EXHIBIT 10.5
                                  ORRSTOWN BANK
                  DIRECTOR REVENUE NEUTRAL RETIREMENT AGREEMENT

     THIS AGREEMENT is made this 11th day of November 1998 by and between
ORRSTOWN BANK (the "Company"), and ROBERT HENRY (the "Director").

                                  INTRODUCTION

     To help promote orderly succession of its Board of Directors, the Company
is willing to provide the Director with an opportunity for retirement income.
The Company will pay the benefits from its general assets.

     AGREEMENT The Director and the Company agree as follows:

                                    Article I
                                   Definitions

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

     1.1.1 "Change of Control" shall mean any of the following:

          (A) any person (as such term is used in Sections 13(d) and 14(d)(2) of
     the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other
     than the Corporation, a subsidiary of the Corporation, an employee benefit
     plan (or related trust) of the Corporation or a direct or indirect
     subsidiary of the Corporation, or affiliates of the Corporation (as defined
     in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as
     determined pursuant to Rule 13d-3 under the Exchange Act), directly or
     indirectly, of securities of the Corporation representing more than 20% of
     the combined voting power of the Corporation's then outstanding securities
     or announces a tender offer or exchange offer for securities of the
     Corporation representing more than 20% of the combined voting power of the
     Corporation's then outstanding securities; or

          (B) the liquidation or dissolution of the Corporation or the Company
     or the occurrence of, or execution of an agreement providing for, a sale of
     all or substantially all of the assets of the Corporation or the Company to
     an entity which is not a direct or indirect subsidiary of the Corporation;
     or

          (C) the occurrence of, or execution of an agreement providing for, a
     reorganization, merger, consolidation or other similar transaction or
     connected series of transactions of the Corporation as a result of which
     either (a) the Corporation does not survive or (b) pursuant to which shares
     of the Corporation common stock ("Common Stock") would be converted into
     cash, securities or other property, unless, in case of either (a) or (b),
     the holders of Corporation Common Stock immediately prior to such
     transaction will, following the consummation of the transaction,
     beneficially own, directly or indirectly, more than 50% of the combined
     voting power of the then outstanding voting securities entitled to vote
     generally in the election of directors of the corporation surviving,
     continuing or resulting from such transaction; or

          (D) the occurrence of, or execution of an agreement providing for, a
     reorganization, merger, consolidation, or similar transaction of the
     Corporation, or before any connected series of such transactions, if, upon
     consummation of such transaction or transactions, the persons who are
     members of the Board of Directors of the Corporation immediately before
     such transaction or transactions cease or, in the case of the execution of
     an agreement for such transaction or transactions, it is contemplated in
     such agreement that upon consummation such persons would cease, to
     constitute a majority of the Board of Directors of the Corporation or, in a
     case where the Corporation does not survive in such transaction, of the
     corporation surviving, continuing or resulting from such transaction or
     transactions; or

          (E) any other event which is at any time designated as a "Change of
     Control" for purposes of this Agreement by a resolution adopted by the
     Board of Directors of the Corporation with the affirmative vote of a
     majority of the non-employee directors in office at the time the resolution
     is adopted; in the event any such resolution is adopted, the Change of
     Control event specified thereby shall be deemed incorporated herein by
     reference and thereafter may not be amended, modified or revoked without
     the written agreement of Executive.

          Notwithstanding anything else to the contrary set forth in this
     Agreement, if an agreement is executed by the Corporation or the Company
     providing for any of the transactions or events constituting a Change of
     Control as defined herein, and the agreement subsequently expires or is
     terminated without the transaction or event being consummated, for purposes
     of this Agreement it shall be as though such agreement was never executed
     and no Change of Control event shall be deemed to have occurred as a result
     of the execution of such agreement.

     1.1.2 "Corporation" means Orrstown Financial Services, Inc.

     1.1.3 "Normal Retirement Date" means the benefit described in Article 3.

     1.1.4 "Normal Retirement Date" means the Date of the Director's Termination
of Service on or after attaining age 70.

     1.1.5 "Plan Anniversary" means each twelve month period from the date set
forth in Section 2.1.

     1.1.6 "Retirement Account" means the account maintained on the books of the
Company as described in Section 2.2.

