ROYAL BANCSHARES OF PENNSYLVANIA INC
EXHIBIT 10.6
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<FILENAME>b402075ex10-6.txt
<DESCRIPTION>EXHIBIT 10.6
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.6


                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made as of the 20th day of August, 2004, between
ROYAL BANCSHARES OF PENNSYLVANIA, INC. ("Corporation"), a Pennsylvania business
corporation having a place of business at 732 Montgomery Avenue, Narberth,
Pennsylvania 19072, ROYAL BANK AMERICA ("Bank") a state chartered bank having a
place of business at 732 Montgomery Avenue, Narberth, Pennsylvania 19072, and
Robert R. Tabas ("Executive"), an individual residing at 681 Black Rock Road,
Bryn Mawr, PA 19010.

                              W I T N E S S E T H:

         WHEREAS, Corporation and Bank desire to employ Executive to serve in
the capacity of Senior Vice President of the Bank under the terms and conditions
set forth herein;

         WHEREAS, Executive desires to accept employment with the Bank on the
terms and conditions set forth herein.

         AGREEMENT:

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

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

2.       DUTIES OF EMPLOYEE. Executive shall perform and discharge well and
         faithfully such duties as an executive officer of the Bank as may be
         assigned to Executive from time to time by the Board of Directors of
         the Bank. Executive shall be employed as Senior Vice President of the
         Bank, and shall hold such other titles as may be given to him from time
         to time by the Board of Directors of the Bank. Executive shall devote
         his full time, attention and energies to the business of Corporation
         and Bank during the Employment Period (as defined in Section 3 of this
         Agreement); provided, however, that this Section 2 shall not be
         construed as preventing Executive from (a) engaging in activities
         incident or necessary to personal investments, (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 or (c) being involved
         in any other activity with the prior approval of the Board of Directors
         of Corporation and Bank. The Executive shall not engage in any business
         or commercial activities, duties or pursuits which compete with the
         business or commercial activities of Corporation or Bank, nor may the
         Executive serve as a director or officer or in any other capacity in a
         company which competes with Corporation or Bank.


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3.       TERM OF AGREEMENT.

         (a)      The period of Executive's employment under this Agreement
                  shall be deemed to have commenced as of August 18, 2004 and
                  shall continue for a period of twenty-four (24) full calendar
                  months thereafter (the "Employment Period"). Commencing on the
                  date of the execution of this Agreement, the term of this
                  Agreement shall be extended for one day each day until such
                  time as the Board of Directors of the Corporation or Bank or
                  Executive elects not to extend the term of the Agreement by
                  giving written notice to the other party in accordance with
                  Section 3 of this Agreement, in which case the term of this
                  Agreement shall be fixed and shall end on the second
                  anniversary of the date of such written notice.

         (b)      Notwithstanding anything herein contained to the contrary: (i)
                  Executive's employment with the Bank may be terminated by the
                  Bank or Executive during the term of this Agreement, subject
                  to the terms and conditions of this Agreement; (ii) nothing in
                  this Agreement shall mandate or prohibit a continuation of
                  Employee's employment following the expiration of the term of
                  the Agreement upon such terms as the Board and the Executive
                  may mutually agree.

         (c)      Notwithstanding the previous 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 Corporation and Bank to Executive. As
                  used in this Agreement, "Cause" shall mean any of the
                  following:

                  (i)      Executive's conviction of or plea of guilty or nolo
                           contendere to a felony, a crime of falsehood or a
                           crime involving moral turpitude, or the actual
                           incarceration of Executive for a period of sixty (60)
                           consecutive days or more;

                  (ii)     Executive's willful failure to follow the good faith
                           lawful instructions of the Board of Directors of
                           Corporation or Bank with respect to their operations,
                           after written notice from Corporation or Bank and a
                           failure to cure such violation within ten (10) days
                           of said written notice, unless it is apparent under
                           the circumstances that Executive is unable to cure
                           such violation; or

                  (iii)    Executive's willful failure to substantially perform
                           Executive's duties to Corporation or Bank, other than
                           a failure resulting from Executive's incapacity
                           because of physical or mental illness, as provided in
                           subsection (f) of this Section 3, after written
                           notice from Corporation or Bank and a failure to cure
                           such violation within ten (10) days of said written
                           notice, unless it is apparent under the circumstances
                           that Executive is unable to cure such violation,
                           which failure results in injury to Corporation or
                           Bank, monetarily or otherwise;

