8-K

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)April11, 2018

FRANKLIN FINANCIAL SERVICES CORPORATION

(Exact name of registrant as specified in its new charter)

Pennsylvania         0-12126    25-1440803

(State or other jurisdiction             (Commission                      (IRS Employer

of incorporation)                     File Number)                      Indent. No.)

20 South Main Street, Chambersburg, PA17201

          (Address of principal executive office)                                       (Zip Code)

Registrant's telephone number, including area code                     (717) 264-6116

N/A

(Former name or former address, if changes since last report)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a –12 under the Exchange Act (17 CFR 240.14a –12)

o Pre-commencement communications pursuant to Rule 14d – 2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e – 4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Item 1.01 and8.01Entry into a Material Definitive Agreement/Other Events

On April 11, 2018, Farmers and Merchants Trust Company of Chambersburg ("F&M Trust"), the wholly-owned commercial bank subsidiary of Franklin Financial Services Corporation (the "Registrant"), entered into a Settlement Agreement and Release dated as of March 28, 2018 (the "Class Settlement Agreement") with the named plaintiffs in the Kalen, et. al., v. Farmers and Merchants Trust Company of Chambersburg, et. al. (Case No. 2:15-CV-01435 WB) case filed in United States District Court for the Eastern District of Pennsylvania and described in our current reports on Form 8-K filed July 29, 2016, July 28, 2017, November 3, 2017 and January 2, 2018. 

Also on April 11, 2018, the named plaintiffs filed with the court a motion for preliminary approval of the Class Settlement Agreement.  On April 12, 2018, the court entered an order setting a hearing on the motion for preliminary approval on May 4, 2018.

The Kalan case was brought by the named plaintiffs as a putative class action on behalf of certain employee health and welfare benefit plans whose assets are held by trusts known as the Regional Employers Assurance League Voluntary Employee’s Beneficiary Association and the Single Employer Welfare Benefit Plan, and the participants and beneficiaries of those plans.  The named plaintiffs alleged that Community Trust Company, which F&M Trust acquired by merger in 2008, and F&M Trust, after the merger, served as trustee of the trusts and failed to perform its fiduciary duties in accordance with the prudent man standard of care, knowingly participated in and facilitated misconduct by its co-fiduciaries, and failed to take reasonable steps to prevent or remedy any fiduciary breaches of its co-fiduciaries. F&M Trust denies any and all wrongdoing and liability and has vigorously defended against the named plaintiffs’ claims.

In connection with the Class Settlement Agreement, F&M Trust also entered into on April 11, 2018 a second Settlement Agreement and Release with certain of the other remaining defendants in the case – Lawrence Koresko, Koresko Financial, LP (incorrectly identified in court documents as Koresko Financial, LLP) and Freedom Brokers, LLC (collectively, the “LK Defendants”), and a third Settlement Agreement and Release with David I. Lefkowitz, Esquire, on behalf of himself and the Palisades Law Group, P.C. and the Palisades Law Group Health and Welfare Benefit Plan (collectively, the “Lefkowitz Parties”).

The three Settlement Agreements were entered into by the parties to make definitive the terms and conditions of settlement set forth in the Class Action Settlement Term Sheet entered into by the parties on December 29, 2017, described in our current report on Form 8-K filed January 2, 2018, following a mediation of the case held pursuant to a Stipulation for Selection of Mediator submitted jointly by the parties and approved by the court, described in our current report on Form 8-K filed November 3, 2017.

The Class Settlement Agreement provides for F&M Trust to make a settlement payment of $10,000,000 in full and final settlement of all claims that the named plaintiffs and members of the Settlement Class have brought or could have brought against F&M Trust.  The settlement payment is to be made within ten (10) business days following the court’s issuance of an order preliminarily approving the Class Settlement Agreement.  The Class Settlement Agreement further provides for a general release of claims by the named plaintiffs and the members of the Settlement Class against F&M Trust and a general release of claims by F&M Trust against the named plaintiffs and the members of the Settlement Class.

The Settlement Agreement with the LK Defendants provides for a general release of claims by F&M Trust against the LK Defendants and a general release of claims by the LK Defendants of F&M Trust.  The Settlement Agreement with the LK Defendants further provides for a general release of claims by the named plaintiffs of the LK Defendants and a general release of claims by the LK Defendants of the named plaintiffs.  The Settlement Agreement with the LK Defendants also provides for the dismissal of the named plaintiffs’ claims against the LK Defendants, the dismissal of F&M Trust’s cross claims against the LK Defendants and the dismissal of the LK Defendants’ cross claims against F&M Trust.

Because Mr. Lefkowitz is representing the named plaintiffs as co-counsel in the case, the Lefkowitz Parties, who otherwise would be members of the Settlement Class, are being excluded from the Settlement Class as a condition of the settlement.  Consequently, the Settlement Agreement with the Lefkowitz Parties separately provides for a general release of claims by the Lefkowitz Parties against F&M Trust and provides for a general release of claims by F&M Trust against the Lefkowitz Parties.

The general releases set forth in the Settlement Agreements with the LK Defendants and the Lefkowitz Parties are contingent upon the court’s final approval of the Class Settlement Agreement.

All three Settlement Agreements provide that nothing contained in the Settlement Agreements is to be construed or deemed as evidence of or an admission of liability by any of the parties thereto, nor shall it be admissible or offered into evidence in any action or proceeding.

The Class Settlement Agreement requires the named plaintiffs to file with the court a motion for preliminary approval of the Class Settlement Agreement, which the named plaintiffs did on April 11, 2018.  In the named plaintiffs’ motion, the named plaintiffs request, among other things, that the court enter an order:

a. Preliminarily approving the Class Settlement Agreement;

b. Preliminarily approving the Settlement Class as a mandatory class;

c. Authorizing counsel to the named plaintiffs to disseminate notice of settlement to the Settlement Class;

d. Establishing a procedure for members of the Settlement Class to object and, only if a non-mandatory Settlement Class is certified, opt-out of the Settlement Class; and

e. Scheduling a hearing for final approval of the settlement.

The Class Settlement Agreement provides that either F&M Trust or the named plaintiffs may terminate the Class Settlement Agreement by written notice to counsel for the other party and the court within ten (10) days after any of the following occurs:

a. The court rejects the motion for preliminary approval of the Class Settlement Agreement or seeks to modify any of its terms;

b. The court rejects the motion for final approval of the Class Settlement Agreement or seeks to modify any of its terms.

c. The court enters an order that imposes on F&M Trust any additional financial obligations or other material obligations not contemplated by the Class Settlement Agreement;

d. An appellate court overturns or modifies any order or judgment of the court granting preliminary or final approval of the Class Settlement Agreement; or

e. Any court issues a decision or order affecting in whole or in part the definition of the Settlement Class, the settlement payment, the general releases or other material terms and conditions of the Class Settlement Agreement.

