Exhibit
10.1


 


Material Contracts


 


FARMERS AND MERCHANTS TRUST COMPANY OF
CHAMBERSBURG


 


DIRECTORS’ DEFERRED COMPENSATION PLAN


 


AMENDED AND RESTATED EFFECTIVE JANUARY 1,
2005


 


WHEREAS, Farmers and Merchants Trust Company of Chambersburg (the “Bank”)
previously adopted the Farmers and Merchants Trust Company of Chambersburg
Directors’ Deferred Compensation Plan (the “Plan”), effective July 1, 1986, and
amended and restated the Plan in its entirety effective May 1, 2003, primarily
for the purpose of introducing self-directed investment provisions; and


 


WHEREAS, the purpose of the Plan has been and continues to be to
provide, for the exclusive benefit of the Participants, the opportunity to
defer the payment of director and board member fees due to them from the Bank;
and


 


WHEREAS, pursuant to Section 8.1 of the Plan, the Bank reserves the
right to amend the Plan from time to time; and


 


WHEREAS, the United States Internal Revenue Code has now been amended,
effective generally with respect to amounts of deferred compensation earned and
vested on and after January 1, 2005, by the addition thereto of a new Section
409A, as a result of which certain amendments to the Plan are deemed by the
Bank to be necessary and appropriate; and


 


WHEREAS, effective July 1, 2006, in connection with the merger of
Fulton County National Bank and Trust Company with and into the Bank, the Bank
is establishing a Fulton County Advisory Board and desires to amend the Plan,
effective as of said date, to permit the members of the Advisory Board to
become Participants hereunder, even though they are not members of the Bank’s
Board of Directors; and


 


WHEREAS, the Bank has determined that it is in the best interest of the
Bank and the Participants that the Plan be amended in the foregoing respects;


 


NOW, THEREFORE, the Plan is hereby amended and restated in its
entirety, effective on and after January 1, 2005, except where a different
effective date is otherwise indicated, as hereinafter set forth.


 


ARTICLE I


 


PURPOSE


 


The
Bank recognizes that the members of its Board of Directors and its Fulton
County Advisory Board (hereinafter, the “Advisory Board”) possess an intimate
knowledge of the Bank, the community and general business strategies. It
further recognizes that the participation of its Directors and its non-director
Advisory Board members is essential to the Bank’s continued growth and success.
Accordingly, in order to retain and attract knowledgeable Directors, the Bank
adopted the Plan initially in 1986 and now hereby amends, restates, and continues
the Plan, allowing its Directors and Advisory Board members to defer their
Director Fees as hereinafter set forth.


 




















 


ARTICLE II


 


DEFINITIONS


 


2.1           “BANK” means Farmers
and Merchants Trust Company of Chambersburg and any successor thereto.


 


2.2           “BENEFICIARY” means
the person or persons designated by a Participant pursuant to Section 5.5.


 


2.3           “COMMITTEE” means
the Personnel Committee of Franklin Financial Services Corporation, the parent
corporation of the Bank. No Director who is a member of the Committee and also
a Participant hereunder shall take any part in the discussions or voting
concerning any determination or discretionary decision to be made by the
Committee in connection with the Director’s benefits hereunder.


 


2.4           “DEFERRAL ELECTION
FORM” shall mean a written agreement between a Participant and the Bank,
whereby a Participant agrees to defer all or a portion of his or her Director
Fees to be earned in the future, and the Bank agrees to make benefit payments
in accordance with the provisions of the Plan.


 


2.5           “DEFERRED BENEFIT
ACCOUNT” means the accounts maintained on the books of the Bank pursuant to
Article IV. A separate Deferred Benefit Account shall be maintained for each
Participant to be utilized solely as a device for the measurement and
determination of the amounts to be paid to the Participants pursuant to the
Plan and shall be subject to Article VI hereof. A Participant’s Deferred
Benefit Account shall not constitute or be treated as a trust fund of any kind.
That portion, if any, of a Participant’s Deferred Benefit Account that is
attributable to deferred Director Fees that were earned prior to January 1,
2005, including both the deferred fees and the investment gains or losses
assigned thereto, shall be referred to herein as the Participant’s Deferred
Benefit Subaccount A,  and the balance of
a Participant’s Deferred Benefit Account that is attributable to deferred
Director Fees that were earned on or after January 1, 2005, including both the
deferred fees and the investment gains or losses assigned thereto, shall be
referred to herein as the Participant’s Deferred Benefit Subaccount B.


 


2.6           “DETERMINATION DATE”
shall mean each March 31, June 30, September 30 and December 31 of each Plan
Year and, for each Participant, the date of death, the date of Termination for
Cause, or the date of Severance, as applicable.


