Exhibit 10.(vi)

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT, made the 28th day of February 2011 (the “Effective Date”),
between PENNS WOODS BANCORP, INC. (“Penns Woods”), a Pennsylvania business
corporation, JERSEY SHORE STATE BANK (“JSSB”), a Pennsylvania banking
institution and wholly owned subsidiary of Penns Woods (Penns Woods and JSSB are
sometimes referred to herein collectively as the “Employer”), and ANN M. RILES,
an adult individual (“Executive”).

 

WITNESSETH:

 

WHEREAS, Executive is presently employed by JSSB as its Senior Vice President
and Chief Credit Officer;

 

WHEREAS, it is the desire of JSSB that Executive continue Executive’s
employment, on the terms and conditions set forth herein, in order that the
experience Executive has gained throughout Executive’s career will continue to
be available to JSSB; and

 

WHEREAS, Executive is willing to continue such employment, on the terms and
conditions set forth herein.

 

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

 

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

 

2.             Titles and Duties of Executive.  Executive shall perform and
discharge well and faithfully such management and administrative duties as a
senior officer of JSSB as may be assigned to Executive from time to time by the
President and Chief Executive Officer of JSSB and which are consistent with
Executive’s positions set forth in the following sentence.  Executive shall be
employed as the Senior Vice President and Chief Credit Officer of JSSB. 
Executive shall report to the President and Chief Executive Officer of JSSB. 
Executive shall devote Executive’s full time, attention and energies to the
business of JSSB during the Employment Period (as defined in Section 3);
provided, however, that this section shall not be construed as preventing
Executive from (a) investing Executive’s personal assets in enterprises that do
not compete with Penns Woods, JSSB or any of their majority-owned subsidiaries
(except as an investor owning less than 5% of the stock of a publicly-owned
company), or (b) being involved in any civic, community or other activities with
the prior approval of the President and Chief Executive Officer of JSSB.

 

3.             Term of Agreement.

 

(a)     This Agreement shall be for a period (the “Employment Period”)
commencing on the Effective Date and ending three years thereafter; provided,
however, that, commencing on the third anniversary of the Effective Date and on
each anniversary thereafter (each an “Annual Renewal Date”), the Employment
Period shall be automatically extended for one (1) additional year from the
applicable Annual Renewal Date, unless JSSB or Executive shall give written
notice of nonrenewal to the other party at least sixty (60) days prior to an

 

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Annual Renewal Date, in which event this Agreement shall terminate at the end of
the then existing Employment Period.  Neither the expiration of the Employment
Period, nor the termination of this Agreement, shall affect the enforceability
of the provisions of Sections 7, 8 and 9.

 

(b)     Notwithstanding the provisions of Section 3(a), this Agreement shall
terminate automatically for Cause (as defined below) upon fifteen (15) days’
prior written notice (setting forth the section relied upon and setting forth in
reasonable detail the facts and circumstances claimed to provide the basis for
termination for Cause) from the Board of Directors of JSSB to Executive, unless
such Cause has been cured within such fifteen (15) day period (if capable of
being cured).  As used in this Agreement, “Cause” shall mean any of the
following:

 

(i)       Executive’s conviction of, or plea of guilty or nolo contendere to, a
felony, a crime of falsehood, or a crime involving moral turpitude, or the
actual incarceration of Executive for a period of at least thirty (30) days;

 

(ii)      Executive’s failure to follow the good faith lawful instructions of
the President and Chief Executive Officer of JSSB, following Executive’s receipt
of written notice of such instructions;

 

(iii)     Executive’s intentional failure to substantially perform Executive’s
duties to, or on behalf of, JSSB, other than a failure resulting from
Executive’s incapacity because of disability;

 

(iv)     Executive’s intentional violation of any law, rule or regulation (other
than traffic violations or similar offenses), Executive’s intentional violation
of any memorandum of understanding or cease and desist order of a federal or
state banking agency applicable to JSSB, Executive’s intentional violation of
any code of conduct or ethics applicable to officers or employees of JSSB, or
Executive’s intentional violation of any material provision of this Agreement;