In addition, F&M Trust may terminate the Class Settlement Agreement by providing written notice to counsel for the named plaintiffs and the court if the court does not certify the Settlement Class as a mandatory class and any member of the Settlement Class timely requests exclusion from the Settlement Class.

As reported in our current report on Form 8-K filed January 2, 2018 and in our annual report on form 10-K filed March 12, 2018, we recognized the settlement payment as an expense in the fourth quarter of 2017.  We expect to fund the settlement payment out of available resources.  

The descriptions of the Settlement Agreements in this report do not purport to be complete and are qualified in their entirety by reference to the complete text of the Settlement Agreements, which are incorporated by reference.  A copy of the Class Settlement Agreement is attached to this report as Exhibit 10.1; a copy of the Settlement Agreement with the LK Defendants is attached to this report as Exhibit 10.2; and, a copy of the Settlement Agreement with the Lefkowitz Parties is attached to this report as Exhibit 10.3.

Forward Looking Statements

Certain statements in this current report on Form 8-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements are not guarantees and involve certain risks, uncertainties and assumptions that are difficult to predict and often beyond the Corporation's control.  You should not place undue reliance on any forward-looking statement and should consider the risks and uncertainties more fully discussed under Part I, Items 1A and 3, “Risk Factors" and "Legal Proceedings," of the Corporation's annual report on Form 10-K for the year ended December 31, 2017 and in any of the Corporation's subsequent filings with the Securities and Exchange Commission.  Forward-looking statements speak as of the date made, and the Corporation undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

FRANKLIN FINANCIAL SERVICES CORPORATION                                                         

By: /s/ Timothy G. Henry.

Timothy G. Henry, President and Chief Executive Officer

Dated:  April13, 2018

EXHIBIT INDEX

Exhibit No.

10.1Class Settlement Agreement

10.2Settlement Agreement with the LK Defendants

10.3Settlement Agreement with the Lefkowitz Parties

EX-10.1

Exhibit 10.1

SETTLEMENT AGREEMENT AND RELEASE

This Settlement Agreement and Release (“Settlement Agreement”) is made and entered into as of March 28, 2018, by and between Plaintiffs Harvey Kalan, M.D., The Harvey Kalan, M.D., Inc. Employee Welfare Benefit Plan, Pamela K. Erdman, M.D., The Dr. Pamela K. Erdman, M.D., Inc. Employee Welfare Benefit Plan, Martin Zenni, M.D., Elisa Zenni, M.D., and The M&E Zenni, Inc. Welfare Benefit Plan (collectively, the “Named Plaintiffs”), individually and on behalf of the settlement class defined below (the “Settlement Class”), on the one hand, and Defendant Farmers & Merchants Trust Company of Chambersburg as successor by merger to Community Trust Company (“F&M”), on the other hand.  The Named Plaintiffs, the Settlement Class, and F&M are collectively referred to herein as the “Parties.”

WHEREAS, the Named Plaintiffs filed a putative class action against F&M and several other defendants in the United States District Court for the Eastern District of Pennsylvania (the “Court”), styled Harvey Kalan, MD., et al. v. Farmers & Merchants Trust Company of Chambersburg as Successor by Merger to Community Trust Company, et al., Civil Action No. 15-01435 (the “Class Action”);

WHEREAS, the Named Plaintiffs allege in the Class Action that F&M committed breaches of fiduciary duty and other actionable forms of misconduct;

WHEREAS, F&M denies each and every claim asserted by the Named Plaintiffs in the Class Action;

WHEREAS, no class has been certified in the Class Action as to the claims against F&M and the Named Plaintiffs will seek certification of the Settlement Class as defined in paragraph 1, below;

WHEREAS, the Parties desire fully, finally, and forever to resolve, discharge, and settle the claims the Named Plaintiffs have or could have brought, individually and on behalf of the Settlement Class, against F&M in the Class Action upon the terms and conditions set forth in this Settlement Agreement; and

WHEREAS, the Named Plaintiffs, F&M, and their respective counsel are satisfied that the terms and conditions of this Settlement Agreement are fair, reasonable, and adequate, particularly given that continued litigation would be protracted and involve substantial expense, and;

NOW, THEREFORE, in consideration of the covenants, conditions, mutual promises, and payments set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.Settlement Class.  The Named Plaintiffs are entering into this Settlement Agreement individually and on behalf of the Settlement Class which consists of: (i) any and all benefit plans, including those governed by the Employee Retirement Income Security Act of 1974, also known as ERISA, and those not governed by ERISA, whose assets, investments, or interests are held by the Regional Employers Assurance Leagues Voluntary Employees’ Beneficiary Association Trust, also known as the REAL VEBA Trust, or the Single Employer Welfare Benefit Plan Trust also known as SEWBPT (together the “Trusts”), which Trusts are now under the control of a court-appointed independent fiduciary; and (ii) any and all participants in and beneficiaries of, or individuals with legal or beneficial interests in, the benefit plans whose assets, investments, or interests are held by the Trusts.  The Named Plaintiffs are informed and believe that the Settlement Class contains more than 200 employee benefit plans whose assets and/or investments are held by the Trusts and more than 500 participants and beneficiaries of these plans.

2.Settlement Payment.

(a)F&M shall pay the sum of Ten Million Dollars ($10,000,000.00) (the “Settlement Payment”) in settlement of all claims that the Named Plaintiffs and the Settlement Class have brought, or could have brought, against F&M, including, but not limited to, claims for damages, disgorgement, restitution, attorney’s fees, costs, expenses, taxes, or sums of any kind.  The Settlement Payment shall be made no later than ten (10) business days following the Court’s issuance of an order preliminarily approving this Settlement Agreement and shall be made in accord with the Court’s order.

(b)The motion for preliminary approval shall request that the Court’s order provide that the Settlement Payment be wired into the IOLTA account of the Named Plaintiffs’ counsel (the “IOLTA Account”), which request shall not be opposed by F&M.  The Settlement Payment shall remain in the IOLTA Account until the Court finally approves this Settlement Agreement and issues an order authorizing the distribution of the Settlement Payment.  If this Settlement Agreement is not finally approved by the Court or is terminated under paragraph 8 below, the Settlement Payment shall immediately be refunded by wire transfer to an account designated by F&M.

3.Release of Claims.

(a)The “Plaintiff Releasing Parties” are all members of the Settlement Class (including the Named Plaintiffs) and their respective heirs, beneficiaries, executors, administrators, trustees, successors, assigns and personal representatives as well as all employer sponsors of the Settlement Class benefit plans, jointly and severally.

