EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of the 1st day of March 2022, by and among

1.

Employment.  The Corporation and the Bank hereby employ Executive and Executive hereby accepts employment with the Corporation and the Bank, under the terms and conditions set forth in this Agreement.

2.

Duties of Executive.  Executive shall serve as the Chief Executive Officer and President of the Corporation and of the Bank reporting only to the Boards of Directors of the Corporation and the Bank.  Executive shall have such other duties and hold such other titles as may be given to him from time to time by the Boards of Directors of the Corporation and the Bank provided that such duties are consistent with the Executive’s position as Chief Executive Officer and President.  

3.

Engagement in Other Employment.  Executive shall devote all of his working time, ability and attention to the business of the Corporation and the Bank and/or their subsidiaries or affiliates, during the term of this Agreement.  The Executive shall seek approval of the Boards of Directors of the Corporation and of the Bank in writing before the Executive engages in any other business or commercial duties or pursuits, including but not limited to, directorships of other companies.  Under no circumstances may the Executive engage in any business or commercial activities, duties or pursuits which compete with the business or commercial activities of the Corporation, the Bank and/or any of their subsidiaries or affiliates nor may the Executive serve as a director or officer or in any other capacity in a company which competes with the Corporation, the Bank

4.

Term of Agreement. 

(a)

This Agreement shall be for a three (3) year period (the “Employment Period”) beginning March 1, 2022, and if not previously terminated pursuant to the terms of this Agreement, the Employment Period shall end three (3) years later (the “Initial Term”).  The Employment Period shall be extended automatically for one (1) additional year on the first annual anniversary date of the commencement of the Initial Term (the date first above written), and then on each anniversary date of this Agreement thereafter, unless the Corporation, the Bank or Executive gives contrary written notice to the other not less than one hundred eighty (180) days before any such anniversary date so that upon the anniversary date if notice had not been previously given as provided in this Section 4(a), the Employment Period shall be and continue for a three (3) year period thereafter.  References in the Agreement to “Employment Period” shall refer to the Initial Term of this Agreement and any extensions to the initial term of this Agreement.  It is the intention of the parties that this Agreement be “Evergreen” unless (i) either party gives written notice to the other party of his or its intention not to renew this Agreement as provided above or (ii) this Agreement is terminated pursuant to Section 4(b) hereof.

(b)

Notwithstanding the provisions of Section 4(a) of this Agreement, this Agreement shall terminate automatically for Cause (as defined herein) upon written notice from the Board of Directors of the Corporation or the 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

(ii) Executive’s failure to follow the good faith lawful

(iii) Executive’s willful failure to substantially perform

(iv) Executive’s intentional violation of the provisions of this

(v) dishonesty or gross negligence of the Executive in the

(vi) Executive’s removal or prohibition from being an

(vii) conduct by the Executive as determined by an affirmative

(viii) Executive’s breach of fiduciary duty involving personal profit;

(ix) unlawful harassment by the Executive against employees, customers, business associates, contractors, or vendors of the Corporation or the Bank, as determined by an affirmative vote of seventy-five percent

(x) the willful violation by the Executive of the provisions of Sections 9, 10, or 11 hereof, after notice from the Corporation; 

(xi) the willful violation of any law, rule or regulation governing banks or bank officers or any Bank policy, or receipt of any cease and desist order issued by a bank regulatory authority;

(xii) theft or abuse by Executive of the Corporation’s or the Bank’s property or the property of the Corporation’s or the Bank’s customers, employees, contractors, vendors, or business associates;

(xiii) any act of fraud, misappropriation or personal dishonesty;

(xiv) insubordination as determined by an affirmative vote of seventy-five percent (75%) of the disinterested members of Board of Directors of the Corporation, after written notice from the Corporation and a failure to cure such violation within fifteen (15) days of said written notice; or

(xv) the existence of any material conflict between the interests of the Corporation or the Bank and the Executive that is not disclosed in writing by the Executive to the Corporation and the Bank and approved in writing by the Boards of Directors of the Corporation and the Bank.

(c)

Notwithstanding the provisions of Section 4(a) of this Agreement, this Agreement shall terminate automatically upon Executive’s voluntary termination of employment for Good Reason.  The term “Good Reason” shall mean (i) the assignment of duties and responsibilities inconsistent with Executive’s status as Chief Executive Officer and President of the Corporation or of the Bank, (ii) a reassignment which requires Executive to move his principal residence or his office more than fifty (50) miles from the Bank’s principal executive office immediately prior to this Agreement, (iii) 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 unless such reduction is the result of a national financial depression or national or bank emergency or such reduction is part of a reduction applicable to all employees, or (iv) any failure of the Bank to provide the Executive with benefits at least as favorable as those enjoyed by the Executive during the Employment Period under any of the pension, life insurance, medical, health and accident, disability or other employee plans of the 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.

(d)

Notwithstanding the provisions of Section 4(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 entitled to receive any amount payable under any disability plan of the Bank for which he is eligible.  Disability shall have the meaning provided in Code Section 409A and the regulations promulgated thereunder. 

(e)

In the event that Executive terminates his employment without Good Reason as defined in Section 4(c), or retires, all of Executive’s rights under this Agreement shall cease as of the effective date of such termination, except for the rights under Paragraph 20 hereof with respect to arbitration.

(f)

Upon the expiration or termination of the Employment Period and this

(g)

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

5.

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 $459,368 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 or in the event of a result of a national financial depression or national or bank emergency or a reduction applicable to all employees reduce

(b)

Bonus.  For services performed by Executive under this Agreement, the Bank may, from time to time, pay a bonus or bonuses to Executive as the Bank or an affiliate thereof, in its sole discretion, deems appropriate.  The payment or nonpayment of any such bonuses shall not reduce or otherwise affect any other obligation of the Bank to Executive provided for in this Agreement.  In addition, the Corporation shall provide (as of the date of execution of this Agreement) the Executive with a Restricted Stock Grant of 400 shares of the Corporation’s Common Stock as delineated on Exhibit A hereto.

(c)

Paid Time-Off.  During the term of this Agreement, Executive shall be entitled to Paid Time-Off in accordance with the manner provided under the paid time-off plan then in effect, and in an amount equal to the Paid Time-Off policy in effect on the day hereof plus five (5) additional days of Paid Time-Off.

(d)

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 the Bank, subject to the terms of said plan, until such time that the Board of Directors of the Bank authorize a change in such benefits.  The 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 the 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 the Bank.  Nothing paid to Executive under any plan or arrangement presently in effect or made

available in the future shall be deemed to be in lieu of the salary payable to Executive pursuant to Section 5(a) hereof.

(e)

Business Expenses.  During the term of this Agreement, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him, which are properly accounted for, in accordance with the policies and procedures established by the Board of Directors of the Bank for its executive officers.  

(f)

Automobile.  Executive shall be provided with a company-owned or leased vehicle during the Employment Period.  The vehicle is to be used for Corporation or Bank business and/or business development; provided, however, that Executive may also employ such vehicle for personal use in accordance with applicable tax rules and at Executive’s expense.

(g)

Club Memberships.  Corporation shall provide payment of annual dues and monthly business development expenses for Executive in connection with a club membership to a golf club or a business club that shall be mutually determined by the parties.

6.

Termination of Employment Following Change in Control. 

(a)

If a Change in Control (as defined in Section 6(b) of this Agreement) shall occur and Executive experiences an involuntary separation of service as defined in Code Section 409A (“Separation of Service”) without Cause, then the provisions of Section 7 of this Agreement shall apply.

(b)

As used in this Agreement, “Change in Control” shall mean the change in ownership or effective control of the Corporation as further defined by Treasury Regulation §1.409A-3(i)(5). 

7.

Rights in Event of Termination Following a Change in Control. 

8.

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

(a)

In the event that Executive’s employment is involuntarily terminated by the Corporation and the Bank without Cause and no Change in Control has occurred at the date of such termination and such termination constitutes a Separation of Service, then the Bank shall pay Executive an amount equal to the Executive’s remaining Annual Base Salary that would otherwise be due and payable under the Agreement to the Executive for the remaining Employment Period, minus applicable taxes and withholdings, payable in equal monthly installments over the remaining Employment Period.  Such amount in the aggregate shall not exceed 2.99 times Executive’s Annual Base Salary or be less than 2.00 times Executive’s Annual Base Salary.  In addition, for a period of two (2) years from the date of Separation of Service, or until Executive secures benefits of comparable coverage 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 at the time of his termination of employment under the terms of and as provided by the medical insurance plan then in effect in which he and his spouse were participants, or, if the Bank cannot legally provide such benefits because Executive is no longer an employee, or future law or plans do not permit so, the Bank shall reimburse Executive in an amount equal to the monthly premium paid by him to obtain comparable coverage for employee benefits which he enjoyed prior to termination, subject to Code Section 409A if applicable.  

(b)

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

9.

Covenant Not to Compete. 

(a)

Executive hereby acknowledges and recognizes the highly competitive nature of the business of the Corporation and the Bank and accordingly agrees that, during employment and for two years following termination of employment regardless of the reason for termination, Executive shall not, except as otherwise permitted in writing by the Bank:

(i)

(A) in any county in which, at any time during the Employment Period or as of the date of Executive’s termination, a branch, office or other facility of the Corporation or the Bank is located or in any county contiguous to such county, or (B) in the area which is within 100 miles from any branch office or other facility of the Corporation or Bank (“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 (1) the banking (including bank holding company) or financial services industry, or (2) any other activity in which the Corporation or the Bank or any of their subsidiaries are engaged during the Employment Period;

(ii)

provide financial or other assistance to any person, firm,

(iii)

directly or indirectly solicit persons or entities who were

(iv)

directly or indirectly solicit employees of the Corporation, the Bank or their subsidiaries who were employed within two (2) years prior to Executive’s termination of employment to work for anyone other than the Corporation, the Bank or their subsidiaries.

(b)

It is expressly understood and agreed that, although Executive and the Corporation and the Bank consider the restrictions contained in Section 9(a) hereof reasonable for the purpose of preserving for the Corporation and the 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 9(a) hereof is an unreasonable or otherwise unenforceable restriction against Executive, the provisions of Section 9(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.

10.

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

11.

Work Made for Hire.    Any work performed by the Executive under this Agreement is considered a “Work Made for Hire” as the phrase is defined by the Copyright Act of 1976 and shall be owned by and for the express benefit of Bank and its subsidiaries and affiliates.  In the event it is established that such work does not qualify as a Work Made for Hire, the Executive agrees to and does hereby assign to Bank, 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 proprietary rights.

12.

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 Bank and its subsidiaries and affiliates, any and all company property, including, but

not limited to, keys, security codes or passes, mobile telephones, automobiles, 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.

13.

Liability Insurance.  The Bank shall use its best efforts to obtain liability insurance coverage for the Executive under an insurance policy with similar terms as that which is currently covering officers and directors of Bank against lawsuits, arbitrations or other legal or regulatory proceedings.

14.

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 office of the Bank, in the case of notices to the Bank.

15.

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 be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

16.

Assignment.  This Agreement shall not be assignable by any party, except by the Corporation or the Bank to any successor in interest to its respective businesses.

17.

Entire Agreement.  This Agreement supersedes any and all agreements, either oral or in writing, among or between the parties with respect to the employment of the Executive by the Bank and/or Corporation.  This Agreement contains all the covenants and agreements between the parties with respect to employment and termination of employment.

