Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”), dated as of February 4, 2015, is
made and entered into by and between Peoples Security Bank and Trust Company, a
Pennsylvania state chartered bank (the “Bank”) and Bradley S. Grubb (the
“Executive”).

ARTICLE I

RECITALS

WHEREAS, the Bank desires to employ the Executive pursuant to the terms and
conditions set forth in this Agreement; and

WHEREAS, the Executive desires to be so employed by the Bank.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
promises contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the parties agree as follows:

ARTICLE II

DEFINITIONS

Section 2.1. “Accrued Obligations” means, as of the Date of Termination, to the
extent not theretofore paid, the sum of (i) Executive’s Base Salary through the
Date of Termination, (ii) the amount of any bonus or other incentive
compensation for any completed bonus period and other vested cash compensation
earned by Executive as of the Date of Termination under the terms of any
compensation, benefit plans, and deferred compensation plans, policies or
arrangements maintained in force by the Company, and (iii) any vacation pay,
expense reimbursements and other cash entitlements accrued by the Executive, in
accordance with Company policy as of the Date of Termination.

Section 2.2. “Bank Board” means the board of directors of the Bank.

Section 2.3. “Cause” means: (i) conviction of, or the entry of a plea of guilty
or no contest to a felony or any other crime of moral turpitude that causes the
Bank or any of its subsidiaries or affiliates public disgrace or disrepute, or
adversely affects the Bank’s operations, financial performance, or relationship
with its customers; (ii) fraud, embezzlement or other misappropriation of funds;
(iii) habitual insobriety or illegal use of controlled drugs; (iv) material
breach of this Agreement, if not cured within thirty (30) days following
Executive’s receipt from the Bank of written notice thereof specifying in
reasonable detail the alleged breach; or (v) refusal to perform the lawful and
reasonable directives of the Chief Executive Officer of the Bank or the Bank
Board, unless such refusal is cured within thirty (30) days following
Executive’s receipt from the Bank of written notice thereof, specifying the
directives Executive allegedly refused to perform.

Section 2.4. “Change in Control” means the occurrence of any one of the
following events: (i) any “person” or “group” (as such terms are used in
Sections 13(d) and

 

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14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), other than any Company employee stock ownership plan or an equivalent
retirement plan, becomes the beneficial owner (as such term is used in
Section 13(d) of the Exchange Act), directly or indirectly, of securities of
Parent representing 50% or more of the combined voting power of Parent’s then
outstanding voting securities, (ii) the Parent Board ceases to consist of a
majority of Continuing Directors (as defined below), (iii) the consummation of a
sale of all or substantially all of the Company’s assets (as measured by the
fair value of the assets being sold compared to the fair value of all of the
Company’s assets), or (iv) a merger or other combination occurs such that a
majority of the equity securities of the resultant entity after the merger or
other combination are not owned by those who owned a majority of the equity
securities of the Parent prior to the merger or other combination. A “Continuing
Director” shall mean a member of the Parent Board who either (i) is a member of
the Parent Board as of the date of this Agreement or (ii) is nominated or
appointed to serve as a member of the Parent Board by a majority of the then
Continuing Directors.

Section 2.5. “Change in Control Termination” means the termination of
Executive’s employment under this Agreement by the Bank or its successor or
assignee without Cause, which occurs within twelve (12) months following a
Change in Control.

Section 2.6. “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of
1986, as amended.

Section 2.7. “Code” means the Internal Revenue Code of 1986, as amended.

Section 2.8. “Company” means the Parent and its direct and indirect
subsidiaries, including, without limitation, the Bank.

Section 2.9. “Date of Termination” has the meaning given to that term in
Section 3.6.

Section 2.10. “Disability” means a condition entitling Executive to benefits
under the long term disability plan, policy or arrangement maintained for
employees of the Bank. Termination as a result of a Disability will not be
construed as a termination by the Bank “without Cause.”

Section 2.11. “Parent” means Peoples Financial Services Corp., a Pennsylvania
corporation.

Section 2.12. “Parent Board” means the board of directors of Parent.

Section 2.13. “Restricted Period” means the period commencing on the Date of
Termination and ending either (i) on date that is 24 months after the Date of
Termination, in the event of a Change in Control Termination, or (ii) on date
that is 12 months after the Date of Termination, in any other event.

 

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ARTICLE III

EMPLOYMENT AND COMPENSATION

Section 3.1. Employment Term.

(a) The Bank shall employ Executive, and Executive hereby accepts employment
with the Bank, upon the terms and conditions set forth in this Agreement,
effective February 4, 2015 (the “Effective Date”) and continuing for an initial
term of thirty-six (36) months (the “Initial Term”) and thereafter for
successive one year periods (each, a “Renewal Term”), unless sooner terminated
in accordance with this Agreement or written notice is given by one party to the
other at least thirty (30) days prior to the expiration of the Initial Term or
any Renewal Term, as applicable. The Initial Term and any Renewal Term are
herein collectively referred to as the “Term.”