(b)The “F&M Releasing Parties” are F&M and its past, present, and future parents, subsidiaries, affiliates, and the predecessors, successors or assigns of any of them, jointly and severally.

(c)Upon the Court’s final approval of this Settlement Agreement and in addition to the preclusive effect of any final judgment entered in accordance with such approval:

(i)The Plaintiff Releasing Parties, in consideration of the Settlement Payment and other good and valuable consideration, release and forever discharge F&M and its past, present, and future owners, members, shareholders, officers, directors, employees, parents, subsidiaries, affiliates, insurers in their capacity as insurers, brokers, agents, attorneys and the predecessors, successors or assigns of any of them, jointly and severally (the “F&M Released Parties”), of and from any and all manner of claims, complaints, allegations, actions, suits, causes of actions, demands, and grievances, of any kind or nature whatsoever, whether individual, class, or otherwise, as well as all foil is of relief, including all accountings, costs, damages, disgorgement, restitution, debts, exemplary or punitive damages, expenses, liabilities, losses, remedies, indemnification, contribution and attorney and/or other professional fees and related disbursements, whether direct or derivative, nominal or beneficial, possessed or claimed, known or unknown, suspected or unsuspected, choate or inchoate, in law or in equity, whether brought under federal, state, or any other jurisdiction’s law, that the Plaintiff Releasing Parties, whether or not they object to this Settlement Agreement and whether or not they make a claim upon or receive a distribution from the Settlement Payment, ever had, now have, or hereafter can, shall, or may have, directly, representatively, derivatively, or in any other capacity, to the extent arising out of or related to the claims and causes of action alleged, or any and all claims or causes of action that could have been alleged, in the Class Action (the “Released Plaintiff Claims”).  This release does not include any claims to enforce this Settlement Agreement, any claims that have been or could be brought against John J. Koresko, V, Koresko & Associates, P.C., or against any insurance company or insurance agent that sold life insurance policies to the Trusts. These exclusions are to eliminate any possible ambiguity and mean that John J. Koresko, V, Koresko & Associates, P.C., and insurance companies and agents that sold life insurance policies to the Trusts are not within the definition of the F&M Released Parties;

(ii)The F&M Releasing Parties, for good and valuable consideration, release and forever discharge all members of the Settlement Class (including the Named Plaintiffs) and their respective heirs, beneficiaries, executors, administrators, trustees, successors, assigns, attorneys and personal representatives as well as all employer sponsors of the Settlement Class benefit plans, jointly and severally (the “Plaintiff Released Parties”) of and from any and all manner of claims, complaints, allegations, actions, suits, causes of actions, demands, and grievances, of any kind or nature whatsoever, whether individual, class, or otherwise, as well as all forms of relief, including all accountings, costs, damages, disgorgement, restitution, debts, exemplary or punitive damages, expenses, liabilities, losses, remedies, indemnification, contribution, and attorneys and other professional fees and related disbursements, whether direct or derivative, nominal or beneficial, possessed or claimed, known or unknown, suspected or unsuspected, choate or inchoate, in law or in

equity, whether brought under federal, state, or any other jurisdiction’s law, that the Parties ever had, now have, or hereafter can, shall, or may have, directly, representatively, derivatively, or in any other capacity, to the extent arising out of or related to the claims and causes of action alleged, or any and all claims or cause of action that could have been alleged, in the Class Action (the “Released F&M Claims”).  This release does not include any claims to enforce this Settlement Agreement, or any claims that have been or could be brought against John J. Koresko, V, Koresko & Associates, P.C., or against any insurance company or insurance agent that sold life insurance policies to the Trusts.  These exclusions are to eliminate any possible ambiguity and do mean that John J. Koresko, V, Koresko & Associates, P.C., and insurance companies and agents that sold life insurance policies to the Trusts fall are not within the definition of the Plaintiff Released Parties ;

(iii)The Plaintiff Releasing Parties and the F&M Releasing Parties (collectively, the “Releasing Parties”) knowingly, expressly, and irrevocably waive any and all defenses, rights, or benefits that the Releasing Parties may have which limit to any extent the releases in paragraph 3(c)(i) and (ii) above.  This waiver includes, but is not limited to, any and all defenses, rights, or benefits that the Releasing Parties might otherwise have under:

1.Section 1542 of the California Civil Code, which provides:

Section 1542. General release; extent.  A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

Or

2.Any law of any state or territory of the United States or other jurisdiction, or principle of common law, which is similar, comparable, or equivalent to section 1542 of the California Civil Code.

(iv)The Plaintiff Releasing Parties may hereafter discover facts other than or different from those which they know or believe to be true with respect to the Released Plaintiff Claims, but the Plaintiff Releasing Parties expressly waive and fully, finally, and forever settle and release, any known or unknown, suspected or unsuspected, contingent or non-contingent, accrued or unaccrued claim which would otherwise fall within the definition of Released Plaintiff Claims, whether or not concealed or hidden, without regard to the subsequent discovery or existence of such different or additional facts.

(v)The F&M Releasing Parties may hereafter discover facts other than or different from those which they know or believe to be true with respect to the Released F&M Claims, but the F&M Releasing Parties expressly waive and fully, finally, and forever settle and release, any known or unknown,

suspected or unsuspected, contingent or non-contingent, accrued or unaccrued claim which would otherwise fall within the definition of Released F&M Claims, whether or not concealed or hidden, without regard to the subsequent discovery or existence of such different or additional facts.

(vi)The Plaintiff Releasing Parties covenant and agree that they will not sue or otherwise seek to impose liability against any of the F&M Released Parties based on the Released Plaintiff Claims, and the F&M Releasing Parties covenant and agree that they will not sue or otherwise seek to impose liability against any of the Plaintiff Released Parties based on the Released F&M Claims.

(vii)None of the releases, waivers and covenants described herein apply to claims to enforce the terms of this Settlement Agreement and the Court shall retain jurisdiction over such claims.