 

(v)      dishonesty on the part of the Executive in the performance of
Executive’s duties or conduct on the part of the Executive which, in the
reasonable judgment of the Board of Directors of JSSB, brings public discredit
to Penns Woods or JSSB;

 

(vi)     Executive’s breach of fiduciary duty, in connection with Executive’s
employment hereunder, which involves personal profit or which results in
demonstrable material injury to Penns Woods or JSSB; or

 

(vii)    Executive’s removal or prohibition from being an institution-affiliated
party by a final order of an appropriate federal banking agency pursuant to
Section 8(e) of the Federal Deposit Insurance Act or by the Pennsylvania
Department of Banking pursuant to state law.

 

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If this Agreement is terminated for Cause, Executive’s rights under this
Agreement shall cease as of the effective date of such termination.

 

(c)     Notwithstanding the provisions of Section 3(a) of this Agreement, this
Agreement shall terminate automatically upon Executive’s voluntary termination
of employment (other than for Good Reason), retirement at Executive’s election,
or Executive’s death, and Executive’s rights under this Agreement shall cease as
of the date of such voluntary termination, retirement at Executive’s election,
or death; provided, however, that, if Executive dies after Executive delivers a
Notice of Termination (as defined in Section 5(d)), the provisions of
Section 16(b) shall apply.

 

(d)     Notwithstanding the provisions of Section 3(a), this Agreement shall
terminate automatically upon Executive’s disability and Executive’s rights under
this Agreement shall cease as of the date of such termination; provided,
however, that, if Executive becomes disabled after Executive delivers a Notice
of Termination, Executive shall be entitled to receive all of the compensation
and benefits provided for in, and for the term set forth in, Section 5 of this
Agreement.  For purposes of this Agreement, disability shall mean Executive’s
incapacitation by accident, sickness, or otherwise which renders Executive
mentally or physically incapable of performing the services required hereunder
of Executive for a period of six (6) consecutive months.  During any such
six-month period of incapacitation prior to termination of this Agreement under
this Section 3(d), Executive shall be paid her regular salary in accordance with
Section 4(a) less any amounts paid to Executive under any short-term or
long-term program then in effect.  Termination of the Agreement under this
Section 3(d) shall not affect benefits otherwise due and payable to Executive
under any other plan, agreement, arrangement in existence at the date of
termination, including without limitation benefits payable under any short-term
or long-term disability program then in effect.

 

(e)     Executive agrees that, in the event Executive’s employment under this
Agreement terminates for any reason, Executive shall concurrently resign as a
director of Penns Woods, JSSB and any affiliate of either, if Executive is then
serving as a director of any of such entities.

 

4.                                   Employment Period Compensation.

 

(a)     Salary.  During the Employment Period, Executive shall be paid a base
salary at the rate of $133,354 per year, payable at such times as salaries are
paid to other senior officers of JSSB.  The Board of Directors of JSSB shall
review Executive’s base salary annually and may, from time to time, in its
discretion increase Executive’s base salary.  Any and all such increases in base
salary shall be deemed to constitute amendments to this subsection to reflect
the increased amounts, effective as of the dates established for such increases
by appropriate corporate action.

 

(b)     Discretionary Bonus.  During the Employment Period, Executive shall be
entitled to participate in an equitable manner by pay grade with other senior
management employees of JSSB in such annual or other periodic bonus programs (if
any) as may be maintained from time to time by JSSB for its senior officers.

 

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(c)     Vacation and Sick Leave.  During the Employment Period, Executive shall
be entitled to such paid vacation as may be determined in accordance with the
personnel policies of JSSB from time to time in effect, but in no event less
than five (5) weeks per annum.  During the Employment Period, Executive shall be
entitled to an annual sick leave benefit as may be determined in accordance with
the personnel policies of JSSB from time to time in effect, but in no event less
than forty (40) hours per year.  Executive shall not be entitled to receive any
additional compensation from JSSB for failure to take all of Executive’s
entitled vacation or sick leave time, nor shall Executive be able to accumulate
unused vacation or sick leave time from one year to the next, unless otherwise
provided by the personnel policies of JSSB from time to time in effect.

