits  shall be payable if the
     Executive  commits  suicide  within  two  years  after  the  date  of  this
     Agreement,  or if  the  insurance  company  denies  coverage  for  material
     misstatements  of fact made by the  Executive on any  application  for life
     insurance purchased by the Company, or any other reason; provided,  however
     that the Company shall evaluate the reason for the denial,  and upon advice
     of  legal  counsel  and  in  its  sole  discretion,   consider   judicially
     challenging any denial.

                                    Article 6
                          Claims and Review Procedures

          6.1 Claims  Procedure.  The Company  shall notify any person or entity
     that makes a claim  against  the  Agreement  (the  "Claimant")  in writing,
     within ninety (90) days of Claimant's written application for benefits,  of
     his or her eligibility or noneligibility  for benefits under the Agreement.
     If the Company 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

                                       8
<PAGE>

     reference to the  provisions of the 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 the 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 the Company determines that
     there  are  special  circumstances  requiring  additional  time  to  make a
     decision,   the  Company   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 ninety-day period.

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

                                    Article 7
                           Amendments and Termination

          This  Agreement  may  be  amended  or  terminated  only  by a  written
     agreement signed by the Company and the Executive.

                                    Article 8
                                  Miscellaneous

          8.1 Binding  Effect.  This Agreement  shall bind the Executive and the
     Company,  and  their  beneficiaries,   survivors,  executors,   successors,
     administrators and transferees.

          8.2 No Guarantee of  Employment.  This  Agreement is not an employment
     policy or contract.  It does not give the  Executive the right to remain an
     employee of the Company,  nor does it interfere with the Company's right to
     discharge the  Executive.  It also does not require the Executive to remain
     an employee nor interfere with the Executive's right to terminate

                                       9
<PAGE>

     employment at any time.

          8.3 Non-Transferability. Benefits under this Agreement cannot be sold,
     transferred, assigned, pledged, attached or encumbered in any manner.

          8.4 Tax  Withholding.  The Company  shall  withhold any taxes that are
     required to be withheld from the benefits provided under this Agreement.

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

          8.6 Unfunded  Arrangement.  The Executive and  beneficiary are general
     unsecured  creditors of the Company for the payment of benefits  under this
     Agreement.  The benefits  represent  the mere promise by the Company to pay
     such  benefits.  The rights to  benefits  are not  subject in any manner to
     anticipation,  alienation, sale, transfer, assignment, pledge, encumbrance,
     attachment,  or garnishment by creditors.  Any insurance on the Executive's
     life  is a  general  asset  of the  Company  to  which  the  Executive  and
     beneficiary have no preferred or secured claim.

          8.7  Recovery of Estate  Taxes.  If the  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 the
     Executive's  estate,  then the  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 the  Executive's
     estate,  exceeds the total  estate tax which would have been payable if the
     value  of such  benefit  had not been  included  in the  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 the Company for a
     lump sum  payment in an amount not to exceed  the  beneficiary's  liability
     hereunder.

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

          8.9 Administration.  The Company shall have powers which are necessary
     to administer this Agreement, including but not limited to:

               8.9.1 Interpreting the provisions of the Agreement;

               8.9.2  Establishing and revising the method of accounting for the
          Agreement;

               8.9.3  Maintaining  a  record  of  benefit  payments;  and  8.9.4
          Establishing rules and prescribing any forms necessary or desirable to
          administer the Agreement.

                                       10

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