EXECUTIVE EMPLOYMENT AGREEMENT

EXHIBIT 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT is made by and among ORRSTOWN BANK, a Pennsylvania banking institution (the “Bank”), ORRSTOWN FINANCIAL SERVICES, INC., a Pennsylvania business corporation (the “Corporation”), and KENNETH R. SHOEMAKER, an adult individual (the “Executive”). The Bank and the Corporation are sometimes hereinafter referred to collectively as the “Employers.”

WHEREAS, the Bank is a subsidiary of the Corporation; and,

WHEREAS, the Executive currently is employed by the Employers as the President and Chief Executive Officer of the Bank and of the Corporation; and

WHEREAS, the Executive has announced his intention to retire as President and Chief Executive Officer of the Bank and of the Corporation, such retirement to be effective upon the conclusion of the annual meeting of shareholders of the Corporation to be held in 2009; and

WHEREAS, the Employers and the Executive desire to enter into this Agreement to provide for the continuing employment of Executive by the Employers following his retirement as President and Chief Executive Officer upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and intending to be legally bound hereby, the parties agree as follows:

1. EMPLOYMENT AND EMPLOYMENT TERM. The Corporation and Bank hereby shall employ the Executive and the Executive hereby accepts employment with the Corporation and the Bank under and pursuant to this Agreement for a term beginning upon the completion of the annual meeting of shareholders of the Corporation to be held in 2009 and ending on the third (3 ^rd ) annual anniversary thereof (the “Term”), unless sooner terminated as hereinafter provided.

2. POSITION, DUTIES, AND PLACE OF EMPLOYMENT. The Executive shall serve as the President Emeritus of the Corporation and the Bank, and as President of the Orrstown Bank Foundation (the “Foundation”). As President Emeritus of the Corporation and the Bank, Executive shall report to the Board of Directors of the Corporation and the Bank, and shall have such powers and duties as may from time to time be prescribed by the Board of Directors of the Corporation and the Bank. As President of the Foundation, the Executive shall have the general powers and duties of supervision and management usually vested in the office of President, subject to such limitations thereon as may be imposed by the Foundation’s governing instruments, and shall coordinate the development efforts of the Foundation. The Executive’s primary office shall be located at such place as the Board of Directors shall determine.

3. ENGAGEMENT IN OTHER EMPLOYMENT. The Executive shall, during the Term of this Agreement, notify the Board of Directors of the Corporation and the Bank in writing and receive written approval from the Corporation and Bank before the Executive engages in any other business or commercial activities, duties or pursuits, including, but not limited to, directorships of other companies. Under no circumstance, during the term of this Agreement, may the Executive engage in any business or commercial activities, duties or pursuits which compete with the business or commercial activities of the Corporation and the Bank, nor may the Executive serve as a director or officer or in any other capacity in a company which competes with the Corporation and the Bank. Executive shall not be precluded, however, from engaging in voluntary or philanthropic endeavors or from engaging in activities incident or necessary to personal investments, so long as they are, in the Boards’ reasonable opinion, not in conflict with or detrimental to the Executive’s rendition of services on behalf of the Bank and Corporation.

4. SALARY. During the term of this Agreement, the Bank shall pay to the Executive an annual salary at a rate of $100,000.00 per year (the “Salary”). The Bank shall pay the Salary to Executive in equal installments pursuant to the Bank’s standard payroll policies and Executive’s salary shall be subject to such withholding or deductions as may be mutually agreed between Employer and Executive or required by law. The Salary shall be pro rated in any calendar year during which the Executive is employed hereunder for less than the entire such year in accordance with the number of days in such calendar year during which he is so employed.

5. FRINGE BENEFITS, EXPENSES AND PERQUISITES.

(a) Employee Benefit Plans. The Executive shall be entitled to participate in or receive benefits under all Bank employee benefit plans including, but not limited to, any pension plan, profit-sharing plan, savings plan, life insurance plan, medical/health insurance plan, disability insurance plan and other health and welfare benefits as made available by the Bank to its full time employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements, and provided, further that such participation does not violate any state or federal law, rule or regulation.

(b) Business Expenses. During the term of his employment hereunder, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him (in accordance with the policies and procedures established by the Board of Directors of the Corporation and the Bank for its senior executive officers) in performing services hereunder, provided that the Executive properly accounts therefore in accordance with Corporation and Bank policy.

(c) Membership Dues. During the term of this Agreement, the Bank shall reimburse to the Executive the “family” membership dues and member assessments to the Carlisle Country Club (the “Club”). Business expenses incurred by Executive at the Club shall be subject to reimbursement in accordance with the reimbursement policies adopted by the Bank for its senior executive officers.

6. BOARD OF DIRECTORS. The Corporation agrees to nominate Executive for election as a director on the Board of Directors of the Corporation in connection with each election of directors of the Corporation wherein his term of office otherwise would expire during the term of this Agreement. The Corporation agrees that the Executive shall be entitled to receive the annual retainer fee that all directors of the Corporation are entitled to receive for service as a director. The Executive will not receive any other Director Fees. In the event Executive’s employment under this Agreement would be terminated by the Employers for Cause (as hereinafter defined) or by Executive without Good Reason (as hereinafter defined), Executive agrees to resign, effective as of the date of termination and in writing, from the director position then held by him under this paragraph 6.

7. NON-DISCLOSURE/TRADE SECRET. During the Term of his employment hereunder, or at any later time, the Executive shall not, without the written consent of the Board of Directors of the Corporation or Bank or a person authorized thereby, knowingly disclose to any person, other than an employee of the Corporation or Bank or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of his duties as an executive of the Corporation or Bank, any confidential information obtained by the Executive while in the employ of the Corporation or Bank with respect to any of the Corporation’s or Bank’s services, products, improvements, formulas, designs or styles, processes, customers, methods of business or any business practices, the disclosure of which could be or will be materially damaging to the Corporation or Bank, provided, however, that confidential information shall not include any information known generally to the public (other than a result of authorized disclosure by the Executive or any person with the assistance, consent or direction of the Executive) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Corporation or Bank or any information that must be disclosed as required by law. This provision shall survive termination of the Executive’s employment under this Agreement and/or termination of this Agreement.

8. RESTRICTIVE COVENANT. The Executive covenants and agrees that while employed by the Corporation and the Bank and for a period of one (1) year after the termination of Executive’s employment, either voluntary or involuntary, the Executive shall not directly or indirectly, within the marketing area of the Corporation and the Bank (defined as the area within an eighty (80) mile radius of Shippensburg, Pennsylvania) enter into or engage generally in direct or indirect competition with the Corporation and the Bank or any subsidiary of the Corporation, either as an individual on his own or as a partner or joint venturer, or as a director, officer, shareholder, employee, agent, independent contractor, lessor or creditor of or for any person. The foregoing restriction shall not be construed to prohibit the ownership by Executive of not more than five (5%) percent of any class of securities of any corporation which is in competition with the Corporation or the Bank, provided that such ownership represents a passive inves