 

(d)     Employee Benefit Plans.  During the Employment Period, Executive shall
be entitled to participate in and receive the benefits of any pension or other
retirement benefit plan, welfare benefit plan or similar employee benefit plans
or arrangements (including stock option plans, short- or long-term disability
plans, life insurance programs, and health insurance) made available from time
to time to employees of JSSB in accordance with the provisions of such plans. 
The base salary and any bonus payable to Executive under Section 4 shall be
considered covered compensation for purposes of such plans to the maximum extent
permitted by the terms of such plans.  Nothing paid to Executive under any plan
or arrangement presently in effect or made available in the future shall be
deemed to be in lieu of the amounts payable to Executive pursuant to
Section 4(a) hereof.

 

(e)     Expense Reimbursement.  JSSB shall promptly reimburse Executive, upon
submission of appropriate documentation, for reasonable business expenses,
including travel and reasonable entertainment expenses, incurred by Executive in
accordance with the expense reimbursement policies of JSSB in effect from time
to time.

 

(f)      Automobile. During the Employment Period, JSSB shall provide Executive
with a mid-size automobile selected by JSSB (which shall be owned or leased by
JSSB) for the Executive’s business use (and ancillary personal use).  JSSB will
cover all repairs and operating expenses of said automobile, including the cost
of liability insurance, comprehensive and collision insurance.  Upon termination
of Executive’s employment hereunder for any reason, Executive shall either
immediately return the vehicle to JSSB or purchase the vehicle (or assume the
lease) in accordance with JSSB’s vehicle purchase policy.  Upon request by JSSB,
Executive shall submit to JSSB on a timely basis documentation which defines the
percentage of Executive’s use of the vehicle which was for business purposes.

 

(g)     Club Dues.  During the Employment Period, JSSB shall pay the initiation
fees, assessments, and dues for Executive and Executive’s spouse, if any, to be
members of the Williamsport Country Club and the Ross Club and reimburse
Executive for all ordinary, necessary, and reasonable business-related expenses
incurred by Executive on JSSB business at said clubs.  As a condition to
receiving such reimbursements, Executive shall submit to JSSB on a timely basis
business expense reports in accordance with the expense reimbursement policies
of JSSB in effect from time to time.

 

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5.             Rights in Event of Termination of Employment Following a Change
in Control.

 

(a)     Benefits.  If a Change in Control (as defined below) shall occur and
concurrently therewith or during a period of twenty-four (24) months thereafter
Executive’s employment hereunder is terminated by JSSB without Cause (other than
for the reasons set forth in Section 3(d)) or by Executive with Good Reason (as
defined below), Executive shall be entitled to receive a lump-sum cash payment,
no later than thirty (30) days following the date of such termination, in an
amount equal to two (2.0) times the sum of (i) Executive’s annual base salary
then in effect (or immediately prior to any reduction resulting in a termination
for Good Reason) and (ii) the average of the last three (3) annual bonuses paid
by JSSB to Executive.

 

(b)     Limitation on Benefits.  Notwithstanding anything in this section or
elsewhere in this Agreement to the contrary, in the event the payments and
benefits payable hereunder to or on behalf of Executive (which the parties agree
will not include any portion of payments allocated to the non-compete and
non-solicitation provisions of Sections 7 and 9 that are classified as payments
of reasonable compensation for purposes of Section 280G of the Internal Revenue
Code of 1986, as amended (the “Code”)), when added to all other amounts and
benefits payable to or on behalf of Executive, would result in the loss of a
deduction under Code Section 280G, or the imposition of an excise tax under Code
Section 4999, the amounts and benefits payable hereunder shall be reduced to
such extent as may be necessary to avoid such loss of deduction or imposition of
excise tax.  In applying this principle, the reduction shall be made in a manner
consistent with the requirements of Code Section 409A and where two or more
economically equivalent amounts are subject to reduction, but payable at
different times, such amounts shall be reduced on a pro-rata basis.  All
calculations required to be made under this subsection will be made by JSSB’s
independent public accountants, subject to the right of Executive’s professional
advisors to review the same.  The parties recognize that the actual
implementation of the provisions of this subsection are complex and agree to
deal with each other in good faith to resolve any questions or disagreements
arising hereunder.

