8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): November 16, 2007

HARLEYSVILLE NATIONAL CORPORATION

__________________________________________

(Exact name of registrant as specified in its charter)

Pennsylvania	0-15237	23-2210237
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
483 Main Street, Harleysville, Pennsylvania		19438
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 215-256-8851

Not Applicable

______________________________________________

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 1.01 Entry into a Material Definitive Agreement

On November 16, 2007, at the effective time of Harleysville National Corporation's acquisition of East Penn Financial Corporation, Harleysville Management Services, LLC, a subsidiary of Harleysville National Corporation, and Brent L. Peters entered into an employment agreement. A brief description of the material terms of the employment agreement are set forth under Item 5.02 of this Form 8-K and incorporated herein by reference. A copy of Mr. Peters' employment agreement is attached hereto as Exhibit 99.2 and made part hereof.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Harleysville National Corporation has appointed Brent L. Peters, (former Chairman, President and Chief Executive Officer and Director of East Penn Financial Corporation and East Penn Bank) to the board of directors of Harleysville National Corporation and its banking subsidiary, Harleysville National Bank. Mr. Peters has also been appointed President of the new East Penn Bank Division and Executive Vice President of Harleysville National Corporation and Harleysville National Bank. Mr. Peters is 61 years of age. Mr. Peter’s appointments were pursuant to the terms of the Agreement and Plan of Merger dated as of May 15, 2007, as amended August 29, 2007, by and among Harleysville National Corporation, East Penn Financial Corporation, East Penn Bank and HNC-EPF, LLC.

On November 16, 2007, at the effective time of Harleysville National Corporation's acquisition of East Penn Financial Corporation, Harleysville Management Services, LLC, a subsidiary of Harleysville National Corporation, and Brent L. Peters entered into an employment agreement for Mr. Peters’ employment as President of the East Penn Bank Division of Harleysville National Bank and as an Executive Vice President of Harleysville National Corporation and Harleysville National Bank. The agreement provides that: so long as Harleysville National Corporation and Harleysville National Bank maintain an Executive Council, Mr. Peters shall be a member of the Executive Council; Mr. Peters is to be a member of the Executive Committee of Harleysville National Bank’s board of directors; Mr. Peters shall be a member of Harleysville National Bank’s ALCO, Senior Loan, Problem Asset, Credit Policy, Disclosure, Senior Staff and Strategic Planning Committees so long as Harleysville National Corporation and Harleysville National Bank maintains them; and Harleysville National Bank and Harleysville National Corporation will cause Mr. Peters to be appointed or elected to the boards of directors of Harleysville National Corporation and Harleysville National Bank for at least three years after the signing.

The employment agreement is for an initial term of three years, renewing automatically at the end of the three-year period for successive one-year terms, unless either party provides written notice of non-renewal at least 90 days prior to the end of the current term. The employment agreement specifies position title and duties, compensation and benefits, and indemnification and termination provisions. Mr. Peters will be paid an initial annual base salary of $296,000, which could increase. He is entitled to participate in annual and long-term incentive plans and employee benefit plans and to receive annual vacation in accordance with the policies established by the board of directors of Harleysville National Corporation. If his employment is involuntarily terminated by Harleysville National Corporation other than for cause, he may receive the greater of the amount due under the agreement or 1.0 times his agreed compensation.

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If his employment is terminated upon occurrence of certain events following a “Change in Control,” as defined in the employment agreement, he will receive 2.0 times his agreed compensation. In either case, Harleysville National Corporation has agreed that Mr. Peters will be entitled to continued participation in Harleysville's employee benefit plans for twelve (12) months or until he secures substantially similar benefits through other employment, whichever shall first occur. The agreement also contained a non-competition provision and a confidentiality provision.

Pursuant to Mr. Peters’ employment agreement, Harleysville National Corporation has agreed to provide him with exclusive use of an automobile and will pay all costs of insurance coverage, repairs, maintenance and other operating and incidental expenses, including license, fuel and oil. Harleysville National Corporation also agrees to provide him with use of a replacement automobile when the automobile he is using reaches three years of age or 60,000 miles, whichever is first, and approximately every three years or 60,000 miles thereafter on the same terms and conditions. The automobile is to remain the property of Harleysville National Corporation. In addition to reimbursement of other reasonable business expenses, Harleysville National Corporation agreed to reimburse him for dues and reasonable Harleysville-related business expenses associated with 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.