(b) If Executive dies while employed by the Bank, this Agreement and Executive’s
employment by the Bank shall automatically terminate on the date of Executive’s
death. The Bank may terminate Executive’s employment and all other positions
with the Company upon written notice to Executive at any time (i) due to the
Disability of Executive, (ii) for Cause, or (iii) without Cause, for any or no
reason. Executive may terminate his employment with the Bank and all other
positions with the Company at any time for any or no reason. Notwithstanding the
generality of the preceding sentence, in the event that Executive resigns from
his employment, Executive shall give thirty (30) days written notice to the Bank
prior to the proposed effective date of such resignation, and such resignation
shall not be effective until the expiration of such notice period, unless such
notice is waived by the Bank (in which case such resignation shall be effective
as of the date of or indicated in such waiver).

Section 3.2. Positions and Duties. Executive will serve as president (or an
officer having a comparable title) of Peoples Security Wealth Management
Division, reporting directly to the Chief Executive Officer (“CEO”) of the Bank,
and will have all duties customarily associated with such position, any duties
as are set forth in the Bank’s bylaws for such position and all duties as are
delegated to Executive from time to time by the CEO or the Bank Board. Executive
shall devote his best efforts and substantially all of his business time and
services to the Company.

Section 3.3. Other Activities. Executive may be involved in various leadership
and non-leadership capacities on a volunteer basis for not-for-profit
organizations as a representative of the Company. In addition, nothing contained
herein shall preclude the Executive from (i) engaging in charitable and
community activities; (ii) participating in industry and trade organization
activities; (iii) managing his and his family’s personal investments and
affairs; and (iv) delivering lectures, fulfilling speaking engagements or
teaching at educational institutions; provided that such activities do not
interfere with the regular performance of his duties and responsibilities under
this Agreement and do not violate his obligations under Article IV of this
Agreement, and provided further that except as disclosed to the Bank prior to
the date hereof or with consent of the Bank Board, the Executive shall not serve
as a paid director of any organization.

 

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Section 3.4. Compensation. The Bank shall pay or cause to be paid or provided to
Executive the following compensation and benefits:

(a) Base Salary. Effective as of the Effective Date, the Executive will receive
an initial base salary of $275,000 per annum, paid in accordance with the Bank’s
payroll practices. The base salary shall be reviewed on an annual basis by the
Bank (or, if appropriate, the Compensation and Benefits Committee of the Parent
Board (the “Compensation Committee”)) and may be increased (but not decreased,
except in connection with an across-the-board salary reduction applicable to all
of the Bank’s management employees) from time to time at the discretion of the
Bank (or, if appropriate, the Compensation Committee). The initial base salary
as adjusted from time to time is hereinafter referred to as Executive’s “Base
Salary.”

(b) Annual Bonus.

(i) For each calendar year ending during the Term, beginning with the 2015
calendar year, the Executive will be eligible to earn a cash incentive payment.
The target amount of that cash incentive payment for the 2015 and 2016 calendar
years will be thirty percent (30%) of the Executive’s Base Salary at the
commencement of the applicable calendar year (the “Target Bonus”). The actual
cash incentive payment payable with respect to a particular calendar year (the
“Annual Bonus”) will be determined by the Bank (or, if appropriate, the
Compensation Committee) based upon the degree of achievement of corporate and/or
individual performance objectives established by the Bank (or, if appropriate,
the Compensation Committee) in its sole discretion.

(ii) For purposes of determining any Annual Bonus payable to Executive, the
measurement of corporate and individual performance will be performed by the
Bank (or, if appropriate, the Compensation Committee) in good faith. From time
to time, the Bank (or, if appropriate, the Compensation Committee) may, in its
sole discretion, make adjustments to corporate or individual performance goals,
so that required departures from the Company’s operating budget, changes in
accounting principles, acquisitions, dispositions, mergers, consolidations and
other corporate transactions, and other factors influencing the achievement or
calculation of such goals do not affect the operation of this Section 3.4(b) in
a manner inconsistent with its intended purposes.

(iii) Any Annual Bonus payable under this Section 3.4(b) will be paid in the
year following the applicable calendar year in which such bonus is attributable
within thirty (30) days following the recommendation of the audit committee of
the Parent Board to include the audited financial statements for the applicable
calendar year in Parent’s annual report on Form 10-K, provided that the
Executive has not been terminated for Cause before such payment date. No Annual
Bonus shall be paid to the Executive if he has been terminated for Cause before
any such Annual Bonus would otherwise be paid.

(c) Signing Bonus. The Bank shall pay Executive a one-time signing bonus of
$100,000 (the “Signing Bonus”) payable no later than the 30th day after the
Effective Date.