 


2.7           “DIRECTOR” means
each individual who serves on the Bank’s Board of Directors and, except for the
President and Chief Executive Officer of the Bank, is not otherwise employed by
the Bank. Effective on and after July 1, 2006, Director shall also mean, but
solely for purposes of participation in this Plan, each individual who serves
as a member of the Advisory Board, even though such individuals are not members
of the Bank’s Board of Directors. .


 


2.8           “DIRECTOR FEES”
means the compensation payable to a Director, as a Director of the Bank or, on
and after July 1, 2006, as a non-director member of the Advisory Board,
including but not limited to meeting and retainer fees.


 


2.9           “EFFECTIVE DATE” of
this amendment and restatement means January 1, 2005, and of the Plan as
initially established means July 1, 1986.


 


2.10         “FUNDS” mean such
mutual funds or combinations of mutual funds or other funds selected from time
to time by the Committee in which a Director who is a Participant in this Plan
may elect, as of any Determination Date, to have his or her Deferred Benefit
Account hypothetically invested or reinvested. The Participant’s selections
will establish the basis upon which future increases or decreases in the value
of his or her Deferred Benefit account will be determined, but the selections
do not obligate the Bank to in fact purchase and hold the Funds selected. Any
and all Funds that may be purchased and held by the Bank, in its sole and
absolute discretion, shall remain titled in, and shall remain the sole property
of, the Bank, subject to the claims of the Bank’s general creditors.


 


2.11         “PARTICIPANT” means
each active Director who has deferred all or a portion of his or her Director
Fees in accordance with Article III and any former Director who remains
entitled to a benefit pursuant to Article V.


 




















 


2.12         “PLAN” means the
Farmers and Merchants Trust Company of Chambersburg Directors’ Deferred
Compensation Plan as described in this instrument, and as amended from time to
time.


 


2.13         “PLAN YEAR” means the
twelve consecutive month period beginning on January 1 and ending on December
31 of each year.


 


2.14         “SEVERANCE” of a
Participant means his or her voluntary or involuntary separation from service
as a member of the Bank’s Board of Directors or of the Advisory Board, if
applicable, for any reason other than death, specifically excepting however a
Termination For Cause.


 


2.15         “TERMINATION FOR
CAUSE” means separation from service as a member of the Bank’s Board of
Directors or of the Advisory Board as a result of willful misconduct or gross
negligence in the performance by the Director of his or her duties as a
Director.


 


ARTICLE III


 


DEFERRAL ELECTIONS


 


3.1           Each Director who
elects to defer all or a specified portion of Director Fees pursuant to the
terms provided herein shall execute a Deferral Election Form prior to the Plan
Year for which the deferral shall first occur.


 


3.2           Each Director
appointed to the Board of Directors of the Bank or to the Advisory Board during
the course of a Plan Year may file a Deferral Election Form within the 30 day
period after such appointment first becomes effective to apply with respect to
Director Fees to be earned in the future, including those earned throughout the
balance of such Plan Year.


 


3.3           An election to defer
Director Fees pursuant to the Plan is irrevocable and shall continue until the
earlier of a Participant’s death, Severance or Termination For Cause. Notwithstanding
the foregoing, a Participant may change the deferred portion of his or her
Director Fees or suspend deferrals effective for any subsequent Plan Year by
executing a new Deferral Election Form prior to the first day of the Plan Year
such change is to be effective.


 


ARTICLE IV


 


DEFERRED BENEFIT ACCOUNT


 


4.1           For recordkeeping
purposes only, the Bank shall maintain separate Deferred Benefit Accounts for
each Participant, and within each Deferred Benefit Account there shall be
maintained a Deferred Benefit Subaccount A and a Deferred Benefit Subaccount B.
The existence of these accounts shall not require any segregation of assets.


 


4.2           The amount of
Director Fees that a Participant elects to defer shall be credited to the
Participant’s Deferred Benefit Account throughout each Plan Year at such time
as the Participant would otherwise be entitled to payment of the Director Fees
that are the source of the deferral.


 


4.3           Pursuant to such
rules and procedures as may be promulgated by the Committee from time to time,
each Participant may, in advance of any Determination Date, designate the Fund
or Funds in which his or her Deferred Benefit Account is to be hypothetically
invested prospectively, effective beginning as of such Determination Date. On
each Determination Date, the Bank shall re-value each Participant’s Deferred
Benefit Account, based on the performance of the Fund or Funds selected by the
Participant, to reflect the realized or unrealized gain or loss in the Director’s
Deferred Benefit Account since the last Determination Date.