A copy of Mr. Peters' employment agreement is attached hereto as Exhibit 99.2 and made part hereof.

Harleysville National Corporation has determined that, other than as disclosed in this Form 8-K, there is no information required to be disclosed regarding related party transactions with Mr. Peters. There are no family relationships between Mr. Peters and any director or other executive officer of Harleysville National Corporation other than Mr. Peters and Debra K. Peters, Vice President of East Penn Bank Division, are husband and wife.

Item 7.01 Regulation FD Disclosure

On November 19, 2007, Harleysville National Corporation issued a press release announcing the completion of its acquisition of East Penn Financial Corporation. Under the terms of the Agreement and Plan of Merger dated as of May 15, 2007, as amended August 29, 2007, East Penn Financial Corporation has been acquired by Harleysville National Corporation and East Penn Financial’s wholly owned subsidiary, East Penn Bank, a $440 million bank offering deposit and lending services throughout the Lehigh Valley, PA has merged with and into Harleysville National Bank, Harleysville National Corporation’s banking subsidiary. These transactions were effective on November 16, 2007.

Based on the terms of the merger agreement and current stock prices, the value of the transaction at the effective date is approximately $85.0 million or $13.41 per share of East Penn Financial stock. East Penn shareholders who made a valid stock election will receive .8416 shares of Harleysville National Corporation common stock for each share of East Penn common stock for approximately 89% of their shares. They will receive $14.50 per share in cash for the remaining shares. All other shareholders who made a valid cash election or no election will receive $14.50 in cash for each share of East Penn Financial common stock. The merger consideration includes the issuance of approximately 2,433,000 shares of Harleysville National

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Corporation common stock and the payment of approximately $50.7 million in cash. The transaction is expected to be accretive to Harleysville National Corporation’s earnings for the calendar year of 2008.

A copy of the press release is furnished herewith as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits

(a)   Not applicable.

(b)   Not applicable.

(c)   Not applicable.

(d)   Exhibits.

Exhibit 99.1: Press Release issued by Harleysville National Corporation dated November 19, 2007 titled “Harleysville National Corporation Completes Acquisition of East Penn Financial Corporation.”

Exhibit 99.2:  Employment Agreement between Harleysville Management Services, LLC and Brent L. Peters, dated November 16, 2007.

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Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the Registrant  has  duly  caused  this  report  to  be  signed on its behalf by the undersigned  hereunto  duly  authorized.

HARLEYSVILLE NATIONAL CORPORATION

Dated: November 19, 2007               /s/ George S. Rapp     

George S. Rapp, EVP and Chief Financial Officer

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EXHIBIT INDEX

	Page No.
Exhibit 99.1: Press Release issued by Harleysville National Corporation dated November 19, 2007 titled “Harleysville National Corporation Completes Acquisition of East Penn Financial Corporation.”	7
Exhibit 99.2: Employment Agreement between Harleysville Management Services, LLC and Brent L. Peters, dated November 16, 2007.	10

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

CONTACT: Paul D. Geraghty, President and CEO

PHONE: 215-513-2391

HARLEYSVILLE NATIONAL CORPORATION COMPLETES ACQUISITION OF EAST PENN FINANCIAL CORPORATION

Harleysville, PA – November 19, 2007- Harleysville National Corporation (NASDAQ: HNBC) announced today the completion of its acquisition of East Penn Financial Corporation (NASDAQ: EPEN).  Under the terms of the Agreement and Plan of Merger dated as of May 15, 2007, as amended August 29, 2007, East Penn Financial Corporation has been acquired by HNBC and East Penn Financial’s wholly owned subsidiary, East Penn Bank, a $440 million bank offering deposit and lending services throughout the Lehigh Valley, PA, has merged with and into Harleysville National Bank, HNBC’s banking subsidiary (HNB).  These transactions were effective on November 16, 2007.  Shares of East Penn Financial will no longer be listed on the NASDAQ stock exchange, but the HNBC stock issued to East Penn Financial shareholders continues to trade on the NASDAQ Global Select Market^®.

“We are very excited about the opportunities this partnership brings not only to our customers but also to our employees and communities.  I am proud of the way both East Penn and Harleysville team members have been working together.  Through their hard work and dedication we have achieved a full system conversion which allows our combined customers to enjoy the benefit of a wide array of financial services delivered seamlessly by friendly, knowledgeable professionals at over 50 locations in eight counties throughout eastern Pennsylvania,” said Paul D. Geraghty, President and CEO of HNBC.