 

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(d) Commissions. During the Term, Executive will be eligible to receive
commission compensation of (i) 2% of incremental gross revenue of the Bank’s
Wealth Management Division and (ii) 7% of the incremental net profit before tax
of the Bank’s Wealth Management Division, in each case measured from January 1,
2015 and calculated in accordance with Exhibit A attached hereto (together, the
“Commissions”). The amount of Commissions payable to Executive will be
determined in good faith by the Bank (or, if appropriate, the Compensation
Committee) in its sole discretion, and shall be paid at the time and subject to
terms and conditions provided under the Bank’s commission payment policy (or, in
the absence of such policy, at the time and subject to terms and conditions
determined by the Bank).

(e) 2015 / 2016 Gross Compensation. If Executive’s gross compensation payable
pursuant to Sections 3.4(a), (b) and (d) in each of calendar year 2015 and 2016
is less than $350,000, the Bank shall make a payment to Executive no later than
March 15 following the applicable year in an amount equal to $350,000 less the
aggregate amounts paid pursuant to Sections 3.4(a), (b) and (d).

(f) Relocation Allowance. The Bank will pay or reimburse Executive for
reasonable tax-qualified moving expenses incurred by Executive in connection
with his residential relocation to the Scranton, Pennsylvania area. Payments and
reimbursements to Executive for moving expenses under this Section 3.4(f) shall
not exceed $75,000 in aggregate and must be documented to the reasonable
satisfaction of the Bank.

(g) General Employee Benefits. The Executive will be eligible to participate in
the employee benefit plans, policies or arrangements maintained by the Company
for employees of the Bank generally, subject to the terms and conditions of such
plans, policies or arrangements; provided, however, that this Agreement will not
limit the Company’s ability to amend, modify or terminate such plans, policies
or arrangements at any time for any reason.

(h) Paid Time Off. In addition to holidays observed by the Bank, Executive shall
be entitled to twenty-five (25) working days paid time off (“PTO”) during each
year of employment without reduction in salary or other benefits. PTO days that
remain unused at the end of any year will accrue or expire to the extent
provided by the Bank’s PTO policy, as in effect from time to time.

(i) Automobile Allowance. The Executive shall receive a monthly automobile
allowance in the amount of $833.33 for the duration of this Agreement,
reimbursed in accordance with the Bank’s reimbursement and payroll policies.

(j) Country Club. The Bank will reimburse Executive for the membership costs at
a country club acceptable to the Bank, in accordance with Bank policy.

(k) Reimbursement of Compensation. If Executive resigns his employment with the
Bank for any reason on or before the second anniversary of the Effective Date,
within fifteen (15) business days following Date of Termination, Executive will
repay to the Bank all amounts paid to Executive pursuant to Sections 3.4(b),
(c), (d), (e), (f), (i) and (j). If Executive resigns his employment with the
Bank for any reason after the second anniversary of the Effective Date, but on
or before the fifth anniversary of the Effective Date, within fifteen (15)

 

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business days following Date of Termination, Executive will repay to the Bank
the Signing Bonus. All amounts paid to Executive pursuant to Sections 3.4(b),
(c), (d), (e), (f), (i) and (j) shall be deemed earned for purposes of this
Section 3.4(k) and any applicable wage law when the obligation to repay such
amounts lapses. Executive authorizes the Bank to deduct and/or offset the
amounts reimbursable pursuant to this Section 3.4(k) from any compensation or
other sums that may be due to Executive at the Date of Termination, and
Executive will repay the balance remaining due after such deduction to the Bank.
Notwithstanding the foregoing, in the event that Executive relocates to the
Scranton, Pennsylvania area, purchases a residence in the Scranton, Pennsylvania
area and resides there for a period of at least three consecutive months, then,
from and after the expiration of such three-month period, Executive shall have
no liability for any amounts reimbursable pursuant to this Section 3.4(k),
except for any such amounts which have become reimbursable prior to the
expiration of such three-month period.

Section 3.5. Reimbursement of Expenses. Executive will be reimbursed by the Bank
for all reasonable business expenses incurred by him in accordance with the
Bank’s customary expense reimbursement policies as in effect from time to time.

Section 3.6. Severance; Severance Payments. Upon a termination of his employment
with the Bank (the effective date of such termination is herein referred to as
the “Date of Termination”), Executive will be entitled only to such
compensation, benefits and rights as described in this Section 3.6 and in any
other agreement between Executive and the Bank.

(a) Termination without Cause. Except as otherwise provided in this Section 3.6,
if Executive’s employment by the Bank is terminated by the Bank without Cause,
Executive will be entitled to:

(i) Payment of all Accrued Obligations, including but not limited to those
earned by Executive under Sections 3.4 and 3.5 above; and

(ii) Cash severance payments equal to one-twelfth of Executive’s Base Salary as
of the Date of such Termination payable for a period of twelve (12) months from
and after the Date of Termination and in accordance with the Bank’s payroll
practices.