4.Preliminary Court Approval.  No later than twenty-eight days (28) days following the execution of this Settlement Agreement by all Parties, the Named Plaintiffs shall file with the Court, and Defendants shall not oppose, a motion for preliminary approval of this Settlement Agreement provided, however, that Named Plaintiffs’ counsel shall provide a draft of any such motion and related papers to counsel for Defendants in advance of filing with a reasonable opportunity to review and approve the content thereof, which approval shall not unreasonably be withheld.  The motion will request that the Court enter an order that: (i) preliminarily approves this Settlement Agreement; (ii) preliminarily certifies the Settlement Class as a mandatory class pursuant to Rule 23(b)(1) of the Federal Rules of Civil Procedure; (iii) declares that if this Settlement Agreement is not approved by the Court or is terminated by the Parties, certification of the Settlement Class will automatically be vacated, and F&M may thereafter fully contest certification of any class which any of the Named Plaintiffs seeks to certify; (iv) stays all proceedings in the Class Action, except those proceedings related to effectuating and complying with this Settlement Agreement, pending the Court’s final approval of this Settlement Agreement; (v) orders the Settlement Payment be wired into the IOLTA account of the Named Plaintiffs’ counsel (the “IOLTA Account”) within ten (10) business days of the preliminary approval order, subject to the refund provisions of paragraphs 2(b) and 8(c) of this Agreement; and (vi) authorizes the dissemination of notice of settlement to the Settlement Class by the Named Plaintiffs’ counsel or by the court-appointed Independent Fiduciary or court-appointed Administrator overseeing the Trusts.

5.Notice Procedures for Members of the Settlement Class.

(a)The Named Plaintiffs’ counsel will ensure that notice is provided to the Settlement Class of the Court’s preliminary approval of the settlement provided for in this Settlement Agreement and, if required by the Court, exclusion procedures in the form and manner approved by the Court, and will perform such related duties as may be necessary. F&M will not object to the notice or, if required, exclusion procedures,

provided that the Court finds the procedures comply with the requirements of Rule 23 of the Federal Rules of Civil Procedure.

(b)If the Court does not certify the Settlement Class as a mandatory class under Rule 23(b)(1), no later than ten (10) days following expiration of the period for members of the Settlement Class to opt out and be excluded from the Settlement Class, Named Plaintiffs’ counsel will provide Defendants’ counsel with a list (i) identifying each member of the Settlement Class that seeks to opt out and be excluded from this Settlement Agreement, and (ii) stating whether the request for exclusion was properly and timely made.  Named Plaintiffs’ counsel will attach to the list a copy of all documentation concerning each request for exclusion.

(c)F&M will not bear any cost, obligation, responsibility, or liability with respect to any of the notice and exclusion procedures, except with regard to the notice required by paragraph 6, below.

6.Notice to Appropriate Federal and State Officials.  No later than five (5) days before the motion for preliminary approval of this Settlement Agreement is filed with the Court, the Named Plaintiffs’ counsel will provide to F&M’s counsel the name and last known address of each member of the Settlement Class known to them and the proposed notice to members of the Settlement Class that is required by paragraph 5(a) above.  No later than ten (10) days after the motion for preliminary approval is filed with the Court, F&M’s counsel will file with the appropriate federal official and the appropriate state official the information and documents required by the Class Action Fairness Act of 2005, 28 U.S.C. § 1715.

7.Final Court Approval.  As soon as the Court allows, the Named Plaintiffs will file with the Court a motion for entry of a final order and judgment that:

(a)Determines that the Court has personal jurisdiction over F&M and all members of the Settlement Class and subject matter jurisdiction to finally approve this Settlement Agreement;

(b)Finally approves this Settlement Agreement as fair, reasonable, and adequate for members of the Settlement Class, within the meaning of Rule 23 of the Federal Rules of Civil Procedure and any other applicable laws or rules;

(c)Approves the releases set forth in paragraph 3 above, enjoins the Plaintiff Releasing Parties from asserting against the F&M Released Parties any of the Released Plaintiff Claims, and enjoins the F&M Releasing Parties from asserting against the Plaintiff Released Parties any of the Released F&M Claims;

(d)Defines the Settlement Class in accordance with Paragraph 1 above, and finally certifies the Settlement Class for purposes of this Settlement Agreement;

(e)Finds that F&M has served upon the appropriate federal official and the appropriate state official of each state in which a member of the Settlement Class resides the information and documents that comply with the requirements of the Class Action Fairness Act, 28 U.S.C. § 1715;

(f)Subject to paragraph 11(e)(ii), authorizes distribution of the Settlement Payment to the court-appointed Independent Fiduciary or court-appointed Administrator overseeing the Trusts; and

(g)Provides that the Class Action shall be dismissed with prejudice as to F&M without attorney’s fees or costs.

(h)Approves the dismissal without prejudice of all claims asserted by the Named Plaintiffs against Pennmont Benefits, Inc., John Doe Companies 1‑50, Lawrence Koresko, Koresko Financial, LLP, and Freedom Brokers, LLC, as well as all claims asserted by F&M in its Third Party Complaint filed May 9, 2016, the intent of the Parties being that this Settlement Agreement shall result in the complete dismissal of the Class Action including all remaining claims, cross-claims, counterclaims and third-party claims asserted therein upon issuance of, and subject to, final approval of this Settlement Agreement by the Court.

(i)Named Plaintiffs’ counsel shall provide a draft of any such motion and related papers to counsel for Defendants in advance of filing with a reasonable opportunity to review and approve the content thereof, which approval shall not unreasonably be withheld.

8.Termination.

(a)Any of the Parties may terminate this Settlement Agreement by providing written notice to counsel for the other Parties and to the Court within ten (10) days after any of the following occurs:

(i)The Court rejects the motion for preliminary approval of this Settlement Agreement contemplated by paragraph 4 above or seeks to modify any of this Settlement Agreement’s terms;

(ii)The Court rejects the motion for final approval of this Settlement Agreement contemplated by paragraph 7 above or seeks to modify any of this Settlement Agreement’s terms;

(iii)The Court enters an order that imposes on F&M additional financial obligations or other material obligations that are not contemplated by this Settlement Agreement;

(iv)An appellate court overturns or modifies any order or judgment of the Court granting preliminary or final approval of this Settlement Agreement; or

(v)Any court issues a decision or order affecting in whole or in part the definition of the Settlement Class in paragraph 1 above, the Settlement Payment in paragraph 2 above, the releases in paragraph 3 above, or other material terms or conditions of this Settlement Agreement.

(b)If the Court does not certify the Settlement Class as a mandatory class and any member timely requests exclusion from the Settlement Class, F&M may, but is not required to, terminate this Settlement Agreement by providing written notice to counsel for the Named Plaintiffs and the Court no later than, ten (10) days after counsel for the Named Plaintiffs provides to counsel for F&M the information on requests for exclusion that is required in paragraph 5(b) above.