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


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                           within ten (10) days of said written notice, unless
                           it is apparent under the circumstances that Executive
                           is unable to cure such violation;

                  (v)      dishonesty of the Executive in the performance of his
                           duties, as reasonably determined by a vote of
                           seventy-five percent (75%) of the directors of the
                           Board of Directors;

                  (vi)     Executive's removal or prohibition from being an
                           institutional-affiliated party by a final order of an
                           appropriate federal banking agency pursuant to
                           Section 8(e) of the Federal Deposit Insurance Act or
                           any applicable Regulatory Agency;

                  (vii)    the willful engaging by the Executive in misconduct
                           injurious to the Corporation or Bank after notice
                           from Corporation or Bank, and a failure to cure such
                           conduct within twenty (20) days;

                  (viii)   the breach of Executive's fiduciary duty to the
                           Corporation or Bank involving personal profit;

                  (ix)     the willful violation of (1) any material law, rule
                           or regulation applicable to Corporation or Bank or
                           (2) any final cease and desist order issued by an
                           applicable regulatory agency;

                  (x)      conduct on the part of Executive that brings public
                           discredit to Corporation or Bank or that is clearly
                           contrary to the best interests of Corporation or Bank
                           as reasonably determined by a vote of seventy-five
                           percent (75%) of the directors of the Board of
                           Directors;

                  (xi)     unlawful harassment by the Executive against
                           employees, customers, business associates,
                           contractors or vendors of Corporation or Bank as
                           reasonably determined by seventy-five percent (75%)
                           of the disinterested members of the Board of
                           Directors following an investigation of the claims by
                           a third party;

                  (xii)    any act of fraud or misappropriation against the
                           Corporation, the Bank, or their customers,
                           employees, contractors or business associates;

                  (xiii)   intentional misrepresentation of a material fact, or
                           intentional omission of information necessary to make
                           the information supplied materially misleading, in
                           application or other information provided by the
                           Executive to Corporation or Bank in connection with
                           the Executive's employment with Corporation or Bank;
                           or

                  (xiv)    the existence of any material conflict between the
                           interests of Corporation or Bank and the Executive
                           that is not disclosed in writing by the Executive to
                           Corporation or Bank prior to action and approved in
                           writing by the Board


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                           of Directors, and, after notice from Corporation or
                           Bank, a failure to cure such conflict within twenty
                           (20) days of said notice.

         (d)      Notwithstanding the foregoing, the Executive's employment
                  under this Agreement shall not be deemed to have been
                  terminated for "Cause" under this Section 3(c) above if such
                  termination took place solely as a result of:

                  (i)      Questionable judgment on the part of the Executive;

                  (ii)     Any act or omission believed by the Executive, in
                           good faith, to have been in, or not opposed to, the
                           best interests of Corporation or Bank (or its
                           affiliated companies); or

                  (iii)    Any act or omission in respect of which a
                           determination could properly be made that the
                           Executive met the applicable standard of conduct
                           prescribed for indemnification or reimbursement or
                           payment of expenses under the Charter or By-laws of
                           Corporation or Bank or the directors' and officers'
                           liability insurance of Corporation or Bank, in each
                           case as in effect at the time of such act or
                           omission.

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

         (e)      Notwithstanding the previous provisions of Section 3 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
                  Senior Vice President of the Bank, (ii) a reassignment which
                  requires Executive to move his principal residence, (iii) any
                  removal of the Executive from office or any adverse change in
                  the terms and conditions of the Executive's employment, except
                  for any termination of the Executive's employment under the
                  provisions of Section 3 hereof, (iv) any reduction in the
                  Executive's Annual Base Salary as in effect on the date hereof
                  or as the same may be increased from time to time, (v) any
                  failure of Corporation and Bank to provide the Executive with
                  benefits at least as favorable as those enjoyed by the
                  Executive under any of the pension, life insurance, medical,
                  health and accident, disability or other employee plans of
                  Corporation and Bank, or the taking of any action that would
                  materially reduce any of such benefits unless such reduction
                  is part of a reduction applicable to all employees. If such
                  termination occurs for Good Reason, then Corporation and Bank
                  shall pay Executive an amount equal to 1.99 times the
                  Executive's Base Amount as defined in subsection (i) of this
                  Section 3, and shall be subject to federal, state and local
                  tax withholdings. Such payment shall be paid at the option of
                  Executive in lump sum or in twenty-four (24) equal monthly
                  installments over a period of two years. Payment shall be made
                  in a lump sum unless a written notice to receive the payments
                  in twenty-four (24) equal monthly installments is received
                  concurrent


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                  with Executive's resignation as provided in this Section. In
                  addition, for a period of two (2) years from the date of
                  termination of employment, or until Executive secures
                  substantially similar benefits through other employment,
                  whichever shall first occur, Executive shall receive a
                  continuation of all life, disability, medical insurance and
                  other normal health and welfare benefits in effect with
                  respect to Executive during the two (2) years prior to his
                  termination of employment, or, if Corporation and Bank cannot
                  provide such benefits because Executive is no longer an
                  employee, a dollar amount equal to the cost to Executive of
                  obtaining such benefits (or substantially similar benefits),
                  not to exceed One Hundred and Twenty percent (120%) of Bank's
                  cost to provide such benefits to an employee. However, in the
                  event the payment described herein, when added to all other
                  amounts or benefits provided to or on behalf of the Executive
                  in connection with the termination of his employment, would
                  result in the imposition of an excise tax under Section 4999
                  of the Internal Revenue Code of 1986, as amended (the "Code"),
                  such payments shall be retroactively (if necessary) increased
                  to the extent necessary to cover such excise tax imposition.

                  At the option of the Executive, exercisable by the Executive
                  within ninety (90) days after the occurrence of the event
                  constituting "Good Reason," the Executive may resign from
                  employment under this Agreement by a notice in writing (the
                  "Notice of Termination") delivered to Corporation and Bank and
                  the provisions of this Section 3(e) hereof shall thereupon
                  apply.

         (f)      Notwithstanding the previous provisions of Section 3 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
                  without further compensation due Executive.

         (g)      Notwithstanding the previous provisions of Section 3 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 without further
                  compensation due Executive.

         (h)      Executive agrees that in the event his employment under this
                  Agreement is terminated, unless (1) Executive maintains an
                  ownership interest in the Corporation of five percent (5%) or
                  more, or (2) termination is due to retirement, Executive shall
                  resign as a director of Corporation and Bank, or any affiliate
                  or subsidiary thereof, if he is then serving as a director of
                  any of such entities.

         (i)      (i) The term "Base Amount" shall equal the base amount as
                  defined by 26 U.S.C. ss.280G (b)(3) which generally includes
                  all compensation for services (excluding directors' fees, if
                  any) for five years prior to the year during which the Change
                  in Control occurs divided by five, except that the calculation
                  of the Base Amount shall not include any compensation
                  resulting from director fees; or the granting, the vesting or
                  exercise of any stock options.


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4.       EMPLOYMENT PERIOD COMPENSATION.

         (a)      Annual Base Salary. For services performed by Executive under
                  this Agreement, the Bank shall pay Executive an Annual Base
                  Salary during the Employment Period at the rate of $187,000.00
                  per year, minus applicable withholdings and deductions,
                  payable at the same times as salaries are payable to other
                  executive employees of the Bank. The Bank 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 or any committee of such Board in the
                  resolutions authorizing such increases.

         (b)      Bonus. For services performed by Executive under this
                  Agreement, the Bank may, from time to time, pay a bonus or
                  bonuses (including payments made under Bank Profit Sharing
                  Incentive Plan) to Executive as the Bank, in its sole
                  discretion, deem appropriate. The payment of any such bonuses
                  shall not reduce or otherwise affect any other obligation of
                  Corporation and/or Bank to Executive provided for in this
                  Agreement.

         (c)      Vacations. During the term of this Agreement, Executive shall
                  be entitled to paid annual vacation in accordance with the
                  policies as established from time to time by the Boards of
                  Directors of the Bank. However, Executive shall not be
                  entitled to receive any additional compensation from the Bank
                  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 Boards of Directors of
                  the Bank.

         (d)      Automobile. During the term of this Agreement, the Bank shall
                  provide Executive with an automobile or automobile allowance
                  consistent with the current practice at the date of signing of
                  this agreement.