(b) Change in Control Termination. In lieu of any compensation and benefits
payable under Section 3.6(a), in the event that Executive’s employment by the
Bank ceases due to a Change in Control Termination, Executive will be entitled
to:

(i) Payment of all Accrued Obligations, including but not limited to those
earned by Executive under Sections 3.4 and 3.5 above; and

(ii) Cash severance payments equal to one-twelfth of Executive’s Base Salary as
of the Date of such Termination payable for a period of twenty-four (24) months
from and after the Date of Termination and in accordance with the Bank’s payroll
practices.

(c) Termination Following Expiration of a Term. In the event of a termination by
the Bank of Executive’s employment following the expiration of any Initial Term
or Renewal Term due to the Bank’s decision not to renew the applicable Term, the
Bank shall pay or provide to Executive the amounts, benefits and rights
described in Section 3.6(a).

 

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(d) Except as provided in this Section 3.6, all compensation and participation
in all benefit plans, policies and arrangements will cease at the Date of
Termination, subject to the terms of any benefit plans, policies and
arrangements then in force and applicable to Executive, and the Company shall
have no further liability or obligation by reason of such termination, provided,
however, that nothing in this paragraph shall affect or be deemed to affect
Executive’s rights to accrued or vested benefits under any benefit plan, policy
or arrangement. The payments and benefits described in this Section 3.6 are in
lieu of, and not in addition to, any other severance arrangement maintained for
the employees of the Bank generally.

Notwithstanding any provision of this Agreement, the payments and benefits
described in this Section 3.6 are conditioned on: (a) the Executive’s execution
and delivery to the Bank and the expiration of all applicable statutory
revocation periods, by the 60th day following the Date of Termination, of a
general release of claims against the Company in a form reasonably prescribed by
the Bank (the “Release”); and (b) the Executive’s continued compliance with the
provisions of Article IV of this Agreement. Subject to Section 3.6(f), below,
the benefits described in this Section 3.6 will be paid or provided (or begin to
be paid or provided as applicable) as soon as administratively practicable after
the Release becomes irrevocable, provided that if the 60-day period described
above begins in one taxable year and ends in a second taxable year such payments
or benefits shall not commence until the second taxable year. Any payments to be
made to Executive and any benefits to be provided to Executive pursuant to this
Section 3.6 shall be paid or provided, as applicable, to Executive’s
beneficiaries, heirs or estate in the event of Executive’s death.

(e) Other Terminations. If Executive’s employment with the Bank ceases for any
reason other than as described in Sections 3.6(a), 3.6(b) and 3.6(c) above
(including but not limited to termination (a) by the Bank for Cause, (b) as a
result of Executive’s death, (c) as a result of Executive’s Disability, or
(d) by Executive), then the Bank’s obligation to Executive will be limited
solely to the payment of Accrued Obligations. All compensation and participation
in benefits will cease at the time of such termination and, except as otherwise
provided by COBRA or the terms of such plans, the Company will have no further
liability or obligation by reason of such termination. The foregoing will not be
construed to limit Executive’s right to payment or reimbursement for claims
incurred prior to the Date of Termination under any insurance contract funding
an employee benefit plan, policy or arrangement of the Company in accordance
with the terms of such insurance contract or Executive’s right to accrued or
vested benefits under the terms of any employee benefit plan, policy or
arrangement.

(f) Application of Section 409A of the Code.

(i) Notwithstanding anything to the contrary in this Agreement, no portion of
the benefits or payments to be made under Section 3.6 hereof will be payable
until the Executive has a “separation from service” from the Company within the
meaning of Section 409A of the Code. In addition, to the extent compliance with
the requirements of Treas. Reg. § 1.409A-3(i)(2) (or any successor provision) is
necessary to avoid

 

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the application of an additional tax under Section 409A of the Code to payments
due to the Executive upon or following his “separation from service,” then
notwithstanding any other provision of this Agreement (or any applicable plan,
policy, program, agreement or arrangement), any such payments that are otherwise
due within six months following the Executive’s “separation from service”
(taking into account the preceding sentence of this paragraph) will be deferred
without interest and paid to the Executive in a lump sum immediately following
that six month period. This paragraph should not be construed to prevent the
application of Treas. Reg. § 1.409A-1(b)(9)(iii) (or any successor provision) to
amounts payable hereunder. For purposes of the application of Section 409A of
the Code, each payment in a series of payments will be deemed a separate
payment.