(c)In the event of the termination of this Settlement Agreement:

(i)This Settlement Agreement will be null and void and of no force or effect whatsoever;

(ii)The Settlement Payment will be immediately refunded to an account designated by F&M;

(iii)Any certification of the Settlement Class by the Court will be vacated.  F&M will retain all defenses to certification and its non-opposition to the Settlement Class will not be used as evidence, and will not be admissible as such, in support of class certification in the Class Action or any other related civil action or proceeding;

(iv)The Parties will revert to their procedural and substantive positions prior to the execution of this Settlement Agreement, including with respect to the appropriateness of class certification, as if this Settlement Agreement had not been executed;

(v)If requested by the Court, the Parties will propose to the Court a reasonable schedule by which litigation of the Class Action may be resumed; and

(vi)The terms and conditions of this Settlement Agreement, the facts and circumstances surrounding this Settlement Agreement, any publicly disseminated information regarding this Settlement Agreement, and any pleadings or orders concerning this Settlement Agreement may not thereafter be used as evidence, and shall not be admissible as such, in the Class Action or any other action or proceeding.

9.No Admission of Liability.  The Parties agree that this Settlement Agreement reflects the resolution of disputed claims and that nothing in this Settlement Agreement, the proceedings undertaken in accordance with this Settlement Agreement, or the negotiations that preceded this Settlement Agreement shall be construed as or deemed to be evidence of, or an admission of liability by F&M for, or of the validity of, any claim that has been or could have been asserted by any member of the Settlement Class against F&M, nor shall any such matters be admissible or offered into evidence in any action or proceeding.

10.Stay, Continuing Jurisdiction, and Governing Law.

(a)The Named Plaintiffs and F&M agree to stay all proceedings in the Class Action involving F&M, except those proceedings related to effectuating and complying with this Settlement Agreement, pending the Court’s final approval of this Settlement Agreement.

(b)Upon final approval of this Settlement Agreement, the Court will retain continuing jurisdiction over the Parties to implement, administer, and enforce this Settlement Agreement.

(c)The Parties hereby submit to the Court’s exclusive jurisdiction for any suit, action, proceeding, or dispute arising out of this Settlement Agreement.

(d)This Settlement Agreement shall be construed, enforced, and administered in accordance with the substantive laws of the Commonwealth of Pennsylvania without regard to its conflicts of law principles. 11.Additional Terms and Conditions.

(a)Authority.  All counsel and any other persons executing this Settlement Agreement warrant and represent that they have full authority to do so.

(b)Best Efforts.  The Named Plaintiffs, F&M, and their respective counsel will undertake reasonable best efforts, including, without limitation, all efforts contemplated herein, to carry out the terms of this Settlement Agreement.  In addition to the documents and other matters referenced in this Settlement Agreement, the Named Plaintiffs, F&M, and their respective counsel will execute and deliver all documents and perform any additional acts reasonably necessary and proper to effectuate the terms of this Settlement Agreement.

(c)Binding Effect.  This Settlement Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Parties and the Release Parties.

(d)Notices.  Any notice, information, or materials to be provided under this Settlement Agreement shall be sent by e-mail and overnight delivery to: 

If to the Named Plaintiffs or the Settlement Class:

Ira Silverstein, Esquire

The Silverstein Firm

1515 Market Street, Suite 1200

Philadelphia, PA 19102

irasilverstein@tsfllc.net

and

David I. Lefkowitz, Esquire

Wilshire Palisades Law Group, P.C.

1337 Ocean Avenue, Suite A

Santa Monica, CA 90401

dl@wplawgroup.com

If to F&M:

Jack M. Stover, Esquire

Buchanan Ingersoll & Rooney PC

409 North Second Street Suite # 500

Harrisburg, PA 17101-1357

jack.stover@bipc.com

and

Jayson R. Wolfgang, Esquire

Buchanan Ingersoll & Rooney PC

409 North Second Street Suite # 500

Harrisburg, PA 17101-1357

jayson.wolfgang@bipc.com

(e)Attorney’s Fees and Costs:

(i)The Parties shall bear their own attorney’s fees and costs.

(ii)Attorney’s Fees and Costs from the Settlement Payment.  The Named Plaintiffs’ counsel shall have the right, in their sole discretion, to petition the Court for payment of attorney’s fees, costs, expenses, and other payments from the common fund created by the Settlement Payment.  F&M shall not oppose any such petition so long as the petition seeks payment from the common fund and not from F&M and provided the requested attorney’s fees do not exceed thirty-five percent (35%) of the Settlement Payment.  Under no circumstances shall the payment from the common fund require an additional payment by F&M in excess of or in addition to the Settlement Payment.

(f)Advice of Counsel.  The Parties acknowledge that they have been represented by independent legal counsel of their own choice, that they have executed this Settlement Agreement with the

consent and advice of their counsel, that they have reviewed this Settlement Agreement and fully understand its terms and contents, and that they have executed this Settlement Agreement willingly, as the result of their own free acts.

(g)Final Agreement.  This Settlement Agreement constitutes the final agreement and understanding of the Parties concerning the subject matter hereof and supersedes any and all prior negotiations, statements, and understandings that preceded the execution of this Settlement Agreement.  The Parties have not relied on any promises, representations, conditions, or obligations not set forth herein.

(h)Drafting and Construction.  Counsel for the Parties have materially participated in the drafting of this Settlement Agreement.  None of the Parties shall be considered solely to be the drafter of this Settlement Agreement or any provisions hereof for the purpose of any statute, law, or rule of interpretation or construction that would or might cause any provision to be construed against the drafter.

(i)Headings.  The headings used in this Settlement Agreement are for the convenience of the reader only and shall not have any effect on the meaning or interpretation of this Settlement Agreement.

(j)Modifications.  This Settlement Agreement may not be altered, amended, or modified except by a writing duly executed by the Parties and, to the extent required by law, approved by the Court.

(k)Counterparts.  This Settlement Agreement may be executed in counterparts, including fax or .pdf counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS HEREOF, AND INTENDING TO BE LEGALLY BOUND HEREBY, the undersigned, being duly authorized on behalf of the Parties, hereby execute this Settlement Agreement.