         (e)      Employee Benefit Plans. During the term of this Agreement,
                  Executive shall be entitled to participate in or receive the
                  benefits of any employee benefit plan currently in effect at
                  Corporation and Bank, subject to the terms of said plan, until
                  such time that the Boards of Directors of Corporation and Bank
                  authorize a change in such benefits. Corporation and Bank
                  shall provide Executive with disability coverage. Corporation
                  and Bank shall not make any changes in such plans or benefits
                  which would adversely affect Executive's rights or benefits
                  thereunder, unless such change occurs pursuant to a program
                  applicable to all executive officers of Corporation and Bank
                  and does not result in a proportionately greater adverse
                  change in the rights of or benefits to Executive as compared
                  with any other executive officer of Corporation and Bank.
                  Nothing paid to Executive under any plan or arrangement
                  presently in effect or made available in the future shall be
                  deemed to be in lieu of the salary payable to Executive
                  pursuant to Section 4(a) hereof.


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         (f)      Retirement Health Benefits. Provided that Executive's
                  employment has not been terminated prior to retirement,
                  Executive shall be entitled to receive medical insurance
                  benefits comparable to the benefits received by full-time
                  employees of the bank, commencing with the later of (1) the
                  date of Executive's retirement, or (2) the date of Executive's
                  60th birthday, and terminating on the earlier of (1) the date
                  that Executive becomes eligible for Medicaid, or (2) the date
                  of Executive's 65th birthday. If Corporation and Bank cannot
                  provide such benefits because Executive is no longer an
                  employee, Executive shall annually receive a dollar amount
                  equal to the cost to Executive of obtaining such benefits (or
                  substantially equal benefits), not to exceed one hundred and
                  twenty percent (120%) of Bank's cost to provide such benefits
                  to other employees.

         (g)      Business Expenses. During the term of this Agreement,
                  Executive shall be entitled to receive prompt reimbursement
                  for all reasonable expenses incurred by him, which are
                  properly accounted for, in accordance with the policies and
                  procedures established by the Boards of Directors of
                  Corporation and Bank for their executive officers. For the
                  purpose of this Agreement, business expenses shall include
                  dues paid for a country club membership, with said country
                  club membership reimbursement subject to an annual cap set by
                  the Compensation Committee.

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, thereafter, if 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(c)
                           of this Agreement);

                  (ii)     any reduction in Executive's title, responsibilities,
                           including reporting responsibilities, or authority,
                           including such title, responsibilities or authority
                           as such 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 significant reduction in Executive's compensation
                           as provided in Section 4 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;


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                  (vi)     any failure to provide Executive with benefits at
                           least as favorable as those enjoyed by Executive
                           under any of Corporation or Bank'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;

                  (vii)    any requirement that Executive travel in performance
                           of his duties on behalf of Corporation or Bank 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; or

                  (viii)   any sustained pattern of interruption or disruption
                           of Executive for matters substantially unrelated to
                           Executive's discharge of Executive's duties on behalf
                           of Corporation and Bank;

                           then, at the option of Executive, exercisable by
                           Executive within ninety (90) days of the Change in
                           Control and occurrence of any of the foregoing
                           events, Executive may resign from employment with
                           Corporation and Bank (or, if involuntarily
                           terminated, give notice of intention to collect
                           benefits under this Agreement) by delivering a notice
                           in writing (the "Notice of Termination") to
                           Corporation and Bank and the provisions of Section 6
                           of this Agreement shall apply. In addition,
                           notwithstanding the payments to Executive
                           contemplated by Section 6, if Executive is requested
                           by the Corporation, Bank or a successor thereto to
                           remain in the employ of the Corporation, Bank, or a
                           successor to the Corporation or Bank following the
                           Date of Change of Control, the Executive expressly
                           agrees, subject to the condition set forth below, to
                           remain in the employ of the Corporation, Bank, or a
                           successor to the Corporation or Bank for not less
                           than six months following the Date of Change of
                           Control. The Corporation, Bank, or successor to the
                           Corporation or Bank shall have the right to request
                           the Executive remain in the employ of the
                           Corporation, Bank, or a successor to the Corporation
                           or Bank for a period of less than six months
                           following the Date of Change of Control. Executive
                           agrees to remain an employee of the Corporation, Bank
                           or successor to the Corporation or Bank pursuant to
                           their request conditioned upon the Executive being
                           compensated in the same amount and on the same terms
                           as he was compensated immediately prior to the Date
                           of Change of Control, including participation in all
                           employee benefit plans to which he would otherwise be
                           entitled.