 

(c)     Exclusive Remedy.  The amounts payable pursuant to this Section 5 shall
constitute Executive’s sole and exclusive remedy in the event of the termination
of Executive’s employment in accordance with Section 5(a).

 

(d)     Good Reason Defined.  For purposes of this Section 5, Executive shall be
considered to have terminated employment hereunder for “Good Reason” if such
termination of employment occurs on or within twenty-four (24) months after a
Change in Control and is on account of any of the following actions by JSSB
without Executive’s express written consent:

 

(i)       A material diminution in Executive’s authority, duties or other terms
or conditions of employment as the same exist on the date of the Change in
Control, or the assignment of duties inconsistent with the duties provided in
Section 2;

 

(ii)      Any reassignment of Executive to a location greater than 50 miles from
the location of Executive’s office on the date of the Change in Control, unless
such new location is closer to Executive’s primary residence than the location
on the date of the Change in Control;

 

(iii)     Any failure to pay Executive any amounts due and owing to Executive
under Section 4 of this Agreement;

 

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(iv)     Any failure to provide Executive with any benefits enjoyed by Executive
under any of JSSB’s retirement or pension, life insurance, medical, health and
accident, disability or other material employee plans in which Executive
participated at the time of the Change in Control or the taking of any action
that would materially reduce any of such benefits in effect at the time of the
Change in Control, except for any reductions in benefits or other actions
resulting from changes to or reductions in benefits applicable to employees
generally;

 

(v)      Any requirement that Executive travel in the performance of Executive’s
duties on behalf of JSSB for a significantly greater period of time during any
year than was required of Executive during the year preceding the year in which
the Change in Control occurred, which results in a material negative change to
Executive in the employment relationship; or

 

(vi)     Any other material breach of this Agreement.

 

Notwithstanding the foregoing, a termination by Executive shall not be for Good
Reason, unless Executive shall have given JSSB at least ten (10) business days
written notice (a “Notice of Termination”) specifying the grounds upon which
Executive intends to terminate Executive’s employment hereunder for Good Reason
and such notice is received by JSSB within ninety (90) days of the date the
event of Good Reason occurred.  In addition, any action or inaction by JSSB
which is remedied within thirty (30) days following a Notice of Termination
shall not constitute Good Reason for termination hereunder and shall render such
Notice of Termination null and void.

 

(e)     Change in Control Defined.  As used in this Agreement, “Change in
Control” shall mean the occurrence of any one of the following:

 

(i)       (A) a merger, consolidation, or division involving Penns Woods or
JSSB, (B) a sale, exchange, transfer, or other disposition of substantially all
of the assets of Penns Woods or JSSB, or (C) a purchase by Penns Woods or JSSB
of substantially all of the assets of another entity, unless (x) such merger,
consolidation, division, sale, exchange, transfer, purchase or disposition is
approved in advance by 66-2/3% or more of the members of the Board of Directors
of Penns Woods who are not interested in the transaction and (y) a majority of
the members of the Board of Directors of the legal entity resulting from or
existing after any such transaction and of the Board of Directors of such
entity’s parent corporation, if any, are former members of the Board of
Directors of Penns Woods or JSSB;

 

(ii)      a “person” or “group” (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934) becomes the “beneficial owner” (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934) of 25% or more
of the outstanding shares of common stock of Penns Woods;

 

(iii)     at any time during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of Penns
Woods cease to constitute a majority of such Board (unless the election or
nomination of each new director was

 

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approved by a vote of at least 51% of the directors who were directors at the
beginning of such period); or

 

(iv)     any other change in control similar in effect to any of the foregoing
and designated as a change in control by the Board of Directors of Penns Woods
or JSSB.