18.

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 Bank to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Bank would be required to perform it if no such succession had taken place.  Failure by Bank to obtain such assumption and agreement prior to the effectiveness of any such succession shall constitute a breach of this Agreement and the provisions of Section 7 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, devisees and legatees.  If Executive should die after a Change in Control 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.

19.

Code Section 409A    

(a)

Any payments made pursuant to this Agreement, to the extent of payments made from the date of termination through March 15th of the calendar year following such date, are intended to constitute separate payments for purposes of Treas. Reg. §1.409A-2(b)(2) and thus payable pursuant to the “short-term deferral” rule set forth in Treas. Reg. §1.409A-1(b)(4); to the extent such payments are made following said March 15th, they are intended to constitute separate payments for purposes of Treas. Reg. §1.409A-2(b)(2) made upon an involuntary termination from service and payable pursuant to Treas. Reg. §1.409A-1(b)(9)(iii), to the maximum extent permitted by said provision.

(b)

The parties hereto intend that any and all post-employment compensation under this Agreement satisfy the requirements of Section 409A or an exception or exclusion therefrom to avoid the imposition of any accelerated or additional taxes pursuant to Section 409A.  Any terms not specifically defined shall have the meaning as set forth in Section 409A. 

(c)

If when the Executive’s employment terminates, the Executive is a “specified employee,” as defined in Code Section 409A(a)(2)(B)(i), then despite any provision of this Agreement or other plan or agreement to the contrary, the Executive will not be entitled to the payments until the earliest of: (a) the date that is at least six months after the Executive’s Separation from Service for reasons other than the Executive’s death, (b) the date of the Executive’s death, or (c) any earlier date that does not result in additional tax or interest to the Executive under Code Section 409A.  As promptly as possible after the end of the period during which payments are delayed under this provision, the entire amount of the delayed payments shall be paid to the Executive in a single lump sum with any remaining payments to commence in accordance with the terms of this Agreement or other applicable plan or agreement.

(d)

Notwithstanding the foregoing, no payment shall be made pursuant to this Agreement unless such termination of employment is a “separation of service” as defined in Code Section 409A.  

20.

Arbitration.  The 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 (except for any enforcement sought with respect to Sections 9, 10, 11 or 12 which may be litigated in court, including an action for injunction or other relief) are to be submitted for resolution, in Chambersburg, Pennsylvania, to the American Arbitration Association (the

21.

Code Sections 280G and 4999.  In the event the payment described herein, when added to all other amounts or benefits provided to or on behalf of the Executive in connection with his termination of employment, would result in the imposition of an excise tax under Section 4999 of the Code, such payments shall be retroactively reduced to the extent necessary to avoid such excise tax imposition.  Upon written notice to Executive, together with calculations from the Corporation, Executive shall remit to Corporation the amount of the reduction plus such interest as may be necessary to avoid the imposition of such excise tax.  Notwithstanding the foregoing or any other provision of this contract to the contrary, if any portion of the amount herein payable to the Executive is determined to be non-deductible pursuant to the regulations promulgated under Section 280G of the Code, then Corporation shall be required only to pay to Executive the amount determined to be deductible under Section 280G.

22.

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.

23.

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.

24.

Consent to Jurisdiction.  To the extent that any court action is permitted consistent with or to enforce this Agreement, the parties hereby consent to the jurisdiction of the Court of Common Pleas of Franklin County located in Chambersburg, Pennsylvania. 

25.

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.



ATTEST:

 Franklin Financial Services Corporation

 /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 



By /s/ G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇

    G. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 

Date:  March 1, 2022     

    Chairman  

ATTEST:

Farmers and Merchants Trust Company of Chambersburg

/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇    

By /s/ G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇

    G. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 

Date:  March 1, 2022     

    Chairman  

WITNESS:     

EXECUTIVE

/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇    

/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇      

Date:  March 1, 2022     

    ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