 




















 


ARTICLE V


 


BENEFITS


 


5.1           Within sixty (60)
days of a Participant’s Termination For Cause, the Bank shall pay to the
Participant a lump sum cash distribution, in lieu of any other benefit provided
hereunder, equal to the Participant’s accumulated deferrals under the Plan up
to the date of the Termination for Cause, determined without regard to
interest, earnings, dividends, or realized or unrealized gain, or, if less due
to realized or unrealized losses, equal to the balance in the Participant’s
Deferred Benefit Account as of the date of the Termination for Cause.


 


5.2           Within sixty (60)
days of a Participant’s Severance or death, the Bank shall pay to the
Participant, or in the event of a Participant’s death to the Participant’s
Beneficiary, a deferred benefit. The amount of the deferred benefit shall be
equal to Participant’s Deferred Benefit Account, determined pursuant to Article
IV, as of the Participant’s date of Severance or date of death.


 


5.3           The portion of the
Participant’s deferred benefit credited to the Deferred Benefit Subaccount A
shall be payable as a lump sum, unless, the Committee, in its sole and absolute
discretion, shall determine to pay that portion of the deferred benefit over an
optional payment period of up to five (5) years. In the event that this portion
of the deferred benefit is payable over such an optional payment period, the
principal amount of the deferred benefit shall be fixed as of the Participant’s
date of death or date of Severance, as applicable, and shall not thereafter increase
or decrease. Payments during any such optional payment period shall be in
approximately equal installments and shall be payable on a monthly, quarterly,
or annual basis as determined by the Committee. The portion of the Participant’s
deferred benefit credited to the Deferred Benefit Subaccount B shall be payable
as a lump sum or over an optional payment period of up to five (5) years, as
elected by the Participant at or in advance of the time of the election to
defer the fees credited to the Subaccount B. In the event that this portion of
the deferred benefit is payable over such an optional payment period, the
principal amount of the deferred benefit shall be fixed as of the Participant’s
date of death or date of Severance, as applicable, and shall not thereafter
increase or decrease. Payments during any such optional payment period shall be
in approximately equal installments and shall be payable on an annual basis.


 


5.4           At the request of a
Participant, the Committee, may, in its sole and absolute discretion, pay all
or any part of the Participant’s Deferred Benefit Subaccount A prior to a date
of Severance. Any such distribution shall be made as of a Determination Date,
and no distribution to any such Participant shall be made more frequently than once
per year. At the request of a Participant, the Committee, may, upon determining
that the Participant has experienced an unforeseeable emergency,  pay all or any part of the Participant’s
Deferred Benefit Subaccount B prior to a date of Severance. If the
Administrator determines that a distribution is necessary on account of the
unforeseeable emergency, the Participant shall receive no more than the amount
of his Deferred Benefit Subaccount B that is necessary to alleviate the
unforeseeable emergency in a single cash payment. Distributions on account of
an unforeseeable emergency are subject to the following rules: (1) a
distribution shall not be deemed on account of an unforeseeable emergency
unless the Participant is experiencing a severe financial hardship on account
of an injury or illness of himself, a spouse or dependent resulting in medical
expenses, a casualty loss of the Participant’s property, an imminent
foreclosure on or eviction from the Participant’s primary residence, or unpaid
funeral expenses; (2) purchase of a residence and payment of educational
expenses shall not be deemed unforeseeable emergencies; (3)  a Participant requesting a distribution on
account of an unforeseeable emergency shall have the burden of presenting to
the Committee evidence of the unforeseeable emergency, and the Committee shall
not approve such request without first receiving such evidence; and (4)  any amount distributed to a Participant on
account of an unforeseeable emergency shall reduce the amount of the Participant’s
benefit that may otherwise become payable under the Plan.


 


5.5           The Participant may
designate a Beneficiary by filing a written notice of such designation with the
Bank in such form as the Bank requires and may include contingent beneficiaries.
The Participant may from time to time change the designated Beneficiary or
Beneficiaries without the consent of such Beneficiary by filing a new
designation in writing with the Bank. (If a Participant maintains his or her
primary residence in a state which has community property laws, the spouse of a
married Participant shall join in any designation of a Beneficiary or
Beneficiaries other than the spouse.)  A
designation shall be effective only if signed by the Participant and accepted 


 




















 


by the Bank during the Participant’s lifetime. A designation shall be
deemed automatically revoked if all designated Beneficiaries (including all
contingent Beneficiaries, if any are named) predecease the Participant or if
the Participant names a spouse as the primary Beneficiary and the marriage is
subsequently dissolved. If no designation shall be in effect at the time when
any benefits payable under this Plan shall become due, the Beneficiary shall be
the Participant’s surviving spouse, or, if no spouse is then living, the Participant’s
children equally (with the descendents of any deceased children taking by right
of representation), or, if no spouse or children or other descendants survive,
the representatives of the Participant’s estate.