 

(f)      Notwithstanding the foregoing, to the extent the definition of “Change
in Control” as set forth in Section 5(e) does not amount to a “change in control
event” as defined under Treas. Reg. § 1.409A-3(i)(5), then the benefits set
forth in Section 5(a) shall be paid at the same time and in the same form as
benefits are paid under Section 6(a).

 

6.             Rights in Event of Termination of Employment absent a Change in
Control.

 

(a)     Benefits.  In the event that Executive’s employment is involuntarily
terminated by JSSB (other than by reason of Section 3(d)) without Cause and no
Change in Control shall have occurred at the date of such termination, Executive
shall be entitled to receive the following benefits:

 

(i)       JSSB shall continue to pay Executive’s then base salary under
Section 4(a) for the number of full months remaining in the Employment Period as
of the date of termination of employment.  A final pro rated payment shall be
made for any fraction of a month remaining in the Employment Period as of the
date of Executive’s termination of employment.

 

(ii)      For a period of two (2) years following Executive’s termination,
Executive shall be provided, at no charge, with a continuation of health and
medical benefits no less favorable than the health and medical benefits in
effect on the date of termination of the Executive’s employment.  To the extent
such benefits cannot be provided under a plan because Executive is no longer an
employee of JSSB or it is not in JSSB’s best interests to provide such benefits
due to the applicable nondiscrimination requirements set forth in Section 1001
of the Patient Protection and Affordable Care Act, as amended, a dollar amount
equal to the after-tax cost (estimated in good faith by JSSB) of obtaining such
benefits, or substantially similar benefits, shall be paid to the Executive
within thirty (30) days following the date of termination.

 

(b)     Exclusive Remedy.  The amounts payable pursuant to this Section 6 shall
constitute Executive’s sole and exclusive remedy in the event of involuntary
termination of Executive’s employment by JSSB (other than by reason of
Section 3(d)) without Cause in the absence of a Change in Control.

 

(c)     Limitation on Benefits.  Notwithstanding anything herein to the
contrary, to the extent the provisions of Code Section 280G become applicable to
payments or benefits to be provided under this Section 6, the provisions of
Section 5(b) shall apply to such payments or benefits.

 

7.             Covenant Not to Compete.

 

(a)     Executive hereby acknowledges and recognizes the highly competitive
nature of the business of Penns Woods and JSSB and accordingly agrees, in
consideration of this

 

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Agreement, including without limitation the three-year initial term hereof,
that, during and for the applicable period set forth in Section 7(c), Executive
shall not:

 

(i)       be engaged, directly or indirectly, either for Executive’s own account
or as agent, consultant, employee, partner, officer, director, proprietor,
investor (except as an investor owning less than 5% of the stock of a
publicly-owned company) or otherwise of any person, firm, corporation, or
enterprise that provides any banking or financial services provided by Penns
Woods, JSSB or any of their respective majority-owned subsidiaries at the date
of termination of employment, in any county in the Commonwealth of Pennsylvania
in which, at the date of termination of the Executive’s employment, a branch,
office or other facility of Penns Woods, JSSB or any of their respective
majority-owned subsidiaries is located, or in any county contiguous to such a
county, whether located inside or outside of the Commonwealth of Pennsylvania
(the “Non-Competition Area”); or

 

(ii)      provide financial or other assistance to any person, firm,
corporation, or enterprise that provides any banking or financial services
provided by Penns Woods, JSSB or any of their respective majority-owned
subsidiaries at the date of termination of employment, in the Non-Competition
Area.