Farmers & Merchants Trust Company of Chambersburg, as Successor by Merger to Community Trust Company   By:  /s/ Timothy G. Henry Timothy G. Henry, President & CEO /s/ Jack M. Stover_____ Jack M. Stover, Esquire Jayson R. Wolfgang, Esquire 409 North Second Street Suite # 500 Harrisburg, PA 17101-1357   Attorneys for Farmers & Merchants Trust Company of Chambersburg as successor by merger to Community Trust Company Harvey Kalan, M.D., individually and on behalf of The Harvey Kalan, M.D., Inc. Employee Welfare Benefit Plan and the Settlement Class   /s/ Pamela K. Erdman Pamela K. Erdman, M.D., individually and on behalf of The Dr. Pamela K. Erdman, M.D., Inc. Employee Welfare Benefit Plan and the Settlement Class   /s/ Martin Zenni Dr. Martin Zenni, individually and on behalf of the Settlement Class   /s/ Elissa Zenni Dr. Elissa Zenni, individually and on behalf of the Settlement Class   /s/ Martin Zenni Dr. Martin Zenni, on behalf of the M&E Zenni Inc., Welfare Benefit Plan, and on behalf of the Settlement Class   /s/ Ira B. Silverstein Ira B. Silverstein, Esquire The Silverstein Firm LLC 1515 Market Street Suite 1200 Philadelphia, PA 19102   /s/ David I. Lefkowitz______ David I. Lefkowitz, Esquire Wilshire Palisades Law Group, P.C. 1337 Ocean Avenue, Suite A Santa Monica, CA 90401   Attorneys for the Named Plaintiffs and the Settlement Class

EX-10.2

EXhibit 10.2

SETTLEMENT AGREEMENT AND RELEASE

This Settlement Agreement and Release (“Settlement Agreement”) is made and entered into as of March 28, 2018, by and between Plaintiffs Harvey Kalan, M.D., The Harvey Kalan, M.D., Inc. Employee Welfare Benefit Plan, Pamela K. Erdman, M.D., The Dr. Pamela K. Erdman, M.D., Inc. Employee Welfare Benefit Plan, Martin Zenni, M.D., Elisa Zenni, M.D., and The M&E Zenni, Inc. Welfare Benefit Plan (collectively, the “Plaintiffs”), Defendant Farmers & Merchants Trust Company of Chambersburg as successor by merger to Community Trust Company (“F&M”), and Lawrence Koresko, Koresko Financial, LP incorrectly identified as Koresko Financial, LLP, and Freedom Brokers, LLC (Lawrence Koresko, Koresko Financial, LP, and Freedom Brokers shall be referred to, collectively, as the “LK Parties”). The Plaintiffs, F&M, and the LK Parties are collectively referred to herein as the “Parties.”

WHEREAS, the Plaintiffs filed a putative class action against F&M, the LK Parties and several other defendants in the United States District Court for the Eastern District of Pennsylvania (the “Court”), styled Harvey Kalan, M.D., et al. v. Farmers & Merchants Trust Company of Chambersburg as Successor by Merger to Community Trust Company, et al., Civil Action No. 15‑01435 (the “Litigation”);

WHEREAS, in the Litigation, F&M and the LK Parties have asserted crossclaims against each other, including claims for indemnification and contribution;

WHEREAS, F&M and the LK Parties deny each and every claim asserted by the Plaintiffs and each other in the Litigation;

WHEREAS, the Parties desire fully, finally, and forever to resolve, discharge, and settle the claims F&M and the LK Parties have or could have brought against each other; and,

WHEREAS, Plaintiffs desire to dismiss without prejudice the claims asserted against the LK Parties in the Litigation; an WHEREAS, the Parties, while contesting the claims being settled herein, wish to avoid the time and expense of continued litigation;

NOW, THEREFORE, in consideration of the covenants, conditions, and mutual promises, set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1.Release of Claims.

(a)Defined terms:

(i)The “Plaintiff Releasing Parties” are the Plaintiffs and their respective heirs, beneficiaries, executors, administrators, trustees, successors, assigns, and personal representatives as well as the employer sponsors of the Plaintiff benefit plans.

(ii)The “F&M Releasing Parties” are F&M and its past, present, and future owners, members, shareholders, officers, directors, employees, parents, subsidiaries, affiliates, insurers, brokers, agents, and the predecessors, successors or assigns of any of them, jointly and severally.

(iii)The “LK Releasing Parties” are Lawrence Koresko and his heirs, beneficiaries, executors, administrators, trustees, successors, assigns and personal representatives, and Koresko Financial, LP incorrectly identified in the Litigation as Koresko Financial, LLP, and Freedom Brokers, LLC, and each of their respective past, present and future owners, members, shareholders, officers, directors, employees, parents, subsidiaries, affiliates, insurers, brokers, agents, and the successors or assigns of any of them, jointly and severally.

(iv)The “Putative Class Members” are (i) any and all benefit plans, including those governed by the Employee Retirement Income Security Act of 1974, also known as ERISA, and those not governed by ERISA, whose assets, investments, or interests are held by the Regional Employers Assurance Leagues Voluntary Employees’ Beneficiary Association Trust, also known as the REAL VEBA Trust, or the Single Employer Welfare Benefit Plan Trust, also known as SEWBPT (together the “Trusts”), which Trusts are now under the control of a court-appointed independent fiduciary; and (ii) any and all participants in and beneficiaries of, or individuals with legal or beneficial interests in, the benefit plans whose assets, investments, or interests are held by the Trusts.

(b)The F&M Releasing Parties, jointly and severally, for good and valuable consideration, release and forever discharge Lawrence Koresko, his heirs, beneficiaries, executors, administrators, trustees, successors, assigns and personal representatives, and Koresko Financial, LP incorrectly identified in the Litigation as Koresko Financial, LLP, and Freedom Brokers, LLC, and each of their respective past, present and future owners, members, shareholders, officers, directors, employees, parents, subsidiaries, affiliates, insurers, brokers, agents, attorneys and the predecessors, and the successors or assigns of any of them, jointly and severally (the “LK Released Parties”), of and from any and all manner of claims, complaints, allegations, demands, actions, suits, causes of actions, and grievances, of any kind or nature whatsoever, as well as all forms of relief, including all accountings, costs, damages, disgorgement, restitution, debts, exemplary or punitive damages, expenses, liabilities, losses, remedies, indemnification, contribution, and attorneys and other professional fees and related disbursements, whether direct or derivative, nominal or beneficial, possessed or

claimed, known or unknown, suspected or unsuspected, choate or inchoate, in law or in equity, whether brought under federal, state, or any other jurisdiction’s law, that the F&M Releasing Parties ever had, now have, or hereafter can, shall, or may have, including claims for indemnification or contribution to the extent arising out of or related to the claims and causes of action alleged, or any and all claims or cause of action that could have been alleged, in the Litigation (the “Released F&M Claims”). This release is contingent and shall only be effective upon the Court’s final approval of that certain Settlement Agreement and Release between the Plaintiffs, acting on behalf of the Putative Class Members, and F&M dated March 28, 2018 (“the Class Settlement Agreement”).  This release does not include any claim by the F&M Releasing Parties, or any of them, to enforce the terms of this Settlement Agreement, any claims that have been or could be brought against John J. Koresko, V or Koresko & Associates, P.C., or against any insurance company or insurance agent, other than the LK Released Parties, that sold life insurance policies to the Trusts.  These exclusions are to eliminate any possible ambiguity and mean that John J. Koresko, V, Koresko & Associates, P.C., and insurance companies and agents (other than Lawrence Koresko, Koresko Financial, LP incorrectly identified in the Litigation as Koresko Financial, LLP, and Freedom Brokers, LLC) that sold life insurance policies to the Trusts, are not within the definition of the LK Released Parties;

