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THIS AGREEMENT ("Agreement") made in February, 2007, between PEOPLES FINANCIAL SERVICES CORP., a Pennsylvania corporation ("Peoples"), Peoples National Bank (the Bank) and RICHARD S. LOCHEN, JR. (the "Executive").

WHEREAS, Peoples is engaged in the business of a bank holding company and is the owner of all the issued and outstanding capital stock of the Bank; and

WHEREAS, Peoples, the Bank and the Executive desire to enter into an agreement regarding, among other things, the employment of the Executive by Peoples.

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

1. Employment. Peoples hereby employs the Executive, and the Executive hereby accepts employment with Peoples, on the terms and conditions set forth in this Agreement.

2. Duties of Executive. The Executive shall perform and discharge well and faithfully such duties as an executive officer of Peoples and the Bank as may be assigned to the Executive from time to time by the Board of Directors of Peoples. The Executive shall be employed as President and Chief Executive Officer of Peoples and the Bank, and shall hold such additional titles as may be given to him from time to time by the Board of Directors of Peoples, the Bank, and any companies affiliated with Peoples. The Executive shall devote his full time, attention and energies to the business of Peoples and its affiliated companies and shall not, during the Employment Period (as defined in Section 3 hereof), be employed or involved in any other business activity, whether or not such activity is pursued for gain, profit or other pecuniary advantage; provided, however, that this Section 2 shall not be construed as preventing the Executive from (a) investing the Executive's personal assets, (b) acting as a member of the Board of Directors of any other corporation or as a member of the Board of Trustees of any other organization, provided no such corporation or organization is a direct or indirect competitor of Peoples or any of its affiliated companies, or (c) being involved in any other activity with the prior approval of the Board of Directors of Peoples. In the event of any reduction in title or a reduction in the Executive's responsibilities or authority, including such responsibilities and authority as the same may be increased at any time during the term of this Agreement, or the assignment to the Executive of duties inconsistent with the Executive's status as President and Chief Executive Officer of Peoples, then the Executive may resign at any time thereafter during the term of this Agreement and prior to the occurrence of a Change in Control, in which case Executive shall be entitled to receive the amounts and benefits set forth in Section 7 hereof.

3. Term of Employment. The Executive's employment under this Agreement shall be for a period (the "Employment Period") commencing upon the date of this Agreement and ending at the end of the term of this Agreement pursuant to Section 17 hereof, unless the Executive's employment sooner terminates in accordance with Section 5 hereof or one of the following provisions:

(a) The Executive's employment under this Agreement may be terminated at any time during the Employment Period for "Cause" (as herein defined), by action of the Board of Directors of Peoples. As used in this Agreement, "Cause" means any of the following events:

(i) the Executive is convicted of or enters a plea of guilty or nolo contendere to a felony, a crime of falsehood, or a crime involving fraud or moral turpitude, or the actual incarceration of the Executive;