 

(b)     It is expressly understood and agreed that, although Executive, Penns
Woods and JSSB consider the restrictions contained in Section 7(a) reasonable
for the purpose of preserving for Penns Woods and JSSB their goodwill and other
proprietary rights, if a final judicial determination is made by a court or
arbitrator having jurisdiction that the time or territory or any other
restriction contained in Section 7(a) is an unreasonable or otherwise
unenforceable restriction against Executive, the provisions of
Section 7(a) shall not be rendered void but shall be deemed amended to apply as
to such maximum time and territory and to such other extent as such court may
judicially determine or indicate to be reasonable.

 

(c)     The provisions of this Section 7 shall be applicable commencing on the
date of this Agreement and ending on one of the following dates, as applicable:

 

(i)       if Executive voluntarily terminates Executive’s employment (other than
for Good Reason) or Executive’s employment is terminated for Cause in accordance
with the provisions of Section 3(b), one (1) year following the effective date
of termination of employment;

 

(ii)      if Executive becomes entitled to receive the payment set forth in
Section 5(a), one (1) year following the effective date of termination of
employment;

 

(iii)     if Executive’s employment is terminated in accordance with the
provisions of Section 3(d) or 6, and Executive actually receives payments under
a disability plan or program maintained by JSSB or severance payments under
Section 6, respectively, the lesser of one (1) year following the effective date
of termination of employment or the period during which such payments remain in
effect;

 

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(iv)     if Executive’s employment terminates as a result of delivery of a
notice of nonrenewal by JSSB in accordance with Section 3(a), the ending date of
the then existing Employment Period; or

 

(v)      if Executive’s employment terminates as a result of delivery of a
notice of nonrenewal by Executive in accordance with Section 3(a), one (1) year
following the ending date of the then existing Employment Period.

 

8.             Unauthorized Disclosure.  During the Employment Period and at any
time thereafter, Executive shall not, without the written consent of the Boards
of Directors of Penns Woods and JSSB, or a person authorized thereby, knowingly
disclose to any person, other than an employee of Penns Woods or JSSB, or a
person to whom disclosure is reasonably necessary or appropriate in connection
with the performance by Executive of Executive’s duties hereunder, any material
confidential information obtained by Executive while in the employ of JSSB with
respect to Penns Woods’, JSSB’s or any of their majority-owned subsidiaries’
services, products, improvements, formulas, designs or styles, processes,
customers, methods of business or any business practices the disclosure of which
could be or would be damaging to Penns Woods, JSSB or any such subsidiary;
provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by Executive or any person with the assistance, consent,
or direction of Executive), or any information that must be disclosed as
required by law.

 

9.             Nonsolicitation of Customers and Employees.  Executive hereby
agrees that Executive shall not during any period that Executive is subject to
the provisions of Section 7, directly or indirectly, (i) solicit any customer of
Penns Woods, JSSB or any majority-owned subsidiary of either of them located in
the Non-Competition Area for any banking or financial services business, or
(ii) solicit or hire any persons who are currently or were within six (6) months
prior to Executive’s termination date employees of Penns Woods, JSSB or any
majority-owned subsidiary of either of them for engagement or employment by any
person, firm, corporation, or enterprise that provides any banking or financial
services provided by Penns Woods, JSSB or any of their respective majority-owned
subsidiaries at Executive’s termination date.  Executive also agrees that
Executive shall not, for the period described in the preceding sentence,
encourage or induce any of such customers or employees of Penns Woods, JSSB or
any majority-owned subsidiary of either of them to terminate their business
relationship with any of such entities.

 

10.           Remedies.  Executive acknowledges and agrees that the remedy at
law of the Employer for a breach or threatened breach of any of the provisions
of Section 7, 8 or 9 would be inadequate and, in recognition of this fact, in
the event of a breach or threatened breach by Executive of any of the provisions
of Section 7, 8 or 9, it is agreed that the Employer shall be entitled to,
without posting any bond, and the Executive agrees not to oppose any request of
the Employer for, equitable relief in the form of specific performance, a
temporary restraining order, a temporary or permanent injunction, or any other
equitable remedy which may then be available.  Nothing contained in this section
shall be construed as prohibiting the Employer from pursuing any other remedies
available to them, at law or in equity, for such breach or threatened breach.