Brent L. Peters, President and Chief Executive Officer of East Penn Financial, said, “Our team is pleased to offer customers expanded product, service and location options while maintaining the same high-quality service and community commitment our bank is known for.  We are pleased to be maintaining our entire team of frontline staff, which will allow us to continue to provide exceptional service to our valued customers.  Together with our Harleysville teammates we look forward to building and enhancing relationships together throughout our expanded market.”

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As part of the agreement, East Penn Bank continues to operate under the East Penn name and logo, as a division of HNB.  Nine of HNB’s existing branches have been transferred to the East Penn division including those in Lehigh, Carbon, Monroe, and Northampton Counties.  Mr. Peters continues with HNBC as Executive Vice President and President of the East Penn Bank division. He has also joined the HNBC and HNB Boards of Directors.  A new East Penn Division advisory board will be formed with directors of East Penn Financial.

With the addition of East Penn’s nine branch offices, the banks’ combined customers have access to over 50 locations throughout eight counties in eastern Pennsylvania.  East Penn customers now have an expanded menu of products and services such as investment management, financial planning, trust and custom credit solutions offered by HNB’s Millennium Wealth Management division and compensation, insurance and estate planning through Cornerstone Advisors.  They will also have access to over 32,000 fee-free ATMs throughout the United States.

Based on the terms of the merger agreement and current stock prices, the value of the transaction at the effective date is approximately $85.0 million or $13.41 per share of East Penn Financial stock.  East Penn shareholders who made a valid stock election will receive .8416 shares of Harleysville National Corporation common stock for each share of East Penn common stock for approximately 89% of their shares.  They will receive $14.50 per share in cash for the remaining shares.  All other shareholders who made a valid cash election or no election will receive $14.50 in cash for each share of East Penn Financial common stock.  The merger consideration includes the issuance of approximately 2,433,000 shares of HNC common stock and the payment of approximately $50.7 million in cash.  The transaction is expected to be accretive to HNBC’s earnings for the calendar year of 2008.

Harleysville National Corporation was advised by Janney Montgomery Scott LLC and Stradley Ronon Stevens & Young, LLP.  East Penn Financial’s financial advisor was Sandler O’Neill and Partners, L.P. and its special legal counsel was Bybel Rutledge LLP.

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Harleysville National Corporation, with assets of $3.8 billion, including the acquisition of East Penn Financial Corporation, is the holding company for Harleysville National Bank (HNB).  Investment Management and Trust Services are provided through Millennium Wealth Management, a division of HNB, with assets under management of $3.3 billion.  Harleysville National Corporation stock is traded under the symbol “HNBC” and is commonly quoted on the NASDAQ Global Select Market^®.  For more information, visit the Harleysville National Corporation website at www.hncbank.com.

This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.  Actual results and trends could differ materially from those set forth in such statements due to various factors.  Such factors include the possibility that increased demand or prices for the Corporation’s financial services and products may not occur, changing economic and competitive conditions, technological developments, and other risks and uncertainties, including those detailed in the Corporation’s filings with the Securities and Exchange Commission.

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EX-99.2

Exhibit 99.2

EMPLOYMENT AGREEMENT

NOTICE TO BRENT L. PETERS:

This is a very important legal document, and you should carefully review and understand the terms and effect of this document before signing it. This Agreement is being entered into in exchange for your entering into a termination of an existing Employment Agreement you have with EAST PENN FINANCIAL CORPORATION and EAST PENN BANK (the “Termination Agreement”). Therefore, you should consult with an attorney before signing this Agreement or the Termination Agreement. You have twenty one (21) days from the day of receipt of this document, May 10, 2007, to consider this Agreement and the Termination Agreement. The twenty one (21) days will begin to run on the day after receipt. If you choose to sign this Agreement and the Termination Agreement, you will have an additional seven (7) days following the date of your signature to revoke the Termination Agreement.  If you revoke the Termination Agreement within that seven (7) day period, this Agreement and the Termination Agreement shall not become effective or enforceable by you or any other party.

THIS AGREEMENT (“Agreement”) is made as of November 16, 2007, between HARLEYSVILLE MANAGEMENT SERVICES, LLC (“HMS”), a corporation having a place of business at 483 Main Street, Harleysville, Pennsylvania 19438; and BRENT L. PETERS ("Executive"), an individual residing at 3837 E. View Drive, Orefield, PA  18069.

WITNESSETH:

WHEREAS, HMS is a subsidiary of HARLEYSVILLE NATIONAL BANK AND TRUST COMPANY (the "Bank"), a national bank having a place of business at 483 Main Street, Harleysville, Pennsylvania 19438;

WHEREAS, Bank is a subsidiary of HARLEYSVILLE NATIONAL CORPORATION ("HNC"), a Pennsylvania business corporation having a place of business at 483 Main Street, Harleysville, Pennsylvania 19438;

WHEREAS, HMS desires to employ Executive as President of the East Penn Bank Division of the Bank and Executive Vice President of HNC and the Bank, effective the date of this Agreement, under the terms and conditions set forth herein;

WHEREAS, Executive desires to accept that assignment under the terms and conditions set forth herein.

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AGREEMENT:

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

1. Employment. HMS hereby employs Executive and Executive hereby accepts employment with HMS on the terms and conditions set forth in this Agreement.

2. Duties and Positions of Employee.

(a) Executive shall perform and discharge well and faithfully such duties as an executive officer of the Bank and HNC as may be assigned to Executive from time to time by the Board of Directors of the Bank and HNC. Executive shall be President of the East Penn Bank Division of the Bank and Executive Vice President of HNC and the Bank and in such capacities shall report to the chief executive officer of HNC, and shall hold such other titles as may be given to him from time to time by the Board of Directors of the Bank and HNC. Executive shall devote his full time, attention and energies to the business of the Bank and HNC during the Employment Period (as defined in Section 3 of this Agreement).

(b) During the Employment Period, so long as the Bank and HNC maintain an Executive Council, Executive shall be a member of the Executive Council.

(c) During the Employment Period, Executive shall be a member of the Executive Committee of the Bank’s Board of Directors.

(d) During the Employment Period, Executive shall be a member of the Bank’s ALCO, Senior Loan, Problem Asset, Credit Policy, Disclosure, Senior Staff and Strategic Planning Committees, so long as the Bank and HNC maintain them.

(e) During the Employment Period, the Bank and HNC will cause Executive to be appointed or elected to the Boards of Directors of HNC and HNB for at least three (3) years from the date of this Agreement.

(f) Notwithstanding any other provision of this Section 2, this Section 2 shall not be construed as preventing Executive from (a) engaging in activities incident or necessary to personal investments so long as such investment does not exceed 5% of the outstanding shares of any publicly held company, (b) acting as a member of the Board of Directors of any other corporation or as a member of the Board of Trustees of any other organization, with the prior approval of the Board of Directors of the Bank and HNC. The Executive shall not engage in any business or commercial activities, duties or pursuits that compete with the business or commercial activities of HNC, 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 that competes with HNC or any of its subsidiaries or affiliates.

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3.Term of Agreement.

(a) This Agreement shall be for a three (3) year period (the "Employment Period") beginning on the date of this Agreement and ending three (3) years from the date of this Agreement. On the third anniversary of the date of this Agreement, and on the same date of each subsequent year (each, a "Renewal Date") the Employment Period shall be automatically extended for a period ending one (1) year from the current Renewal Date, unless either party shall give written notice of non-renewal to the other party at least ninety (90) days prior to that Renewal Date, in which event this Agreement shall terminate at the end of the then existing Employment Period.

(b) Notwithstanding the provisions of Section 3(a) of this Agreement, this Agreement shall terminate automatically for Cause (as defined herein) upon written notice from the Board of Directors of the Bank and HNC 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;

(ii) Executive's willful failure to follow the good faith lawful instructions of the Board of Directors of the Bank and HNC with respect to the operations of the Bank and HNC; or

(iii) Executive's willful failure to perform Executive's duties to the Bank and HNC (other than a failure resulting from Executive's incapacity because of physical or mental illness, as provided in subsection (d) of this Section 3), which failure results in injury to the Bank and HNC, monetarily or otherwise.

(iv) Executive's intentional violation of the provisions of this Agreement;

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

(vi) conduct on the part of the Executive that brings public discredit to HNC or the Bank;

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

(viii) Executive's 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;

(ix) Executive's unlawful discrimination, including harassment, against employees, customers, business associates, contractors or visitors of HNC or the Bank;

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(x) Executive's theft or abuse of HNC's or the Bank’s property or the property of customers, employees, contractors, vendors or business associates of HNC or the Bank;

(xi) any final removal or prohibition order to which the Executive is subject, by a federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act;

(xii) any act of fraud or misappropriation by Executive; or

(xiii) intentional misrepresentation of a material fact, or intentional omission of information necessary to make the information supplied not materially misleading, in any application or other information provided by the Executive to HNC or the Bank or any representative of HNC or the Bank in connection with the Executive's employment with HMS and the Bank.

If this Agreement is terminated for Cause, Executive's rights under this Agreement shall cease as of the effective date of such termination.

(c) Notwithstanding the provisions of Section 3(a) of this Agreement, this Agreement shall terminate automatically upon Executive's voluntary termination of employment (other than in accordance with Section 5 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 of the East Penn Bank Division of the Bank and Executive Vice President of HNC and the Bank, (ii) a reduction in salary or benefits, except such reductions that are the result of a national financial depression or national or bank emergency when such reduction has been implemented by the Board of Directors for HNC and Bank's senior management, or (iii) a reassignment which requires Executive to move his principal office more than fifty (50) miles from Executive's office on the date of this Agreement. If such termination occurs for Good Reason and upon execution of a mutual release, then HMS will provide Executive with the following pay and benefits: (i) a payment in an amount equal to the greater of: that portion of Executive’s Agreed Compensation, as defined in subsection (g) of this Section 3, for the then existing Employment Period that has not been paid to Executive as of the date his employment terminates or 1.0 times the Executive's Agreed Compensation. Such amount shall be payable in twelve (12) equal monthly installments; and (ii) subject to plan terms, Executive’s continued participation in HMS's employee benefit plans for twelve (12) months or until Executive secures substantially similar benefits through other employment, whichever shall first occur. If Executive is no longer eligible to participate in an employee benefit plan because he is no longer an employee, HMS will pay Executive the amount of money that it would have cost HMS to provide the benefits to Executive.

  However, in the event the payments 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 HMS's

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independent auditors, Executive shall remit to HMS 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 Agreement 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"), then HNC shall be required only to pay to Executive the amount determined to be deductible under Section 280G.  Notwithstanding any other provision of this Agreement, the provisions of this paragraph of this subsection (c) shall apply only in the event that Executive terminates this Agreement with Good Reason more than 15 months after the effective date of this Agreement.

Executive shall not be required to mitigate the amount of any payment provided for in this Section 3(c) by seeking employment or otherwise. Unless otherwise agreed to in writing, the amount of payment or benefit provided for in this section 3(c) 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 or right to receive any retirement or other benefit after the date of termination of employment or otherwise.

(d) Notwithstanding the provisions of Section 3(a) of this Agreement, this Agreement shall terminate automatically 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 absolutely entitled to receive an amount equal to and no greater than seventy (70%) of the Executive's Agreed Compensation as defined in subsection (g) of this Section 3, less amounts payable under any disability plan of HMS, until the earliest of (i) his return to employment, (ii) his attainment of age 65, or (iii) his death. In addition, Executive shall be entitled to a continuation of HMS's employee benefits for such period. If Executive is no longer eligible to participate in an employee benefit plan because he no longer is an employee, HMS will pay the Executive the amount of money that it would have cost HMS to provide the benefits to Executive. For purposes of this Agreement, Disability shall mean Executive's incapacitation by accident, sickness or otherwise which renders Executive mentally or physically incapable of performing all of the essential functions of his job, taking into account any reasonable accommodation required by law, without posing a direct threat to himself or others, for a period of six (6) months.

(e) Notwithstanding the provisions of Section 3(a) of this Agreement, this Agreement shall terminate automatically upon Executive's death, and Executive’s rights under this Agreement shall cease as of the date of such termination.

(f) Notwithstanding the provisions of Section 3(a) of this Agreement, this Agreement shall terminate automatically upon Executive's voluntary termination of employment absent Good Reason, except for the provisions of Sections 5 and 6.

(g) The term "Agreed Compensation" shall equal the Executive's highest Annual Base Salary under the Agreement.

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(h) Executive agrees that in the event his employment under this Agreement is terminated, Executive shall resign as a director of HNC, the Bank and any affiliate or subsidiary thereof, if he is then serving as a director of any such entities.

4. Employment Period Compensation.

(a) Annual Base Salary.  For services performed by Executive under this Agreement, HMS shall pay Executive an Annual Base Salary in the aggregate during the Employment Period at the rate of $296,000.00 per year, payable at the same times as salaries are payable to other executives of the Bank and HNC. HMS may, from time to time, increase Executive's Annual Base Salary, and any and all such increases shall be deemed to constitute amendments to this Section 4(a) to reflect the increased amounts, effective as of the date established for such increases by the Board of Directors of the Bank and HNC or any committee of such Board in the resolutions authorizing such increases.

(b) Incentive Plans. Executive shall be entitled to participate in HMS’ Annual and Long Term Incentive Plans which provide incentives based on goals and objectives as specified by HMS.

(c) Vacations. During the term of this Agreement, Executive shall be entitled to four (4) weeks paid annual vacation in accordance with the policies as established from time to time by the Board of Directors of the Bank and HNC. However, Executive shall not be entitled to receive any additional compensation from HMS for failure to take a vacation, nor shall Executive be able to accumulate unused vacation time from one year to the next, except to the extent authorized by the Board of Directors of the Bank.

(d) Employee Benefit Plans. During the term of this Agreement, Executive shall be entitled to participate in and receive the benefits of any Employee Benefit Plan currently in effect at HMS at the level of comparable HMS executives, until such time that the Board of Directors of the Bank and HNC authorizes a change in such benefits. 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 4(a) hereof.

(e) Automobile. During the term of this Agreement, HMS shall provide Executive with exclusive use of an automobile mutually agreed upon by HMS and Executive. HMS 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.   HMS shall provide Executive with use of 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.  The automobile shall at all times remain the property of HMS.

(f)  Business Expenses.   During the term of this Agreement, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him, to the extent properly accounted for, in accordance with the policies and procedures established by the Board of Directors of HMS for its executive officers. HMS shall reimburse Executive for any

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and all dues and reasonable HMS 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.

5. Termination of Employment Following Change in Control.

(a)If a Change in Control (as defined in Section 5(b) of this Agreement) shall occur, and if thereafter at any time during the term of this Agreement there shall be:

(i) any involuntary termination of Executive's employment (other than for the reasons set forth in Section 3(b) or 3(d) of this Agreement);

(ii) any reduction in Executive's title, responsibilities, including reporting responsibilities, or authority, including such title, responsibilities or authority as such title, responsibilities or authority may be increased from time to time during the term of this Agreement;

(iii) the assignment to Executive of duties inconsistent with Executive's office on the date of the Change in Control or as the same may be increased from time to time after the Change in Control;

(iv) any reassignment of Executive to a location greater than fifty (50) miles from the location of Executive's office on the date of the Change in Control;

(v) any reduction in Executive's Annual Base Salary in effect on the date of the Change in Control or as the same may be increased from time to time after the Change in Control;

(vi) any failure to provide Executive with benefits at least as favorable as those enjoyed by Executive under any of HMS's retirement or pension, life insurance, medical, health and accident, disability or other employee plans in which Executive participated at the time of the Change in Control, or the taking of any action that would materially reduce any of such benefits in effect at the time of the Change in Control; or

(vii) any requirement that Executive travel in performance of his duties on behalf of the Bank or any of its subsidiaries or affiliates for a significantly greater period of time during any year than was required of Executive during the year preceding the year in which the Change in Control occurred;

then, at the option of Executive, exercisable by Executive within one hundred twenty (120) days of the occurrence of any of the foregoing events, Executive may resign from employment with HMS (or, if involuntarily terminated, give notice of intention to collect benefits under this Agreement) by delivering such notice in writing (the "Notice of Termination") to HMS and the provisions of Section 6 of this Agreement shall apply.

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(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 HNC only (not the Bank), (B) a sale, exchange, transfer or other disposition of substantially all of the assets of HNC only (not the Bank), or (c) a purchase by HNC only (not the Bank) of substantially all of the assets of another entity, unless (x) such merger, consolidation, division, sale, exchange, transfer, purchase or disposition is approved in advance by seventy percent (70%) or more of the members of the Board of Directors of HNC only (not the Bank) who are not interested in the transaction and (y) 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 HNC only (not the Bank); or

(ii) any other change in control of HNC only (not the Bank) similar in effect to any of the foregoing.