         (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
                           Corporation or Bank, (B) a sale, exchange, transfer
                           or other disposition of substantially all of the
                           assets of Corporation or Bank, or (C) a purchase by
                           Corporation or Bank of


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                           substantially all of the assets of another entity,
                           unless (y) such merger, consolidation, division,
                           sale, exchange, transfer, purchase or disposition is
                           approved in advance by seventy percent (70%) or more
                           of the members of the Board of Directors of
                           Corporation or Bank who are not interested in the
                           transaction and (z) a majority of the members of the
                           Board of Directors of the legal entity resulting from
                           or existing after any such transaction and the Board
                           of Directors of such entity's parent corporation, if
                           any, are former members of the Board of Directors of
                           Corporation or Bank; or

                  (ii)     any "person" (as such term is used in Sections 13(d)
                           and 14(d) of the Securities Exchange Act of 1934 (the
                           "Exchange Act")), other than Corporation or Bank or
                           any "person" who on the date hereof is a director or
                           officer of Corporation or Bank is or becomes the
                           "beneficial owner" (as defined in Rule 13d-3 under
                           the Exchange Act), directly or indirectly, of
                           securities of Corporation or Bank representing
                           twenty-five percent (25%) or more of the combined
                           voting power of Corporation or Bank's then
                           outstanding securities; provided, however, that for
                           the purposes of this Agreement, a Change-in-Control
                           shall not result from any transfer of ownership,
                           which would otherwise cause the transferee to be a
                           beneficial owner (as defined in Rule 13d-3 under the
                           Exchange Act) directly or indirectly through any
                           contract, arrangement, understanding, relationship or
                           otherwise, to a family member of Daniel M. Tabas, who
                           is not currently a director or an officer of the
                           Corporation or the Bank, of securities of the
                           Corporation, which are solely or jointly owned or
                           titled in the name of Daniel M. Tabas, the estate of
                           Daniel M. Tabas, or any trust, proxy, power of
                           attorney, pooling arrangement or any other contract
                           or arrangement or other special purpose entity in
                           which Daniel M. Tabas either is the grantor, settlor,
                           or he otherwise caused to be formed; or controls the
                           voting rights or disposition of shares of the
                           Corporation; or

                  (iii)    during any period of two (2) consecutive years during
                           the term of Executive's employment under this
                           Agreement, individuals who at the beginning of such
                           period constitute the Board of Directors of
                           Corporation or Bank cease for any reason to
                           constitute at least a majority thereof, unless the
                           election of each director who was not a director at
                           the beginning of such period has been approved in
                           advance by directors representing at least
                           sixty-seven percent (67%)of the directors then in
                           office who were directors at the beginning of the
                           period; or

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

         (c)      As used in this Agreement, provisions to the contrary
                  notwithstanding, Change of Control shall not include any
                  transaction as defined in Section 5 (b)(i) in which the
                  majority of the outside directors defined as directors not
                  directly related by birth


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                  or marriage to Robert Tabas, or Murray Stempel, do not vote in
                  favor of the transaction giving rise to a change of control.

6.       RIGHTS IN EVENT OF TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN
         CONTROL.

         In the event that Executive delivers a Notice of Termination (as
         defined in Section 5(a) of this Agreement) to Corporation and 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)(i) of this Agreement) has also
         occurred, Corporation or Bank shall pay Executive an amount equal to
         and no greater than 1.99 times the Executive's Base Amount as defined
         in subsection (i) of Section 3, minus applicable taxes and
         withholdings. Such payment shall be paid at the option of the Executive
         in lump sum or in twenty-four (24) equal installments over a period of
         two years. In addition, for a period of two (2) years from the date of
         termination of employment, or until Executive secures substantially
         similar benefits through other employment, whichever shall first occur,
         Executive shall receive a continuation of all life, disability, medical
         insurance and other normal health and welfare benefits in effect with
         respect to Executive during the two (2) years prior to his termination
         of employment, or, if Corporation and Bank cannot provide such benefits
         because Executive is no longer an employee, a dollar amount equal to
         the cost to Executive of obtaining such benefits (or substantially
         similar benefits), not to exceed One Hundred and Twenty percent (120%)
         of Bank's cost to provide such benefits to an employee. However, if the
         payment described herein, when added to all other amounts or benefits
         provided to or on behalf of the Executive in connection with his
         termination of employment, would result in the imposition of an excise
         tax under Code Section 4999, such payments shall be retroactively (if
         necessary) increased to the extent necessary to cover such excise tax
         imposition.

7.       RIGHTS IN EVENT OF TERMINATION OF EMPLOYMENT ABSENT CHANGE IN CONTROL.

         In the event that Executive's employment is involuntarily terminated by
         Corporation and/or Bank without Cause and no Change in Control shall
         have occurred at the date of such termination, Corporation and Bank
         shall pay Executive an amount equal to 1.99 times the Executive's Base
         Amount as defined in subsection (i) of this Section 3, and shall be
         subject to federal, state and local tax withholdings. Such payment
         shall be paid at the option of Executive in lump sum or in twenty-four
         (24) equal monthly installments over a period of two years. Payment
         shall be made in a lump sum unless a written notice to receive the
         payments in twenty-four (24) equal monthly installments is received
         concurrent with Executive's resignation as provided in this Section. In
         addition, for a period of two (2) years from the date of termination of
         employment, or until Executive secures substantially similar benefits
         through other employment, whichever shall first occur, Executive shall
         receive a continuation of all life, disability, medical insurance and
         other normal health and welfare benefits in effect with respect to
         Executive during the two (2) years prior to his termination of
         employment, or, if Corporation and Bank cannot provide such benefits
         because Executive is no longer an employee, a dollar amount equal


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         to the cost to Executive of obtaining such benefits (or substantially
         similar benefits) not to exceed one hundred twenty percent (120%) of
         Bank's cost to provide such benefits to an employee. However, if the
         payment described herein, when added to all other amounts or benefits
         provided to or on behalf of the Executive in connection with his
         termination of employment, would result in the imposition of an excise
         tax under Code Section 4999, such payments shall be retroactively (if
         necessary) increased to the extent necessary to cover such imposition.

8.       COVENANT NOT TO COMPETE.

         (a)      Executive hereby acknowledges and recognizes the highly
                  competitive nature of the business of Corporation and Bank and
                  accordingly agrees that, during and for the applicable period
                  set forth in Section 8(c) hereof, Executive shall not:

                  (i)      be engaged, directly or indirectly, either for his
                           own account or as agent, consultant, employee,
                           partner, officer, director, proprietor, investor
                           (except as an investor owning less than 5% of the
                           stock of a publicly owned company) or otherwise of
                           any person, firm, corporation or enterprise engaged
                           in (1) the banking (including bank holding company)
                           or financial services industry, or (2) any other
                           activity in which Corporation or Bank or any of their
                           subsidiaries are engaged during the Employment
                           Period, in any county in which, at any time during
                           the Employment Period or at the date of termination
                           of the Executive's employment, a branch, office or
                           other facility of Corporation or Bank or any of their
                           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"); or

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

                  (iii)    solicit current and former customers of Corporation,
                           Bank or any Corporation subsidiary in the
                           Non-Competition Area; or

                  (iv)     solicit current or former employees of Corporation,
                           Bank or any Corporation subsidiary.

                  Notwithstanding the foregoing, Executive shall not be
                  prohibited from making personal investments, loans, or real
                  estate transactions comparable to such transactions which
                  would have been permitted during the Executive's employment
                  with the Corporation or Bank.


                                       11
<PAGE>

         (b)      It is expressly understood and agreed that, although Executive
                  and Corporation and Bank consider the restrictions contained
                  in Section 8(a) hereof reasonable for the purpose of
                  preserving for Corporation and Bank and their 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 shall be
                  deemed amended to apply as to such maximum time and territory
                  and to such other extent as such court may judicially
                  determine or indicate to be reasonable.

         (c)      The provisions of this Section 8 shall be applicable
                  commencing on the date of this Agreement and ending on the
                  second anniversary date of the effective date of termination
                  of employment.

         (d)      The provision of Section 9 will apply during the period of
                  enforcement of the Covenant not to Compete as defined in
                  Section 8(c).

         (e)      In the event that Bank breaches this Agreement, this Section 8
                  of the Agreement and specifically the time periods set forth
                  in Section 8(c)shall be voided.

         (f)      Executive agrees that any breach of the restrictions set forth
                  in this Section will result in irreparable injury to
                  Corporation and Bank for which they will have no adequate
                  remedy at law and the Corporation and Bank shall be entitled
                  to injunctive relief in order to enforce the provisions hereof
                  and/or seek specific performance and damages. Executive agrees
                  to personal jurisdiction in the Common Pleas Court of
                  Montgomery County, Pennsylvania or the U. S. District Court
                  for the Eastern District of Pennsylvania. In the event that
                  Corporation or Bank obtains injunctive relief, Executive will
                  promptly reimburse the Corporation and Bank for reasonable
                  attorney fees and any other costs associated with the
                  litigation.