 

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11.          Legal Expenses.  If Executive obtains a judgment, award or
settlement which enforces a material disputed right or benefit under this
Agreement, JSSB shall pay to Executive, within ten days after demand therefor,
all legal fees and expenses incurred by Executive in seeking to obtain or
enforce such right or benefit.

 

12.          Notices.  Except as otherwise provided in this Agreement, any
notice required or permitted to be given under this Agreement shall be deemed
properly given if in writing and if mailed by registered or certified mail,
postage prepaid with return receipt requested, to Executive’s residence (as then
reflected in the personnel records of JSSB), in the case of notices to
Executive, and to the then principal offices of JSSB, in the case of notices to
JSSB.

 

13.          Waiver.  No provision of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by Executive and the President and Chief Executive Officer of
JSSB.  No waiver by any party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.

 

14.          Assignment.  This Agreement shall not be assignable by any party,
except by the Employer to any affiliated company or to any successor in interest
to its businesses.

 

15.          Entire Agreement; Effect on Prior Agreements.  This Agreement
contains the entire agreement of the parties relating to the subject matter of
this Agreement and supersedes and replaces any prior written or oral agreements
between them respecting the within subject matter.

 

16.          Successors; Binding Agreement.

 

(a)     The Employer will require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) to all or substantially all of
the businesses and/or assets of Penns Woods and/or JSSB to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Employer would be required to perform it if no such succession had taken
place.  Failure by the Employer to obtain such assumption and agreement prior to
the effectiveness of any such succession shall constitute a material breach of
this Agreement and the provisions of Section 5 (relating to termination of
employment following a Change in Control) shall apply as though a Notice of
Termination was authorized and had been timely given.  As used in this
Agreement, “Penns Woods”, and “JSSB” shall mean Penns Woods and JSSB, as defined
previously, and any successor to their respective businesses and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise.

 

(b)     This Agreement shall inure to the benefit of and be enforceable by
Executive’s personal or legal representatives, executors, administrators, heirs,
distributees, devisees, and legatees.  If Executive should die after a Notice of
Termination is delivered by Executive, or following termination of Executive’s
employment without Cause, and any amounts would be payable to Executive under
this Agreement if Executive had continued to live, all such amounts shall be
paid in accordance with the terms of this Agreement to Executive’s devisee,

 

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legatee, or other designee, or, if there is no such person, to Executive’s
estate.  The preceding sentence shall also apply to the last clause of
Section 3(c).

 

17.          No Mitigation or Offset.  Executive shall not be required to
mitigate the amount of any payment or benefit provided for in this Agreement by
seeking employment or otherwise.  Further, there shall be no offset against any
amount or benefit payable or provided hereunder following Executive’s
termination of employment solely by reason of Executive’s employment with
another employer.

 

18.          Validity.  The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

 

19.          Applicable Law.  This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania, without regard
to its conflict of laws principles.

 

20.          Headings.  The section headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction, or
limit the scope or intent, of any of the provisions of this Agreement.

 

21.          Number.  Words used herein in the singular form shall be construed
as being used in the plural form, as the context requires, and vice versa.

 

22.          Regulatory Matters.  The obligations of JSSB under this Agreement
shall in all events be subject to any required limitations or restrictions
imposed by or pursuant to the Federal Deposit Insurance Act or the Pennsylvania
Banking Code of 1965 as the same may be amended from time to time.

 

23.          Tax Withholding.  All payments made and benefits provided hereunder
shall be subject to such federal, state and local tax withholding as may be
required by law.