(c)The LK Releasing Parties, jointly and severally, for good and valuable consideration, release and forever discharge F&M and its past, present, and future owners, members, shareholders, officers, directors, employees, parents, subsidiaries, affiliates, insurers, brokers, agents, attorneys and the predecessors, successors or assigns of any of them, jointly and severally (the “F&M Released Parties”), of and from any and all manner of claims, complaints, allegations, demands, actions, suits, causes of actions, and grievances, of any kind or nature whatsoever, as well as all forms of relief, including all accountings, costs, damages, disgorgement, restitution, debts, exemplary or punitive damages, expenses, liabilities, losses, remedies, indemnification, contribution, and attorneys and other professional fees and related disbursements, whether direct or derivative, nominal or beneficial, possessed or claimed, known or unknown, suspected or unsuspected, choate or inchoate, in law or in equity, whether brought under federal, state, or any other jurisdiction’s law, that the LK Releasing Parties ever had, now have, or hereafter can, shall, or may have, including claims for indemnification or contribution to the extent arising out of or related to the claims and causes of action alleged, or any and all claims or cause of action that could have been alleged, in the Litigation (the “Released LK Claims”).  This release is contingent and shall only be effective upon the Court’s final approval of the Class Settlement Agreement.  This release does not include any claim by the LK Releasing Parties, or any of them, to enforce the terms of this Settlement Agreement, any claims that have been or could be brought against John J. Koresko, V or Koresko & Associates, P.C., or against any insurance company or insurance agent that sold life insurance policies to the Trusts.  These exclusions are to eliminate any possible ambiguity and mean that John J.

Koresko, V, Koresko & Associates, P.C., and insurance companies and agents that sold life insurance policies to the Trusts are not within the definition of the F&M Released Parties.

Dismissal.

Upon execution of this Settlement Agreement and any other contingencies set forth herein, the Parties shall take such steps as are necessary to:

(a) Dismiss Plaintiffs’ claims against the LK Parties in the Litigation, without prejudice;

(b) Dismiss F&M’s crossclaims against the LK Parties in the Litigation, with prejudice; and

(c) Dismiss the LK Parties’ crossclaims against F&M in the Litigation, with prejudice.

2.No Admission of Liability.  Nothing in this Settlement Agreement, the Litigation or the negotiations that preceded this Settlement Agreement shall be construed as or deemed to be evidence of, or an admission of liability by F&M or the LK Parties for, or of the validity of, any claim or crossclaim that has been or could have been asserted against F&M and/or the LK Parties nor shall it be admissible or offered into evidence in any action or proceeding.

3.Additional Terms and Conditions.

(a)Authority.  All counsel and any other persons executing this Settlement Agreement warrant and represent that they have full authority to do so.

(b)Binding Effect.  This Settlement Agreement shall be binding on, and inure to the benefit of, the successors, assigns, and agents of the Parties, the LK Releasing Parties and F&M Releasing Parties, and the LK Released Parties and F&M Released Parties.

(c)Counterparts.  This Settlement Agreement may be executed in counterparts, including fax or .pdf counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

(d)Attorneys’ Fees.  The Parties shall bear their own respective attorneys’ fees and costs in conjunction with this Agreement.  In the event that any action is brought to enforce or interpret this Agreement, the prevailing party shall be entitled to recover in that action their reasonable attorneys’ fees from the non‑prevailing party, in addition to any other relief to which the prevailing party may be entitled.

(e)Advice of Counsel.  Each of the Parties has received or had the opportunity to seek their or its own independent legal advice with respect to the advisability of executing this Agreement and with respect to the releases, waivers, and all other matters contained herein.

(f)Choice of Law.  This Settlement Agreement shall be construed, enforced, and administered in accordance with the substantive laws of the Commonwealth of Pennsylvania without regard to its conflicts of law principles.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS HEREOF, AND INTENDING TO BE LEGALLY BOUND HEREBY, the undersigned, being duly authorized on behalf of the Parties, hereby execute this Settlement Agreement.

Farmers & Merchants Trust Company of Chambersburg, as Successor by Merger to Community Trust Company   By:  /s/ Timothy G. Henry_______________ Timothy G. Henry, President & CEO     /s/ Jack M. Stover______________________ Jack M. Stover, Esquire Jayson R. Wolfgang, Esquire 409 North Second Street Suite #500 Harrisburg, PA  17101-1357     Attorneys for Farmers & Merchants Trust Company of Chambersburg as successor by merger to Community Trust Company     /s/ Lawrence Koresko Lawrence Koresko, individually and on behalf of Koresko Financial, LP, and Freedom Brokers, LLC     /s/ James Bainbridge James Bainbridge, Esquire The Bainbridge Law Firm, LLC 1250 Germantown Pike, Suite 203 Plymouth Meeting, PA 19462 (484) 690-4542   Attorneys for Lawrence Koresko, individually and on behalf of Koresko Financial, LLP, and Freedom Brokers, LLC   /s/ Harvey Kalan Harvey Kalan, M.D., individually and on behalf of The Harvey Kalan, M.D., Inc Employee Welfare Benefit Plan   /s/ Pamela K. Erdman Pamela K. Erdman, M.D., individually and on behalf of The Dr. Pamela K. Erdman, M.D., Inc. Employee Welfare Benefit Plan     /s/ Martin Zenni Dr. Martin Zenni   /s/ Elissa Zenni Dr. Elissa Zenni   /s/ Martin Zenni Dr. Martin Zenni, on behalf of The M&E Zenni Inc., Welfare Benefit Plan   /s/ Ira B. Silverstein Ira B. Silverstein, Esquire The Silverstein Firm LLC 1515 Market Street Suite 1200 Philadelphia, PA  19102   /s/ David I. Lefkowitz David I. Lefkowitz, Esquire Wilshire Palisades Law Group, P.C. 1337 Ocean Avenue, Suite A Santa Monica, CA  90401   Attorneys for the Named Plaintiffs and the Settlement Class

EX-10.3

Exhibit 10.3

SETTLEMENT AGREEMENT AND RELEASE

This Settlement Agreement and Release (“Settlement Agreement”) is made and entered into as of March 28, 2018, by and between David I. Lefkowitz, Esquire, individually and on behalf of Wilshire Palisades Law Group, P.C. and the Wilshire Palisades Law Group Health and Welfare Benefit Plan (together the “Lefkowitz Parties”) and Farmers & Merchants Trust Company of Chambersburg as successor by merger to Community Trust Company (“F&M”).  The Lefkowitz Parties and F&M are collectively referred to herein as the “Parties.”