 


5.6           To the extent
required by the law in effect at the time payments are made, the Bank shall
withhold any taxes required by the federal or any state or local government
from payments made hereunder.


 


5.7           In the case of a
Participant who is a key employee (as defined in Internal Revenue Code Section
416(i)) of the Bank or of Franklin Financial Services Corporation as of the
last day of the calendar year preceding the date a benefit becomes payable
hereunder due to a Severance or a Termination For Cause (or, in the case the
benefit becomes payable in the first calendar quarter of the year, as of the
last day of the second preceding calendar year), distribution of that portion
of the Participant’s benefit that is credited to his Deferred Benefit
Subaccount B shall be made or commenced six months after the date the benefit
would otherwise been paid pursuant to the foregoing provisions of this Article
V.


 


ARTICLE VI


 


UNFUNDED PLAN


 


6.1           Benefits are payable
as they become due based on the value shown in the Participant’s Deferred
Benefit Account irrespective of any actual investments the Bank may make to
meet its obligations. The Bank is under no obligation to purchase or maintain
any asset or Fund, and any reference to Funds or investments is solely for the
purpose of computing the value of benefits. Neither this Plan nor any action
taken pursuant to the provisions of this Plan shall create or be considered to
create a trust of any kind, or a fiduciary relationship between the Bank and
the Participant, or any other person. To the extent a Participant or any other
person acquires a right to receive payments from the Bank under this Plan, such
right shall be no greater than the right of any unsecured creditor of Bank.


 


ARTICLE VII


 


ASSIGNMENT


 


7.1           No Participant,
Beneficiary or heir shall have any right to commute, sell, transfer, assign or
otherwise convey the right to receive any payment under the terms of this Plan.
Any such attempted assignment shall be considered null and void.


 


ARTICLE VIII


 


AMENDMENT AND TERMINATION


 


8.1           The Plan may be
amended in whole or in part by the Committee at any time. Notice of any such
amendment shall be given in writing to each Participant and each Beneficiary of
a deceased Participant.


 


8.2           Subject to Section
8.3, no amendment hereto shall permit amounts accumulated pursuant to the Plan
prior to the amendment to be paid to a Participant or Beneficiary prior to the
time he or she would otherwise be entitled thereto.


 




















 


8.3           The Committee
reserves the sole right to terminate the Plan at any time prior to the
commencement of payment of benefits, but only in the event that the Committee
shall determine that there has been a change in control of the Bank (as “change
in control” is defined in the regulations promulgated by the Internal Revenue
Service under Internal Revenue Code Section 409A), a bankruptcy or liquidation
of the Bank, or a resolution adopted by the Board of Directors of the Bank and
its parent holding company to terminate all nonqualified deferred compensation
plans they and their affiliates then maintain, coupled with a concurrent
undertaking to not re-establish thereafter any non-qualified deferred
compensation plans for a period of at least five years. In the event of any
such termination, each affected Participant shall be entitled to a deferred
benefit equal to the amount of his or her Deferred Benefit Account determined
under Article IV as of the date of termination of the Plan.


 


ARTICLE IX


 


MISCELLANEOUS


 


9.1           The benefits
provided for the Participants under this Plan are in addition to benefits
provided by any other plan or program of the Bank and, except as otherwise
expressly provided for herein, the benefits of this Plan shall supplement and
shall not supersede any plan or agreement between the Bank and any Participant
or any provisions contained herein.


 


9.2           The Plan shall be
governed and construed under the laws of the Commonwealth of Pennsylvania as in
effect at the time of its restatement.


 


9.3           The terms of this
Plan shall be binding upon and inure to the benefit of the parties hereto,
their respective heirs, executors, administrators and successors.


 


9.4           The interest of any
Participant or any Beneficiary receiving payments hereunder shall not be
subject to anticipation, nor to voluntary or involuntary alienation until
distribution is actually made.


 


9.5           All headings
preceding the text of the several Articles hereof are inserted solely for
reference and shall not constitute a part of this Plan, nor affect its meaning,
construction or effect.


 


9.6           Where the context
admits, words in the masculine gender shall include the feminine and neuter
genders.


 


 


	
   

  	
  FARMERS AND MERCHANTS TRUST

  
	
   

  	
  COMPANY OF CHAMBERSBURG

  
	
   

  	
   

  
	
   

  	
   

  
	
  Effective Date:

  	
   

  	
   

  	
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  Title: