Exhibit 10.4


 





 


Employee
Annual Incentive Plan


Plan Document


 


Plan Effective:
January 1, 2004


Revised/Approved:
February 5, 2016


 






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Employee
Annual Incentive Plan


 


I. Introduction/Purpose


 


This Employee
Annual Incentive Plan has been developed as a meaningful compensation tool for employees at all levels, who through high levels
of performance, contribute to the success and profitability of Juniata Valley Financial Corp (Company). The Plan is designed to
support organizational objectives, financial goals, and the best interests of the shareholders as defined in the Bank’s
Strategic Plan, by making available additional, variable, and contingent at-risk compensation, in the form of cash awards.


 


The Employee
Annual Incentive Plan is based upon the achievement of required financial targets and other defined objectives consistent with
those contained in the Strategic Plan. The formulas and awards have been carefully constructed to integrate the interests of the
shareholder as well as enable the Bank to attract, retain, and motivate high quality personnel and support the continued growth
and profitability of the Company.


 


The Plan is
not meant to be a substitute for salary increases, but supplemental to base salary and a reward for performance that contributes
to outstanding levels of long-term achievement.


 


While risk
is an inherent aspect of business, this compensation plan is designed to reward executives for certain levels of performance without
encouraging undue risk taking which could materially threaten the safety and soundness of the organization or business unit.


 


II. Plan
Year


 


The Plan year
for this program will be the calendar year. The effective date of the Plan is January 1, 2004. The performance measures for this
will be determined, calculated and approved annually.


 






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III. Participation


 


In order to
be eligible, an individual must meet the following criteria:


 


		·	Must
                                         have been employed prior to July 1 of the Plan year; 



		·	Must
                                         be employed in a full-time or part-time position; and



		·	Must
                                         receive an overall rating of “Good” or better on his/her most recent individual
                                         performance evaluation prior to the Plan year award.



 


A
participant's eligibility ceases at termination of employment (other than retirement, death or disability), and the participant
will not receive any awards under the Plan for the year of termination. Termination as a result of retirement (as defined in the
company’s retirement plans), death, or disability will provide pro-rated awards in the Plan through the last working date
for the year in which termination occurred. If the participant dies during the Plan year, his/her designated beneficiary shall
receive a pro-rated share of any award for which he/she would have been eligible.


 


Due to the
various levels of responsibility of the positions within the Bank, the Board of Directors has selected the following Tiers of
participation for the Employee Annual Incentive Plan. These tiers will generally be based upon position responsibility and grade
level.


 


Tier
1 – President and Chief Executive Officer


 


Tier
2 – Executive Vice President/Chief Financial Officer


 


Tier
3 –■ 


 


Tier
4 – ■)


 


Tier
5 – ■


 


IV. Performance
Factors


 


The annual
portion of the Plan is based upon company financial performance factors which may change from year to year. In general, these
factors may be measures such as return on assets, return on equity, net income, earnings per share or similar indicators. The
factors and weighing of the factors are determined at the beginning of each Plan year. Each factor has quantifiable objectives
consisting of threshold, target and optimum goals. The Company’s financial performance factors for the current year can
be found in Exhibit A.


 


V. Award
Calculation and Distribution


 


Awards under
the Plan are calculated according to determination of the established performance factors at year end. Company performance between
the threshold and target, and target and optimum is interpolated. Awards are determined by taking the determined award percentage
times eligible compensation.


 




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With regard to discretionary changes
to award amounts relative to individual performance, please reference the following:


 


		·	Tier
                                         4 ■



 


		·	Tier
                                         3 ■. 



 


		·	Tier
                                         2 (Executive Vice President/Chief Financial Officer) – After the award
                                         is calculated according to the financial performance factors, the President and Chief
                                         Executive Officer may increase or decrease the award up to 10%* (of the calculated award
                                         amount) based on the participant’s individual performance for the year. 



 


		·	Tier
                                         1 (President and Chief Executive Officer) – After the award is calculated according
                                         to the financial performance factors, the Board may increase or decrease the award up
                                         to 10% (of the calculated award amount) based on the participant’s individual performance
                                         for the year. 



 


*All discretionary
adjustments within the 10% (of the calculated award amount) being made by the President and Chief Executive Officer will be reviewed
and approved by the Board of Directors.


 


Bank performance
below threshold will result in no awards being paid under the Plan. In the event this occurs, the President and Chief Executive
Officer will have discretion to grant individual awards, with approval by the Board of Directors, for performance bonuses to those
individuals who have achieved a high level of individual performance within their divisions.


 


Annual awards
are paid in cash less normal payroll tax withholding. Awards will be paid within 75 days following the end of the plan year. Any
participant terminating employment (except retirement, death, or disability) prior to the actual payment of the award will forfeit
that award.