(ii) Any reimbursements and in-kind benefits provided under this Agreement shall
be made or provided in accordance with the requirements of Section 409A of the
Code, including, where applicable, the requirement that (i) any reimbursement
shall be for expenses incurred during the period of time specified in this
Agreement, (ii) the amount of expenses eligible for reimbursement, or in-kind
benefits provided, during a calendar year may not affect the expenses eligible
for reimbursement, or in-kind benefits to be provided, in any other calendar
year, (iii) the reimbursement of an eligible expense will be made on or before
the last day of the calendar year following the year in which the expense is
incurred, and (iv) the right to reimbursement or in-kind benefits is not subject
to liquidation or exchange for another benefit.

(g) Limitation on Payments. If any payment or benefit due under this Agreement,
together with all other payments and benefits that Executive receives or is
entitled to receive from the Bank, the Parent or any of their subsidiaries,
affiliates or related entities, would (if paid or provided) constitute an Excess
Parachute Payment (as defined below), the amounts otherwise payable and benefits
otherwise due under this Agreement or any other arrangement will be limited to
the minimum extent necessary to ensure that no portion thereof will fail to be
tax-deductible to the Company by reason of Section 280G of the Code or result in
an excise tax payable pursuant to Section 4999 of the Code. The determination of
whether any payment or benefit would (if paid or provided) constitute an Excess
Parachute Payment will be made by the Parent Board, in its good faith
discretion. If a reduction to Executive’s payments and benefits is required
pursuant to this Section 3.6(g), such reduction shall occur to the payments and
benefits in the order that results in the greatest economic present value of all
payments actually made to Executive.

(h) Adjustments Necessary to Comply with Maximum Payment Limit. If,
notwithstanding the initial application of Section 3.6(g), the Internal Revenue
Service determines that any amount paid or benefit provided to Executive would
constitute an Excess Parachute Payment, Section 3.6(g) will be reapplied based
on the Internal Revenue Service’s determination and Executive will be required
to repay to the Bank any Overpayment (as defined below) immediately upon receipt
of written notice of the applicability of this section.

(i) Recoupment of Certain Incentive-Based Compensation.

(i) Breach of Restrictive Covenants. If the Executive breaches, in any respect,
any of the covenants to be performed by the Executive pursuant to

 

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Article IV below (regarding non-competition, non-solicitation, confidentiality,
or non-disparagement), whether during the Term or the Restricted Period, then
the Executive shall repay or return to the Bank the entire amount of any
incentive-based compensation received by the Executive during the 12 month
period preceding such breach.

(ii) Obligations Not Exclusive. The rights of the Bank and the obligations of
the Executive set forth in this Section 3.6(i) are in addition to any other
rights and obligations under applicable laws and regulations, the terms and
conditions of any plan and award agreement pursuant to which incentive-based
compensation is awarded to the Executive, and the terms and conditions of any
claw back, recoupment or similar policy applicable to the executive officers of
the Bank, which the Bank or the Company may adopt and maintain from time to
time.

(j) Definitions. For purposes of this Agreement:

(i) “Excess Parachute Payment” has the same meaning as used in
Section 280G(b)(1) of the Code.

(ii) “Overpayment” means any amount paid to Executive in excess of the maximum
payment limit of Section 3.6(g) of this Agreement.

ARTICLE IV

RESTRICTIVE COVENANTS AND REMEDIES

Section 4.1. Confidential Information. In consideration of the employment by the
Bank of Executive and the consideration outlined in Article III of this
Agreement, and as an inducement to the Company to continue to entrust Executive
with its Trade Secrets (as hereinafter defined), Executive agrees that Executive
will not use for himself or disclose to any person any Trade Secret of the
Company obtained by Executive as a result of his employment by the Bank unless
authorized in writing by the Bank to do so. For purposes of this Agreement,
“Trade Secrets” means any trade secrets and is deemed to include, but not be
limited to, all confidential information, including price lists, patents,
designs, inventions, copyrighted materials, product lists, marketing strategies,
personnel files, customer lists, and all other information or material received
by Executive in connection with his employment by the Bank which is not
otherwise available to the general public; provided, that the term Trade Secrets
shall exclude (i) information that is or subsequently becomes publicly available
other than as a result of Executive’s breach of this Agreement; (ii) is acquired
from another source not under a duty of confidentiality to the Company and not
as a result of a breach of this Agreement; (iii) is independently developed by
Executive without use of the Trade Secrets; (iv) is approved for public release
by the Company; or (v) is required to be disclosed by court order, subpoena, in
connection with a civil or criminal investigative demand, the discovery rules of
any court or otherwise by law or legal process. Upon cessation of Executive’s
service to the Bank for any reason, all written or electronic materials
evidencing Trade Secrets, and all copies thereof, in the possession or control
of Executive shall be delivered to the Bank.

Section 4.2. Ownership of Inventions and Ideas. Executive acknowledges that the
Bank shall be the sole owner of all the results and proceeds of his service to
the Company,

 

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including but not limited to, all patents, patent applications, patent rights,
formulas, copyrights, inventions, developments, discoveries, other improvements,
data, documentation, drawings, charts, and other written, audio and/or visual
materials relating to equipment, methods, products, processes or programs in
connection with or useful to the business of the Company (collectively, the
“Developments”) which Executive, by himself or in conjunction with any other
person, may conceive, make, acquire, acquire knowledge of, develop or create
during Executive’s employment by the Bank, free and clear of any claims by
Executive (or any successor or assignee of Executive) of any kind or character
whatsoever. Executive acknowledges that all copyrightable Developments shall be
considered works made for hire under the Federal Copyright Act. Executive hereby
assigns and transfers his right, title and interest in and to all such
Developments and agrees that he shall, at the request of the Bank, execute or
cooperate with the Company in any patent applications, execute such assignments,
certificates or other instruments, and do any and all other acts, as the Bank
from time to time reasonably deems necessary or desirable to evidence,
establish, maintain, perfect, protect, enforce or defend the Company’s right,
title and interest in or to any such Developments.

Section 4.3. Restrictive Covenants. In consideration of the employment by the
Bank of Executive and the consideration outlined in Article III of this
Agreement, Executive agrees to be bound by this Section 4.3. Executive will not,
directly or indirectly, do any of the following during the Term and the
Restricted Period:

(a) engage or participate in any business activity substantially similar to an
activity from which the Company derives revenue (or, with respect to the
application of this provision during the Restricted Period, engage or
participate in any such business activity within any Company branch or office
operating or preparing to operate on the date Executive’s employment ends) (a
“Competing Business”);

(b) become interested in (as owner, stockholder, lender, partner, co-venturer,
director, officer, employee, agent or consultant) any person, firm, corporation,
association or other entity engaged in any Competing Business. Notwithstanding
the foregoing, Executive may hold up to 4.9% of the outstanding securities of
any class of any publicly traded securities of any company;

(c) solicit or call on, either directly or indirectly, for purposes of selling
goods or services competitive with goods or services sold by the Company, any
customer with whom the Company shall have dealt or any prospective customer that
the Company has identified and solicited at any time during Executive’s
employment by the Bank;

(d) adversely influence or attempt to adversely influence any supplier, customer
or potential customer of the Company to terminate or modify any written or oral
agreement or course of dealing with the Company;

(e) adversely influence or attempt to adversely influence any person to
terminate or modify any employment, consulting, agency, distributorship or other
arrangement with the Company; or

 

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(f) employ or retain, or arrange to have any other person or entity employ or
retain, any employee, consultant, agent or distributor of the Company (or with
respect to the application of this provision during the Restricted Period, any
person or entity who, within the 12 months preceding the Date of Termination,
was employed or engaged by the Company as an employee, consultant, agent or
distributor).

Executive acknowledges that the restrictions contained in Sections 4.1, 4.2 and
4.3 are reasonable and necessary to protect the legitimate interests of the Bank
and the Parent and that the duration of the Restricted Period, and the
provisions of Sections 4.1, 4.2 and 4.3, are reasonable given Executive’s
position within the Bank and the substantial consideration payable under this
Agreement. Executive further acknowledges that Sections 4.1, 4.2 and 4.3 are
included herein in order to induce the Bank and the Parent to enter into this
Agreement and that the Bank and the Parent would not have entered into this
Agreement in the absence of these provisions.

Section 4.4. Enforcement.

(a) Specific Enforcement. Executive acknowledges that any material breach by
him, willfully or otherwise, of this Article IV will cause continuing and
irreparable injury to the Bank and the Parent for which monetary damages would
not be an adequate remedy. Executive will not, in any action or proceeding to
enforce any of the provisions of this Agreement, assert the claim or defense
that such an adequate remedy at law exists. In the event of any such material
breach by Executive, the Bank and/or the Parent will have the right to enforce
this Agreement by seeking injunctive or other relief in any court and this
Agreement will not in any way limit remedies of law or in equity otherwise
available to the Bank and the Parent.

(b) Restitution. If Executive materially breaches any part of Section 4.1, 4.2
or 4.3, the Bank and the Parent will have the right and remedy to require
Executive to account for and pay over to the Bank and the Parent all
compensation, profits, monies, accruals, increments or other benefits derived or
received by Executive as the result of such breach. This right and remedy will
be in addition to, and not in lieu of, any other rights and remedies available
to the Bank and the Parent under law or in equity.

(c) Extension of Restricted Period. If Executive breaches Section 4.1, 4.2 or
4.3, the Restricted Period will be extended by an amount of time equal to the
period that Executive was in breach.

(d) Judicial Modification. If any court determines that Section 4.1, 4.2 or 4.3,
or this Section 4.4 (or any part thereof) is unenforceable because of its
duration or geographic scope, that court will have the power to modify that
section and, in its modified form, that section will then be enforceable.