6. Rights in Event of Termination of Employment Following Change in Control.

(a) In the event that Executive delivers a Notice of Termination (as defined in Section 5(a) of this Agreement) to HMS only (not the Bank), Executive shall be absolutely entitled to receive the compensation and benefits set forth below:

If, at the time of termination of Executive's employment, a "Change in Control" (as defined in Section 5(b) of this Agreement) has also occurred, upon execution of a release satisfactory to HMS, HMS will provide Executive with the following pay and benefits: (i) a payment in an amount equal to and no greater than 2.0 times the Executive's Agreed Compensation as defined in subsection (g) of Section 3, which amount shall be payable in twelve (12) equal monthly installments; and (ii) subject to plan terms, Executive’s continued participation in HMS's employee benefit plans for twelve (12) months or until Executive secures substantially similar benefits through other employment, whichever shall first occur. If Executive is no longer eligible to participate in an employee benefit plan because he no longer is an employee, HMS will pay Executive the amount of money that it would have cost HMS to provide the benefits to Executive. However, in the event the payments 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 HMS's independent auditors, Executive shall remit to HMS the amount of the reduction plus such interest as maybe necessary to avoid the imposition of such excise tax. Notwithstanding the foregoing or any other provision of this Agreement 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 Code, then HMS shall be required only to pay to Executive the amount determined to be deductible under Section 280G.

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(b) Executive shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking other employment or otherwise. Unless otherwise agreed to in writing, the amount of payment or the benefit provided for in this Section 6 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 o£ or right to receive any retirement or other benefits after the date of termination of employment or otherwise.

7. Rights in Event of Termination of Employment Absent Change in Control.

(a) In the event that Executive's employment is involuntarily terminated by HMS without Cause and no Change in Control shall have occurred as of the date of such termination, upon execution of a mutual release, HMS will provide Executive with the following pay and benefits: (i) a payment in an amount equal to the greater of: that portion of the Executive’s Agreed Compensation for the then existing Employment Period that has not been paid to Executive as of the date his employment terminates, or 1.0 times the Executive’s Agreed Compensation. Such amount shall be payable in a lump sum; and (ii) subject to plan terms, Executive’s continued participation in HMS's employee benefit plans for twelve (12) months or until Executive secures substantially similar benefits through other employment, whichever shall first occur. If Executive is no longer eligible to participate in an employee benefit plan because he is no longer an employee, HMS will pay Executive the amount of money that it would have cost HMS to provide the benefits to Executive.

However, in the payments 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 imposition. Upon written notice to Executive, together with calculations of HMS's independent auditors, Executive shall remit to HMS 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 Agreement 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 Code, then HMS shall be required only to pay to Executive the amount determined to be deductible under Section 280G.  Notwithstanding any other provision of this Agreement, the provisions of this paragraph of this subsection (a) shall apply only in the event that Executive's employment is involuntarily terminated by HMS without Cause more than 15 months after the effective date of this Agreement.

(b) Executive shall not be required to mitigate the amount of any payment provided for in this Section 7 by seeking other employment or otherwise. The amount of payment or the benefit provided for in this Section 7 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.

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(c) The amounts payable pursuant to this Section 7 shall constitute Executive's sole and exclusive remedy in the event of involuntary termination of Executive's employment by HMS without cause in the absence of a Change in Control.

8. Covenant Not to Compete

(a) Executive hereby acknowledges and recognizes the highly competitive nature of the business of HNC and the Bank and accordingly agrees that, during his employment and for a period of one (1) year following the date of termination of Executive’s employment, regardless of the reason for termination, Executive shall not:

(i) in any county in which, at any time during the Employment Period or as of the date of termination of the Executive's employment, a branch, office or other facility of HNC or any of its subsidiaries is located, or in any county contiguous to such a county, including contiguous counties located outside of the Commonwealth of Pennsylvania (the "Non-Competition Area") 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 the banking (including bank and financial holding company) or financial services industry, or any other activity in which HNC or any of its subsidiaries are engaged during the Employment Period; or

(ii) in the Non-Competition area provide financial or other assistance to any person, firm, corporation, or enterprise engaged in the banking (including bank and financial holding company) or financial services industry, or any other activity in which HNC or any of its subsidiaries are engaged during the Employment Period; or

(iii) directly or indirectly contact, solicit or attempt to induce any person, corporation or other entity who or which is a customer or referral source of HNC, or any of its subsidiaries or affiliates, during the term of Executive's employment or on the date of termination of Executive's employment, to become a customer or referral source of any person or entity other then HNC or one of its subsidiaries or affiliates; or

(iv) directly or indirectly solicit, induce or encourage any employee of HNC or any of its subsidiaries or affiliates, who is employed during the term of Executive's employment or on the date of termination of Executive’s employment, to leave the employ of HNC or any of its subsidiaries or affiliates, or to seek, obtain or accept employment with any person or entity other than HNC or any of their subsidiaries or affiliates.