 


While every
effort has been made to ensure that this incentive plan does not motivate or reward undue risk taking, any results deemed to have
been the result of inappropriate risk will be backed out of incentive payments. The Board of Directors has the discretion to lever
incentive payments down by as much as 100% if it is determined that excessive risk has been taken. This can be done on an individual
or overall basis, as appropriate.


 




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VI. Clawback


 


Awards will be recalculated if the
relevant company performance measures upon which they are based are restated or otherwise adjusted within the 36-month period
following the public release of the financial information. Any material overpayments or adjustments required by law will be owed
back to the company.


 


VII. Administration


 


Eligible Compensation
for purpose of this Plan is defined as a participant’s W-2 gross wages net of any option activity results, taxable retirement
earnings, prior year commissions and bonuses and any other imputed income resulting from employee benefits.


 


The Board of
Directors of the Bank may amend the Plan at any time.


 


Once established,
performance factors will remain in place for the year, unless the Board of Directors decides otherwise.


 


Participation,
performance factors, thresholds, targets and any other participation features are established each Plan year and may change from
year to year according to the strategic objectives of the bank.


 


At least annually,
the Chief Financial Officer acting as the highest ranking risk officer will review this Plan and provide a detailed report including
a detailed assessment regarding any risk issues inherent in the Plan. This risk report and the plan document in full will be reviewed
by the Personnel and Compensation Committee of the Board of Directors to ensure that the plan design is consistent with the compensation
philosophy of Juniata Valley Bank and that the plan does not motivate undue risk taking. The annual review will also include the
market competitiveness of the plan, the plan’s alignment with the Bank’s strategic plan, an assessment of how the
plan meets the objectives in the Introduction of this document, plus the plan’s impact on the overall safety and soundness
of the Bank. The Committee will then provide a report and recommendations to the full Board of Directors who are responsible to
approve the Plan. The Board of Directors of the Bank may amend the Plan at any time.


 


The Plan does
not constitute a contract of employment, and participation in the Plan does not give any employee the right to be retained by
the Bank or any right or claim to an award under the Plan unless specifically accrued under the terms of this Plan.


 


Any right of
a participant or his or her beneficiary to the payment of an award under this Plan may not be assigned, transferred, pledged or
encumbered.


 






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Any adjustments
to the financial performance results utilized in this Plan because of extraordinary gains or losses or other items must be approved
by the Board of Directors.


 


VIII. Plan
Approval


 


This Plan has
been amended and approved by the Board of Directors of Juniata Valley Financial Corp on


 


	.	 
	 	 
	By	                        	 
	 	 
	Board
    of Directors	 
	Juniata
    Valley Financial Corp	 


 




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Exhibit
A: Bank Performance Factors and Award Schedule


Plan
Year 2015


 


2016
Goals


 


	Performance Measures
 (Basic) Earnings Per Share (75%)
	 
	Threshold	 	 	Target	 	 	Optimum	 
	$	1.05	 	 	$	1.11	 	 	$	1.22	 
	 	 	 	 	 	 	 	 	 	 	 
	Return on Average Equity (25%)
	Threshold	 	 	Target	 	 	Optimum	 
	 	8.227	%	 	 	8.66	%	 	 	9.526	%



 


2016
Award Schedule


 


	 	 	President 
 & CEO	 	 	EVP/CFO	 	 	 	 	 	 	 
	 	 	Tier 1*	 	 	Tier 2*	 	 	Tier 3*	 	Tier 4	 	Tier 5
	Min	 	 	12.00	%	 	 	10.00	%	 	■	 	■	 	■
	Target	 	 	20.00	%	 	 	16.00	%	 	■	 	■	 	■
	Max	 	 	30.00	%	 	 	24.00	%	 	■	 	■	 	■



 


NOTE:
Awards will be interpolated for performance levels between threshold and target and target and maximum.


 


*Please
see additional notes for these Tiers:


 


Tier
4 ■ . 


 


Tier
3 ■ 


 


Tier
2 (Executive Vice President/Chief Financial Officer) – After the award is calculated according to the
financial performance factors, the President and Chief Executive Officer may increase or decrease the award up to 10%* (of the
calculated award amount) based on the participant’s individual performance for the year. 


 


Tier
1 (President and Chief Executive Officer) – After the award is calculated according to the financial performance
factors, the Board may increase or decrease the award up to 10% (of the calculated award amount) based on the participant’s
individual performance for the year. 


 


*All discretionary
adjustments within the 10% (of the calculated award amount) being made by the President and Chief Executive Officer will be reviewed
and approved by the Board of Directors. 


 






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