WHEREAS, David I. Lefkowitz, Esquire and the Wilshire Palisades Law Group, P.C., along with Ira Silverstein, Esquire and The Silverstein Firm LLC, represent the plaintiffs in a putative class action against F&M, inter alia, in the United States District Court for the Eastern District of Pennsylvania (the “Court”), captioned Harvey Kalan, MD., et al. v. Farmers & Merchants Trust Company of Chambersburg as Successor by Merger to Community Trust Company, et al., Civil Action No. 15‑01435 (the “Litigation”);

WHEREAS, the putative class in the Litigation is comprised of (i) any and all benefit plans, including those governed by the Employee Retirement Income Security Act of 1974, also known as ERISA, and those not governed by ERISA, whose assets, investments, or interests are held by the Regional Employers Assurance Leagues Voluntary Employees’ Beneficiary Association Trust, also known as the REAL VEBA Trust, or the Single Employer Welfare Benefit Plan Trust, also known as SEWBPT (together the “Trusts”), which Trusts are now under the control of a court‑appointed independent fiduciary; and (ii) any and all participants in and beneficiaries of, or individuals with legal or beneficial interests in, the benefit plans whose assets, investments, or interests are held by the Trusts;

WHEREAS, the Lefkowitz Parties are members of the putative class in the Litigation;

WHEREAS, an agreement in principle to settle the Litigation has been reached as between the plaintiffs on behalf of all members of the putative class (the “Settlement Class”), and F&M (the “Settlement”), the terms of which are memorialized in a Settlement Agreement that is subject to approval by the Court in accordance with Rule 23 of the Federal Rules of Civil Procedure;

WHEREAS, as a condition of the Settlement, the Lefkowitz Parties will be excluded from the Settlement Class; and

WHEREAS, the Parties hereto desire fully, finally, and forever to resolve, discharge, and settle any and all claims that the Lefkowitz Parties have or may have against F&M;

NOW, THEREFORE, in consideration of the covenants, conditions, and mutual promises, set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1.Incorporation of Recitals.

The preceding recitals are incorporated herein and form a material part of this Settlement Agreement.

2.Release of Claims.

The Lefkowitz Parties, jointly and severally, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby release and forever discharge, for themselves, their agents, servants, employees, heirs, beneficiaries, executors, administrators, trustees, successors, assigns and personal representatives, F&M and its past, present, and future owners, members, shareholders, officers, directors, employees, parents, subsidiaries, affiliates, insurers, brokers, agents and attorneys, and the predecessors, successors or assigns of any of them, jointly and severally (the “F&M Released Parties”), of from any and all manner of claims, complaints, allegations, demands, actions, suits, causes of actions, and grievances, of any kind or nature whatsoever, as well as all forms of relief, including all accountings, costs, damages, disgorgement, restitution, debts, exemplary or punitive damages, expenses, liabilities, losses, remedies, indemnification, contribution, and attorneys and other professional fees and related disbursements, whether direct or derivative, nominal or beneficial, possessed or claimed, known or unknown, suspected or unsuspected, choate or inchoate, in law or in equity, whether brought under federal, state, or any other jurisdiction’s law, that the Lefkowitz Parties ever had, now have, or hereafter can, shall, or may have, including claims for indemnification or contribution to the extent arising out of or related to the claims and causes of action alleged, or any and all claims or cause of action that could have been alleged, in the Litigation.  This release is contingent and shall only be effective upon the Court’s final approval of the Settlement of the Litigation.  This release does not include any claims to enforce this Settlement Agreement or any claims that have been or could be brought against John J. Koresko, V, Koresko & Associates, P.C. or against any insurance company, agent, or firm that participated in the sale of life insurance policies to the Trusts, or the sale of participation in the Koresko arrangement to the Lefkowitz Parties.  These exclusions are to eliminate any possible ambiguity and mean that John J. Koresko, V, Koresko & Associates, P.C., and any insurance company, agent, or firm that sold life insurance policies to the Trusts, or participation in the Koresko arrangement, are not within the definition of the F&M Released Parties.

3.No Admission of Liability.

Nothing in this Settlement Agreement, the Litigation or the negotiations that preceded this Settlement Agreement shall be construed as or deemed to be evidence of, or an admission of liability by any of the Parties hereto, nor shall it be admissible or offered into evidence in any action or proceeding.

4.Additional Terms and Conditions.

(a)Authority.  All counsel and any other persons executing this Settlement Agreement warrant and represent that they have full authority to do so.

(b)Binding Effect.  This Settlement Agreement shall be binding on, and inure to the benefit of, the successors, assigns, and agents of the Parties.

(c)Counterparts.  This Settlement Agreement may be executed in counterparts, including fax or .pdf counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

(d)Attorneys’ Fees.  The Parties shall bear their own respective attorneys’ fees and costs in conjunction with this Settlement Agreement.  In the event that any action is brought to enforce or interpret this Agreement, the prevailing party shall be entitled to recover in that action their reasonable attorneys’ fees from the non‑prevailing party, in addition to any other relief to which the prevailing party may be entitled.

(e)Advice of Counsel.  Each of the Parties has received or had the opportunity to seek their or its own independent legal advice with respect to the advisability of executing this Settlement Agreement and with respect to the releases, waivers, and all other matters contained herein.

(f)Choice of Law.  This Settlement Agreement shall be construed, enforced, and administered in accordance with the substantive laws of the Commonwealth of Pennsylvania without regard to its conflicts of law principles.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS HEREOF, AND INTENDING TO BE LEGALLY BOUND HEREBY, the undersigned, being duly authorized on behalf of the Parties, hereby execute this Settlement Agreement.

Farmers & Merchants Trust Company of Chambersburg, as Successor by Merger to Community Trust Company

By:  /s/Timothy G. Henry_________/s/ David I. Lefkowitz___________________

Timothy G. Henry, President & CEODavid I. Lefkowitz, Esquire, individually and

on behalf of the Wilshire Palisades Law

Group, P.C. and the Wilshire Palisades Law

/s/ Jack M. StoverGroup Health and Welfare Benefit Plan

Jack M. Stover, Esquire1337 Ocean Avenue, Suite A

Jayson R. Wolfgang, EsquireSanta Monica, CA  90401

409 North Second Street

Suite # 500

Harrisburg, PA  17101‑1357

Attorneys for Farmers & Merchants Trust Company of Chambersburg as successor by merger to Community Trust Company