(e) Restrictions Enforceable in All Jurisdictions. If any court holds that
Section 4.1, 4.2 or 4.3, or this Section 4.4 (or any part thereof) is
unenforceable by reason of its breadth or scope or otherwise, it is the
intention of the parties hereto that such determination not bar or in any way
affect the right of the Bank and the Parent to the relief provided above in the
courts of any other jurisdiction within the geographic scope of this section.

 

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(f) Disclosure of Protective Provisions. Executive agrees to disclose the
existence and terms of Sections 4.1, 4.2 and 4.3 to any employer for whom
Executive seeks to work during the Restricted Period. Executive also agrees that
during the Restricted Period the Executive will provide and the Company may
similarly provide a copy of this Section 4 to any business or enterprise
(i) which Executive may directly or indirectly own, manage, operate, finance,
join, control or of which he may participate in the ownership, management,
operation, financing, or control, or (ii) with which Executive may be connected
as an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which Executive may use or permit
to be used Executive’s name.

ARTICLE V

MISCELLANEOUS

Section 5.1. No Liability of Officers and Directors for Severance Upon
Insolvency. Notwithstanding any other provision of the Agreement and intending
to be bound by this provision, Executive hereby (a) waives any right to claim
payment of amounts owed to him, now or in the future, pursuant to this Agreement
from directors or officers of the Company if the Company becomes insolvent,
except through their individual or collective acts of malfeasance or
misfeasance, and (b) fully and forever releases and discharges the Company’s
officers and directors from any and all claims, demands, liens, actions, suits,
causes of action or judgments arising out of any present or future claim for
such amounts except if such claims, demands, liens, actions, suits, causes of
action or judgments are based on their individual or collective acts of
malfeasance or misfeasance.

Section 5.2. Ability to Perform. Executive represents and warrants to the
Company that there are no restrictions, agreements or understandings whatsoever
to which he is a party that would prevent or make unlawful his execution of this
Agreement, that would be inconsistent or in conflict with this Agreement or
Executive’s obligations hereunder, or that would otherwise prevent, limit or
impair the performance by Executive of his duties under this Agreement on and
after the Effective Date.

Section 5.3. Payments Subject to Tax Withholding. All payments and transfers of
property described in this Agreement will be made net of any applicable tax
withholding.

Section 5.4. Dispute Resolution. Except for disputes arising under Article IV
hereof, all disputes involving the interpretation, construction, application or
alleged breach of this Agreement and all disputes relating to the termination of
Executive’s employment with the Bank shall be submitted to final and binding
arbitration in Scranton, Pennsylvania. The arbitrator shall be selected and the
arbitration shall be conducted pursuant to the then most recent Employment
Dispute Resolution Rules of the American Arbitration Association in
Philadelphia, Pennsylvania. The arbitrator shall have authority to rule on any
dispositive motions filed by the parties. The decision of the arbitrator shall
be final and binding, and any court of competent jurisdiction may enter judgment
upon the award. The arbitrator shall have jurisdiction and authority to
interpret and apply the provisions of this Agreement and relevant federal, state
and local laws, rules and regulations insofar as necessary to the determination
of the dispute and to remedy any breaches of the Agreement and/or violations of
applicable laws, but shall not have jurisdiction or authority to alter in any
way the provisions of this Agreement. The arbitrator shall

 

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have the authority to award attorneys’ fees and costs to the prevailing party.
The parties hereby agree that this arbitration provision shall be in lieu of any
requirement that either party exhaust such party’s administrative remedies under
federal, state or local law.

Section 5.5. Successors and Assigns; Third Party Beneficiary. Each of the Bank
and the Parent may assign this Agreement to any affiliate or to any successor to
its assets or business by means of liquidation, dissolution, merger,
consolidation, sale of assets or otherwise. For avoidance of doubt, a
termination of the Executive’s employment by the Bank in connection with a
permitted assignment of the Bank’s rights and obligations under this Agreement
is not a termination “without Cause” so long as the successor or assignee offers
employment to the Executive on the terms herein specified (without regard to
whether the Executive accepts employment with the successor or assignee). The
duties of the Executive hereunder are personal to Executive and may not be
assigned by him. The Parent and each of its direct and indirect subsidiaries
(excluding the Bank) is designated as a third party beneficiary of this
Agreement and shall be entitled to enforce the terms hereof as if it were a
party hereto.

Section 5.6. Non-Disparagement. Executive agrees that he shall not in any way,
orally or in writing, disparage or defame the Company or any of its board
members, officers or employees to any third party or commit any libelous or
slanderous act against the Company or any of its board members, officers or
employees whether in the capacity as his former employer or otherwise.