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 Boards of Directors of Corporation and Bank or a person
         authorized thereby, knowingly disclose to any person, other than an
         employee of Corporation or Bank or a person to whom disclosure is
         reasonably necessary or appropriate in connection with the performance
         by the Executive of his duties as an executive of Corporation and Bank,
         any material confidential information obtained by him while in the
         employ of Corporation and Bank with respect to any of Corporation and
         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 Corporation or
         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


                                       12
<PAGE>

         similar to that conducted by Corporation and Bank or any information
         that must be disclosed as required by law.

10.      LIABILITY INSURANCE. Corporation and Bank shall use their best efforts
         to obtain insurance coverage for the Executive under an insurance
         policy covering officers and directors of Corporation and Bank against
         lawsuits, arbitrations or other legal or regulatory proceedings;
         however, nothing herein shall be construed to require Corporation
         and/or Bank to obtain such insurance, if the Board of Directors of the
         Corporation and/or Bank determine that such coverage cannot be obtained
         at a reasonable price.

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

12.      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 Boards of Directors of Corporation and
         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.

13.      ASSIGNMENT. This Agreement shall not be assignable by any party, except
         by Corporation and Bank to any successor in interest to their
         respective businesses.

14.      ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
         parties relating to the subject matter of this Agreement.

15.      SUCCESSORS; BINDING AGREEMENT.

         (a)      Corporation and 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 Corporation and Bank to expressly assume and
                  agree to perform this Agreement in the same manner and to the
                  same extent that Corporation and Bank would be required to
                  perform it if no such succession had taken place. Failure by
                  Corporation and 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, "Corporation" and "Bank" shall mean Corporation and
                  Bank, as defined previously and any successor to their
                  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,


                                       13
<PAGE>

                  devisees and legatees. If Executive should die after a Notice
                  of Termination is delivered by Executive, or following
                  termination of Executive's employment without Cause, and any
                  amounts would be payable to Executive under this Agreement if
                  Executive had continued to live, all such amounts shall be
                  paid in accordance with the terms of this Agreement to
                  Executive's devisee, legatee, or other designee, or, if there
                  is no such designee, to Executive's estate.

16.      ARBITRATION. Corporation, Bank and Executive recognize that in the
         event a dispute should arise between them concerning the interpretation
         or implementation of this Agreement, lengthy and expensive litigation
         will not afford a practical resolution of the issues within a
         reasonable period of time. Consequently, each party agrees that all
         disputes, disagreements and questions of interpretation concerning this
         Agreement are to be submitted for resolution, in Philadelphia,
         Pennsylvania, to the American Arbitration Association (the
         "Association") in accordance with the Association's National Rules for
         the Resolution of Employment Disputes or other applicable rules then in
         effect ("Rules"). Corporation, Bank or Executive may initiate an
         arbitration proceeding at any time by giving notice to the other in
         accordance with the Rules. Corporation and Bank 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, Corporation, Bank and Executive shall be entitled to
         an injunction restraining all further proceedings in any pending or
         subsequently filed litigation concerning this Agreement, except as
         otherwise provided herein. In the event that Executive terminates
         pursuant to Section 6 herein, and any dispute arising under or in
         conjunction with Executive's termination is resolved in Executive's
         favor, whether by judgment, arbitration or settlement, Executive shall
         be entitled to the reimbursement by Corporation or Bank of all
         reasonable legal fees paid or incurred by Executive in resolving such
         dispute.

17.      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.

18.      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.

19.      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.


                                       14
<PAGE>

ATTEST:                                   ROYAL BANCSHARES OF PENNSYLVANIA, INC.

/s/ George J. McDonough                   By /s/ Jack R Loew
----------------------------------        --------------------------------------
George J. McDonough, Secretary            Jack R. Loew, Chairman,
                                          Compensation Committee


                                          ROYAL BANK AMERICA

/s/ George J. McDonough                   By /s/ Joseph P. Campbell
----------------------------------        --------------------------------------
George J. McDonough, Secretary            Joseph P. Campbell, President


WITNESS:

/s/ Patricia Bilotta                      /s/ Robert R. Tabas
----------------------------------        --------------------------------------
                                          Robert R. Tabas,
                                          Senior Vice President, "Executive"
                                          of Royal Bank America

                                       15

</TEXT>
</DOCUMENT>