     1.1.7 "Simulated Investments" means investments specified by the Company
for use in measuring the Retirement Benefit. Subject to Article 2, the Company
can change the Simulated Investments only with the Director's written agreement.
The Simulated Investments shall be of equal initial amounts.

     1.1.8 "Simulated Investment Rate" means the after-tax rate of return on a
Simulated Investment. If the Simulated Investment is a life insurance policy,
the Simulated Investment Rate shall track cash surrender value and not include
receipt of the policy's death benefits.

     1.1.9 "Termination of Service" means the Director's ceasing to serve on the
Board of the Company or its successor for any reason other than death.

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                                    Article 2
                               Retirement Account

     2.1 SimuLated Investments. The Company shall establish two Simulated
Investments, in the amount of $655,000 as of October 1, 1998 as follows:

     2.1.1 Simulated Investment Number One shall be equal to the cash surrender
value of one or more life insurance policies, as described in Appendix A.

     2.1.2 Simulated Investment Number Two shall be equal to the principal and
the accumulated net after-tax interest earnings on an alternative investment.
For purpose of this Agreement, Simulated Investment Number Two assumes an
investment in one year U.S. Treasury Bills, assumes the applicable income rate
to be the Company's highest marginal tax rate for the previous calendar year,
assumes that after-tax interest shall accrue monthly and be compounded at each
Plan Anniversary Date, and assumes that the accumulated balance shall be
reinvested in one year U.S. Treasury Bills at each Plan Anniversary Date.

     2.2 Retirement Account. The Company shall establish a Retirement Account on
its books for the Director. The Retirement Account as of any date shall be
determined by: (1) subtracting the value of Simulated Investment Number Two from
the value of Simulated Investment Number One, (2) dividing the difference by the
"adjustment rate", and (3) subtracting the sum of all previous distributions.
For purposes of this Section 2.2 the term "adjustment rate" shall mean the
figure equal to one minus the Company's highest marginal tax rate for the
previous calendar year.

     2.3 Statement of Accounts. The Company shall provide to the Director,
within 90 days after each Plan Anniversary, a statement setting forth the
Retirement Account balance.

     2.4 Accounting Device Only. The Retirement Account and Simulated
Investments are solely devices for measuring amounts to be paid under this
Agreement. They are not a trust fund of any kind. The Director is a general
unsecured creditor of the Company for the payment of benefits. The benefits
represent the mere Company promise to pay such benefits. The Director's rights
not subject in any manner to anticipation, alienation, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by the Director's creditors.

                                    Article 3
                                Lifetime Benefits

     3.1 Retirement Benefit. Subject to the general limitations of Article 6,
the Company shall pay to the Director the Normal Retirement Benefit described in
Section 3.1.1.

     3.1.1 Normal Retirement Benefit. Commencing on April 15, 2000 and
continuing each April 15 until the earlier of (1) the Director's death or (2)
the date the Director has received total payments of $120,000, the Company shall
pay a Normal Retirement Benefit to the Director. The Normal Retirement Benefit
shall be paid annually in an amount equal to the hypothetical growth, if any, of
the Director's Retirement Account from the immediately preceding Plan
Anniversary Date, determined pursuant to the method set forth in Section 2.1 and
2.2 hereof.

     3.2 Change of Control Benefit. Following a Change of Control, the Director
shall continue to receive the Normal Retirement Benefit payable in accordance
with Article 3 herein until the Director or his beneficiary has received total
payments of $120,000.

                                    Article 4
                                 Death Benefits

     Upon the Director's death prior to termination of this Agreement, the
Company shall pay to the Director's beneficiary a benefit equal to the
difference between $120,000 and the total payments previously distributed to the
Director under this Agreement. The Company shall pay the benefit to the
beneficiary in a lump sum within 60 days following the Director's death. This
shall terminate any further obligations the Company has to the Director or his
beneficiary.

                                    Article 5
                                  Beneficiaries

     5.1 Beneficiary Designations. The Director shall designate a beneficiary by
filing a written designation with the Company. The Director may revoke or modify
the designation at any time by filing a new designation. However, designations
will only be effective if signed by the Director and accepted by the Company
during the Director's lifetime. The Director's beneficiary designation shall be
deemed automatically revoked if the beneficiary predeceases the Director, or if
the Director names a spouse as beneficiary and the marriage is subsequently
dissolved. If the Director dies without a valid beneficiary designation, all
payments shall be made to the Director's surviving spouse, if any, and if none,
to the Director's surviving children and the descendants of any deceased child
by right of representation, and if no children or descendants survive, to the
Director's estate.

     5.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. The Company may require proof of incompetence,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit.

Article 6 General Limitations

     Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement:

     6.1 Termination for Cause. If the Company terminates the Director's service
for:

     6.1.1 Gross negligence or gross neglect of duties;

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

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     6.1.3 Fraud, disloyalty, dishonesty or willful violation of any law or
significant Company policy resulting in an adverse effect on the Company.

     6.2 Suicide. If the Director commits suicide within two years after the
date of this Agreement, or if the Director has made any material misstatement of
fact on any application for life insurance purchased by the Company.

     6.3 Competition After Termination of Service. If the Director, without the
prior written consent of the Company, engages in, becomes interested in,
directly or indirectly, a sole proprietor, as a partner in a partnership, or as
a substantial shareholder in a corporation, or becomes associated with, in the
capacity of employee, director, officer, principal, agent, trustee or in any
other capacity whatsoever, any enterprise conducted in the trading area (a 50
mile radius of the main office of the Company at the comer of King and Penn
Streets), which enterprise is, or may deemed to be competitive with any business
carried on by the Company as of the date of the Director's termination of
service. This Section 6.3 shall not apply following a Change of Control.

                                    Article 7
                          Claims and Review Procedures

     7.1 Claims Procedure. The Company shall notify the Director's beneficiary
in writing, within ninety (90) days of his or her written application for
benefits, of his or her eligibility or noneligibility for benefits under the
Agreement. If the Company determines that the beneficiary is not eligible for
benefits or full benefits, the notice shall set forth (1) the specific reasons
for such denial, (2) a specific reference to the provisions of the Agreement on
which the denial is based, (3) a description of any additional information or
material necessary for the claimant to perfect his or her claim, and a
description of why it is needed, and (4) an explanation of the Agreement's
claims review procedure and other appropriate information as to the steps to be
taken if the beneficiary wishes to have the claim reviewed. If the Company
determines that there are special circumstances requiring additional time to
make a decision, the Company shall notify the beneficiary of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional 90-day period.

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

                                    Article 8
                           Amendments and Termination

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

                                    Article 9
                                 Administration

     9.1 Administration. Unless otherwise determined by the Company's Board of
Directors ("Board"), the Board or its designee shall be the named fiduciary and
shall act for the Company under this Agreement.

     9.2 Powers of the Company. The Company shall have all powers necessary to
administer this Agreement, including, without limitation, powers:

     9.2.1 to interpret the provisions of the Agreement; and

     9.2.2 to establish rules for the administration of the Agreement and to
prescribe any forms required to administer the Agreement.

     9.3 Actions of the Company. All determinations, interpretations, rules, and
decisions of the Company shall be conclusive and binding upon all persons having
or claiming to have any interest or right under this Agreement.

                                   Article 10
                                  Miscellaneous

     10.1 Binding Effect. This Agreement shall bind the Director and the
Company, and their beneficiaries, survivors, executors, administrators and
transferees.

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

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

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

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     10. 5 Unfunded Arrangement. The Director is a general unsecured creditor of
the Company for the payment of benefits under this Agreement. The benefits
represent the mere promise by the Company to pay such benefits. The rights to
benefits are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors. Any insurance on the Director's life or any other asset held in
connection with this Agreement is a general asset of the Company to which the
Director has no preferred or secured claim.

     IN WITNESS WHEREOF, the Director and a duly authorized Company officer have
signed this Agreement.

DIRECTOR:                                     COMPANY:
                                              ORRSTOWN BANK

_____________________________                 By ______________________________

                                              Title ___________________________

     By execution hereof, 0rrstown Financial Services, Inc. consents to and
agrees to be bound by the terms and conditions of this Agreement.


ATTEST:                                       CORPORATION:
                                              ORRSTOWN FINANCIAL SERVICES, INC.

_____________________________                 By ______________________________

                                              Title ___________________________



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