Section 5.7. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law. However, if any provision of this Agreement is held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
will not affect any other provision, and this Agreement will be reformed,
construed and enforced as though the invalid, illegal or unenforceable provision
had never been herein contained.

Section 5.8. Survival. This Agreement, including, without limitation, the
recoupment provisions set forth in Section 3.6(i) and the restrictive covenants
set forth in Article IV, will survive the cessation of the Executive’s
employment to the extent necessary to fulfill the purposes and intent of this
Agreement.

Section 5.9. Entire Agreement; Amendments. Except as otherwise provided herein,
this Agreement contains the entire agreement and understanding of the parties
hereto relating to the subject matter hereof. Therefore, this Agreement merges
and supersedes all prior and contemporaneous discussions, agreements and
understandings of every nature relating to Executive’s employment, compensation,
severance, termination or any related matter. This Agreement may not be changed
or modified, except by an Agreement in writing signed by the Executive, the Bank
and the Parent.

Section 5.10. Notice. Any notice or communication required or permitted under
this Agreement will be made in writing and (a) sent by overnight courier,
(b) mailed by certified or registered mail, return receipt requested or (c) sent
by telecopier, addressed as follows:

If to Executive, to the address on file with the Bank.

 

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If to the Bank or the Parent:

Peoples Security Bank and Trust Company

150 North Washington Avenue

Scranton, PA 18503

Attn: Chief Executive Officer

Section 5.11. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania, without regard
to the principles of conflicts of laws rules of any state. Any legal proceeding
arising out of or relating to this Agreement will be instituted in a state or
federal court in the Commonwealth of Pennsylvania, and each of the Executive,
the Bank and the Parent hereby consent to the personal and exclusive
jurisdiction of such court(s) and hereby waive any objection(s) that they may
have to personal jurisdiction, the laying of venue of any such proceeding and
any claim or defense of inconvenient forum.

Section 5.12. Counterparts and Facsimiles. This Agreement may be executed,
including execution by facsimile signature, in one or more counterparts, each of
which will be deemed an original, and all of which together will be deemed to be
one and the same instrument.

Section 5.13. Remedies. In the event of any breach of this Agreement by either
party, the party injured by such breach shall be entitled to attorneys’ fees,
costs and expenses incurred by reason of such breach, if any, together with
interest at the maximum rate permitted by law. This paragraph shall not be
considered a waiver of or a limitation on the remedies available under this
Agreement or at law or in equity for breach of this Agreement.

[signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date(s) written below.

 

PEOPLES SECURITY BANK AND TRUST COMPANY By:

/s/ Craig W. Best                                    2/4/15

Name: Craig W. Best Date Title: President CEO EXECUTIVE

/s/ Bradley S. Grubb                                           2/4/15

Bradley S. Grubb Date    

 

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Exhibit A

Wealth Management Division

The “Bank’s Wealth Management Division” means the Bank’s business of providing
wealth management, trust, investment and brokerage services, wherever located
within the Bank and its affiliates, from time to time.

Incremental Gross Revenue

“Incremental gross revenue of the Bank’s Wealth Management Division” means, with
respect to any year ending December 31 during the Term, the excess, if any, of
the gross revenue of the Bank’s Wealth Management Division for such year, over
the gross revenue of the Bank’s Wealth Management Division for the immediately
preceding year.

The “gross revenue of the Bank’s Wealth Management Division” means the gross
revenue of the Bank’s Wealth Management Division, comprised of trust income (or
“commissions and fees on fiduciary activities”) and brokerage revenue (or
“wealth management income”), before deduction of any third party payments
(including, without limitation, revenue sharing or expense reimbursement
payments to Infinex Investments, Inc. or Commonwealth Financial Network) or
other expenses. For reference, the unaudited gross revenue of the Bank’s Wealth
Management Division for the year ended December 31, 2014, was $3,108,936.

Incremental Net Profit

“Incremental net profit before tax of the Bank’s Wealth Management Division”
means, with respect to any year ending December 31 during the Term, the excess,
if any, of the net profit before tax of the Bank’s Wealth Management Division
for such year, over the net profit before tax of the Bank’s Wealth Management
Division for the immediately preceding year.

The “net profit before tax of the Bank’s Wealth Management Division” means the
gross revenues of the Bank’s Wealth Management Division, less all third party
payments (including, without limitation, revenue sharing or expense
reimbursement payments to Infinex Investments, Inc. and Commonwealth Financial
Network) and other expenses incurred by or allocated to the Bank’s Wealth
Management Division, including, without limitation, salaries and employee
benefits expense, depreciation of equipment, and other expenses, excluding only
income tax expense. The net profit before tax of the Bank’s Wealth Management
Division shall not include any net funds credit. For reference, the unaudited
net profit before tax of the Bank’s Wealth Management Division for the year
ended December 31, 2014, was $1,382,896.

 

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