(b) It is expressly understood and agreed that, although Executive and HNC consider the restrictions contained in Section 8(a) hereof reasonable for the purpose of preserving for HNC and its subsidiaries their 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 8(a) hereof is an unreasonable or otherwise unenforceable restriction against Executive, the provisions of Section 8(a) hereof shall not be rendered void but

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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.

9. 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 the Bank and HNC or a person authorized thereby, knowingly disclose to any person, other than an employee of the Bank, HNC 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 the Bank, any material confidential information obtained by him while in the employ of HMS with respect to any of HNC's or the 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 HNC or the 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 HNC or the Bank or any information that must be disclosed as required by law.

10. Work Made for Hire. Any work performed by the Executive under this Agreement should be considered a "Work Made for Hire" as that phrase is defined by the U.S. patent laws and its subsidiaries and affiliates. In the event it should be established that such work does not qualify as a Work Made for Hire, the Executive agrees to and does hereby assign to HNC and its affiliates and subsidiaries, all of his rights, title, and/or interest in such work product, including, but not limited to, all copyrights, patents, trademarks, and property rights.

11. Return of Company Property and Documents.  The Executive agrees that, at the time of termination of his employment, regardless of the reason for termination, he will deliver to the Bank, any and all Bank, HNC or HMS property, including, but not limited to, automobiles, keys, security codes or passes, mobile telephones, pagers, computers, devices, confidential information, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, software programs, equipment, other documents or property, or reproductions of any of the aforementioned items developed or obtained by the Executive during the course of his employment.

12. Liability Insurance. The Bank shall use its best efforts to obtain insurance coverage for the Executive under an insurance policy covering officers and directors of the Bank against lawsuits, arbitrations or other legal or regulatory proceedings; however nothing herein shall be construed to require the Bank to obtain such insurance, if the Board of Directors of the Bank determines that such coverage cannot be obtained at a reasonable price.

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; to the principal executive offices of the Bank, in the case of notices to the Bank, and to the principal executive offices of HNC, in the case of notices to HNC.

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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 the 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 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 HNC and the Bank to any successor in interest to their respective businesses.

16. Entire Agreement. This Agreement contains the entire agreement of the parties and supersedes all other agreements, written or oral, between the parties relating to the subject matter of this Agreement.

17. Successors, Binding Agreement.

(a) The 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 the Bank to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place. Failure by the 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 3 of this Agreement shall apply. As used in this Agreement "HNC" and “Bank” shall mean HNC and Bank, as defined previously and any successor to its respective businesses 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 he has delivered a Notice of Termination to HMS pursuant to Section 5 above, or following HMS’s termination of Executive's employment without Cause, such amounts that would have been payable to Executive under this Agreement if Executive had continued to live, 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. The Bank, HMS 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 (except for any enforcement sought with respect to Sections 8, 9, 10 or 11, which maybe litigated in court through an action for an injunction or other relief) are to be submitted for resolution, in Montgomery County, 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"). The Bank, HMS or Executive may initiate an arbitration proceeding at any time by giving notice to the other in accordance with the Rules. The Bank,

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 HMS and Executive may, as a matter or 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, the Bank, HMS 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 or any enforcement sought with respect to Sections 8, 9, 10 or 11, which may be litigated through an action for injunction or other relief.

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 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.

ATTEST: By: /s/ JoAnn M. Bynon                                                                   (Signature) Print Name: JoAnn M. Bynon                                                                 Title:  Sr. VP & Corp. Sec.	HARLEYSVILLE MANAGEMENT SERVICES, LLC By:   /s/ Michael B. High                                                                   Print Name: Michael B. High Title: Vice President
WITNESS: /s/ Erik Gerhard   (Signature) Print Name: Erik Gerhard                                                                 Title: ______________________	/s/ Brent L. Peters    Brent L. Peters

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