 

24.          Compliance with Code Section 409A.

 

(a)     Notwithstanding anything in this Agreement to the contrary, the receipt
of any benefits under this Agreement as a result of a termination of employment
shall be subject to satisfaction of the condition precedent that Executive
undergo a “separation from service” within the meaning of Treas. Reg. §
1.409A-1(h) or any successor thereto.  In addition, if Executive is deemed to be
a “specified employee” within the meaning of that term under Code
Section 409A(a)(2)(B), then with regard to any payment or the provisions of any
benefit that is required to be delayed pursuant to Code Section 409A(a)(2)(B),
such payment or benefit shall not be made or provided prior to the earlier of
(i) the expiration of the six (6) month period measured from the date of
Executive’s “separation from service” (as such term is defined in Treas. Reg. §
1.409A-1(h)), or (ii) the date of Executive’s death (the “Delay Period”). 
Within ten (10) days following the expiration of the Delay Period, all payments
and benefits delayed pursuant to this section (whether they would have otherwise
been payable in a single sum or in installments in

 

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the absence of such delay) shall be paid or reimbursed to Executive in a lump
sum, and any remaining payments and benefits due under this Agreement shall be
paid or provided in accordance with the normal payment dates specified for them
herein.  To the extent that the foregoing applies to the provision of any
ongoing welfare benefits to Executive that would not be required to be delayed
if the premiums therefore were paid by Executive, Executive shall pay the full
costs of premiums for such welfare benefits during the Delay Period and JSSB
shall pay Executive an amount equal to the amount of such premiums paid by
Executive during the Delay Period within ten (10) days after the conclusion of
such Delay Period.

 

(b)     Except as otherwise expressly provided herein, to the extent any expense
reimbursement or other in-kind benefit is determined to be subject to Code
Section 409A, the amount of any such expenses eligible for reimbursement or
in-kind benefits in one calendar year shall not affect the expenses eligible for
reimbursement or in-kind benefits in any other taxable year (except under any
lifetime limit applicable to expenses for medical care), in no event shall any
expenses be reimbursed or in-kind benefits be provided after the last day of the
calendar year following the calendar year in which Executive incurred such
expenses or received such benefits, and in no event shall any right to
reimbursement or in-kind benefits be subject to liquidation or exchange for
another benefit.

 

(c)     Any payments made pursuant to Sections 5 and 6, to the extent of
payments made from the date of termination through March 15th of the calendar
year following such date, are intended to constitute separate payments for
purposes of Treas. Reg. §1.409A-2(b)(2) and thus payable pursuant to the
“short-term deferral” rule set forth in Treas. Reg. §1.409A-1(b)(4); to the
extent such payments are made following said March 15th, they are intended to
constitute separate payments for purposes of Treas. Reg. §1.409A-2(b)(2) made
upon an involuntary termination from service and payable pursuant to Treas. Reg.
§1.409A-1(b)(9)(iii), to the maximum extent permitted by said provision. 
Notwithstanding the foregoing, if JSSB determines that any other payments
hereunder fail to satisfy the distribution requirement of
Section 409A(a)(2)(A) of the Internal Revenue Code of 1986, as amended (the
“Code”), the payment of such benefit shall be delayed to the minimum extent
necessary so that such payments are not subject to the provisions of Code
Section 409A(a)(1).

 

[INTENTIONALLY LEFT BLANK]

 

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(d)     To the extent it is determined that any benefits described in
Section 6(b) are taxable to Executive, they are intended to be payable pursuant
to Treas. Reg. §1.409A-1(b)(9)(v), to the maximum extent permitted by said
provision.

 

IN WITNESS WHEREOF, the parties have executed this Agreement, or caused it to be
executed, as of the date first above written.

 

PENNS WOODS BANCORP, INC.

 

 

 

 

 

 

 

By:

/s/ Richard A. Grafmyre

 

Date:

February 28, 2011

 

 

 

 

(“Penns Woods”)

 

 

 

 

 

 

 

 

 

 

 

JERSEY SHORE STATE BANK

 

 

 

 

 

 

 

By:

/s/ Richard A. Grafmyre

 

Date:

February 28, 2011

 

 

 

 

(“JSSB”)

 

 

 

 

 

 

 

 

 

 

 

/s/ Ann M. Riles

(SEAL)

 

Date:

February 28, 2011

 

 

 

 

 

ANN M. RILES

 

 

 

 

 

 

 

(“Executive”)

 

 

 

 

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